One Month of Retirement
This report is a bit early this month with almost a full week left of trading in July. But we are taking advantage of our retirement with lack of commitments and going on a three week road trip to visit family – both close family and very extended family.
July 2014 Performance
All markets gained for the month with the Canadian market continuing to finally outperform the US market. Fortunately for us, our July gains outstripped our excessive spending, in getting set up for retirement, giving is continued growth to our net worth.
Here are the percentage gains for my investment portfolio compared to the three major indices.
|S & P||0.89||7.03|
Long Term Performance
I always emphasize taking a long term view to investing. If you have a solid strategy and stick with it, things tend to take care of themselves. The above chart (using Google Finance) shows our portfolio for the last 10 years in the Middle East. It includes new money added, so it isn’t all raw growth, but it does show how a disciplined approach will serve you well over time. Note how the 2008-09 crisis is barely a blip on the chart and was more than recovered by 2010. It also demonstrates how important it is to be in the market to take advantage of potential bull markets (which of course you can’t predict). If you had have stayed out of the market after the crash, you would have missed one of the longest and strongest bull markets in history. It is this surge that has facilitated our retirement.
Move to Canada
As I am now relocated to Canada for my retirement I have decided to repatriate my funds from TD Direct Investing in Luxembourg. It is not a difficult process but it is paperwork intensive. It involves sending forms from the receiving institution (in my case HSBC InvestDirect) and then also filling out forms from TD DirectInvesting. Cash and securities are treated separately and there is a fee for transferring out. HSBC will cover some of the fees for me – most institutions will do the same.
Now that I will be taxable for the first time in twelve years, I need to be as tax efficient as possible in my financial decisions. I am trying to ensure that both Rochelle and I stay within the lowest tax bracket which in Alberta is about 16.5% on marginal taxable income. With personal deductions and Rochelle’s personal age exemption I have estimated that we can withdraw a considerable amount from our RRSPs (A Canadian plan for saving for retirement, similar to the US IRA). We don’t need the cash, so I will just turn around and invest it in my non-registered accounts. With this withdrawal, we should both stay in the low tax bracket and our effective tax rate (total tax divided by total income) will be under 12% for Rochelle and about 13% for me. That will cover 2014 and hopefully I can do something similar for 2015. Getting a 15% or less effective tax rate is certainly acceptable.
I returned to Canada to take up residency on June 28, 2014. That date is significant for tax purposes as it becomes the date from which all of my income is taxable. Up to that point I paid no taxes, except that which was automatically withheld from dividend payments on my Canadian and US stocks.
From June 28 on, I will be fully taxable on all of my income including dividends and capital gains. So on June 28 I ran a listing of my stocks and their associated market values. That becomes my official cost of my stocks for tax purposes. Any gains from that date on will be treated as taxable capital gains. The good thing is that both capital gains and dividends are treated more favourably than regular income and I will pay at a lower rate due to how dividends and capital gains are brought into income.
Articles of interest:
Mutual fund article – The Huffington Post published an interesting article about mutual funds with a distinct Canadian element.
House Prices – I have often considered Garth Turner one of the extreme right wing nutbags of Canadian Politics. However I have read many of his publications on investing and he does make a lot of sense.
ValueLine mainly rates stocks listed on the US stock exchanges. Several of the top Canadian stocks are listed on the NYSE, but ValueLine does not rate them as A++ so they do not appear on my regular list of suggested stocks. However there are a lot of Canadian stocks that are good to own and hold. HERE is a good article about some of the best Canadian Stocks:
Here is a screener of the Canadian companies that are rated by Valueline: (note: the dividend growth is only one year growth, so may be deceptive)
Suggested stocks (standard criteria: A++, 2% dividends, dividend growth)
Note: ValueLine has changed their website considerably and I haven’t learned all the nuances. Therefore the dividend growth is only one year, rather than the 10 year from previous posts. Also it is now picking up stocks from the NASDQ which didn’t show up before (eg MSFT).