Investment tips

Income Property

Canada’s big banks have all cut their prime lending rates following the announcement that the central bank had lowered its benchmark interest rate to 0.5 per cent.

It was the second time this year the Bank of Canada had dropped the rate to stimulate the economy, after holding the rate steady for about four years.

The bank is now forecasting a rebound later in the year, but a small one: 1.1 per cent growth in GDP for all of 2015. As recently as April, the bank was expecting 1.9 per cent growth this year.

What is this mean for home buyer? More chances to qualify for mortgage financing.

For Home Investors:

Thinking of paying off your mortgage in 10 years? Perhaps paying for your children education in full? Or maybe building for additional wealth for retirement?

The answer to this questions may be: BUY AN INVESTMENT PROPERTY

Let us show you how you can take advantage of the equity of your home to acquire an investment property without having to change your finances.

Contact Us For More Information “How To Acquire A Secondary Investment Property” using your home equity.

InsuranceWhat is life insurance? The video defines the purpose of life insurance and its purpose.

Now you have successfully purchased your dream home for your family and living in a lifestyle that you always dream off. Lovely family, beautiful children and stable jobs to secure your financial needs. Then you start to wonder what’s next? You question yourself, how do you guarantee and secure the future of your children? Will they have a proper education and be able to continue the same lifestyle they have now should anything unthinkable were to happen to you as a bread whiner?

These are one of the most common question everyone dreaded and perhaps the question we try not to think about. Wether we like it or not our time will expire one way or another. But the real question needed to be answer is will it be too fast or too soon that we don’t have a chance to give our love ones time to prepare?

I’d like you to consider the following question…

1. Are you healthy? Are you prone to sickness? Do you live in a fast lane with bad habits (drugs, alcohol, tobacco use?)
2. What type of lifestyle do you have now? Is it the same lifestyle you want your love ones to have or better?
3. Could you stand seeing your love ones downgrade their lifestyle due to uncertainty?
4. Will your children be able to attain a higher education and still continue the same lifestyle they have now in the event that your income was cut off?
5. Most important question..if you have the choice would you do something about it?

As a realtor and a real estate advisor part of my job is to educate home buyers/owners about protecting their biggest investment by providing a straight to the heart advice, an awareness to the reality and a prevention to any inevitable loss.

Life Insurance. How educated are you when it comes to life insurance or some people call it life assurance? Unfortunately, most people associate life insurance as just an extra expense, pyramid scheme or sales people knocking at your door selling an insurance policy for a quick commission. Those days are long gone! I’m sure by now you are now familiar with economic downturn, uncertainty and familiar with the term economic word “bailout!”

What is Life Insurance?
Life Insurance are meant to replace or offset an income loss should an unforeseen and catastrophic things were to happen such as disability, illness, injuries or death. Life insurance is in place as an assurance of the enjoyment of a normal day-to-day life should unforeseen or unthinkable things were to happen and caused a loss of income. Just like a concept of a bailing out a company they need an income stream to be able to continue on with a current business!

Some people may argue what about Mortgage Insurance? I have a mortgage insurance what is the difference?
Believe it or not a mortgage insurance are meant to protect the bank (lending institution) and not to protect you. Mortgage insurance is an assurance by you to the bank (lending institution) that you will repay your mortgage entirely if anything happens to you and you can no longer pay back your debt.

You don’t believe me? Let me give you a quick example of the difference between the two. As an example:

Let’s say you took out a mortgage of $500,000 amortization of 25 years. For the sake of this example let’s pretend you are paying $40,000 annually towards your mortgage.

Year1: $40,000
Year2: $40,000
Year3: $40,000
Year4: $40,000
Year5: $40,000
Total payment accumulated on year 5: $200,000

In five years you had accumulated and paid an amount of $200,000 against your $500,000 mortgage and therefore your outstanding balance owing is $300,000.

Let’s say for an argument you have chosen a “mortgage insurance” for a sake of an argument, in this example you passed away on your 5th year of your mortgage term. The bank (lending institution) who assured you of your mortgage will only have to pay the remaining balance of the mortgage owed which is $300,000.

Quantitative Analysis:
$500,000 – $200,000 = $300,000

You ask yourself a question is this a good deal? Certainly not! Because if you were to take on a separate life insurance policy using the above example you are entitled to a $500,000 coverage regardless if you passed away on day one or year 5 of a policy. A $200,000 using the above example is considerably huge amount of money that your children can use for their education purposes or to taken care of any other financial obligation.

Another thing to consider when choosing a mortgage insurance over life insurance is how accessible a policy is when it is needed. The advantages about choosing a mortgage insurance over life insurance is it is easy to acquire and doesn’t need a lot of requirement to qualify for. It is also cheaper in most cases compare to life insurance policy. But don’t get fooled by the convenience and cost! The whole point of having insurance policy is to have access to it when it is needed.

It sometimes to your advantage to pay a little more and to go through rigorous background checkup prior to acquiring a life insurance policy. I say this because if you make a mistake on the application form when filling up an insurance document you could easily be denied of a coverage. For example, let say you declare on the application a non smoker and you happen to die in lung cancer causing tobacco use the insurance company may simply deny your claim. In the insurance point of view you are a smoker if you smoke one cigarette a year. I will say this again, you are a smoker if you smoke one cigarette a year and yes they have the ability to trace nicotine in your body.

On the other hand when you are applying for a life insurance policy, the insurance provider will most likely require you to be subjected to a stringent blood, urine or even sometimes fitness testing. Depending on the result of the test will determine how much premium you will need to pay for your insurance policy. In other words once you are approved by an insurance provider you are entitled to your policy and have access to claim when it is needed.

There are different flavours of life insurance policy. Term, Whole Life or Universal policy and these policy serves different purpose. Just like buying a car not all car are made for the same purpose. Some are built for speed some are built for comfort. So it is important to know which is the right policy for your needs. You can do this by consulting a licensed life insurance agent. I will post a follow-up blog on different types of life insurance policy out there and their purpose on my next blog. So stay tuned…

investmentMutual funds are perhaps the easiest and least stressful way to invest in the market. In fact, more new money has been introduced into funds during the past few years than at any time in history. Before you jump into the pool and select a mutual fund in which to invest, you should know exactly what they are and how they work. As part of a Beginner’s Guide to Investing in Mutual Funds, this article can give you the foundation you need to start understanding mutual fund investing.

What is a mutual fund?
Put simply, a mutual fund is a pool of money provided by individual investors, companies, and other organizations. A fund manager is hired to invest the cash the investors have contributed. The goal of the manager depends upon the type of fund; a fixed-income fund manager, for example, would strive to provide the highest yield at the lowest risk. A long-term growth manager, on the other hand, should attempt to beat the Dow Jones Industrial Average or the S&P 500 in a fiscal year (very few funds actually achieve this; to find out why, read Index Funds – The Dumb Money Almost Always Wins).

Closed vs. Open-Ended Funds, Load vs. No-Load
Mutual funds are divided along four lines: closed-end and open-ended funds; the latter is subdivided into load and no load.

• Closed-End Funds
This type of fund has a set number of shares issued to the public through an initial public offering. These shares trade on the open market; this, combined with the fact that a closed-end fund does not redeem or issue new shares like a normal mutual fund, subjects the fund shares to the laws of supply and demand. As a result, shares of closed-end funds normally trade at a discount to net asset value.

• Open-End Funds
A majority of mutual funds are open-ended. In simple terms, this means that the fund does not have a set number of shares. Instead, the fund will issue new shares to an investor based upon the current net asset value and redeem the shares when the investor decides to sell. Open-end funds always reflect the net asset value of the fund’s underlying investments because shares are created and destroyed as necessary.

Load vs. No Load
A load, in mutual fund speak, is a sales commission. If a fund charges a load, the investor will pay the sales commission on top of the net asset value of the fund’s shares. No load funds tend to generate higher returns for investors due to the lower expenses associated with ownership.

What are the benefits of investing through a mutual fund?
Mutual funds are actively managed by a professional money manager who constantly monitors the stocks and bonds in the fund’s portfolio. Because this is his or her primary occupation, they can devote considerably more time to selecting investments than an individual investor. This provides the peace of mind that comes with informed investing without the stress of analyzing financial statements or calculating financial ratios.

How do I begin investing in a fund?
If you already have a brokerage account, you can purchase mutual fund shares as you would a share of stock. If you don’t, you can visit the fund’s web page or call them and request information and an application. Most funds have a minimum initial investment which can vary from $25 – $100,000+ with most in the $1,000 – $5,000 range (the minimum initial investment may be substantially lowered or waived altogether if the investment is for a retirement account such as a 401k, traditional IRA or Roth IRA, and / or the investor agrees to automatic, reoccurring deductions from a checking or savings account to invest in the fund.

The importance of dollar-cost averaging.
The dollar-cost averaging strategy is just as applicable to mutual funds as it is to common stock. Establishing such a plan can substantially reduce your long-term market risk and result in a higher net worth over a period of ten years or more.

How do I select a fund that’s right for me?
Every fund has a particular investing strategy, style or purpose; some, for instance, invest only in blue chip companies. Others invest in start-up businesses or specific sectors. Finding a mutual fund that fits your investment criteria and style is absolutely vital; if you don’t know anything about biotechnology, you have no business investing in a biotech fund. You must know and understand your investment.

After you’ve settled upon a type of fund, turn to Morningstar or Standard and Poors (S&P). Both of these companies issue fund rankings based on past record. You must take these rankings with a grain of salt. Past success is no indication of the future, especially if the fund manager has recently changed.

Volatility Risk from Lowest to Highest:
The easiest way to remember it is to ryhme it from lowest to highest as follows. (My, Mother, Buy, Baby ducks, Eggs, In, Spain, and Rome.) The higher the return the higher the risk.

This is for illustration purposes only.
R Real Estate Funds 11-12% rate of return
S Specialty Funds 9-10% rate of return
I International & Foreign Funds 7-8% rate of return
E Equity 6-7% rate of return
D Dividend 4-5% rate of return
B Balance Funds 2-3% rate of return
B Bonds 2-3% rate of return
M Mortge Funds 1-2% rate of return
M Money Market 1-2% rate of return