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Thread: Please advise

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    Veteran Member Yea's Avatar
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    Default Please advise

    Please keep in mind I’m in Canada.

    The financial pressure and reality of growing to retirement age really scares me. I have always been independent, plan to live forever and I need to know I’ll be living great even in 100 yrs.

    There are limits in Canada as to how much one can really “save”. I am looking for the right investments. Clearly, diversified but I need my large basket and I’m really undecided.


    Is real-estate the best way to go?
    -People will always need housing
    -Land will be in larger demand (wont it?)
    -Unlikely to devaluate (varies)
    -More than likely wont just disappear!


    What are some other options? Large returns, compound interest.. were can I get the best rates?

    Business venture capital investments, bonds, stocks, etc. etc. etc. It’s confusing there are soo many options.


    I have mutual funds which I haven’t profited from, (they keep loosing money). I don’t trust those “financial advisors”, they just want my money so they can invest with who ever their company does business with.

    Please advise.
    Thanks, greatly appreciated.


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    Banned Melonie's Avatar
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    Default Re: Please advise

    your biggest problem at the moment is that you've been investing using Canadian dollars - which are more or less backed by Canadian natural resources and as a result keep rising compared to the US$. This means that if you invest in US$ priced investments, even if those investments go up in terms of US$ terms they may still have gone down in Canadian dollar terms. You've also got taxation issues which are different than the US. And real estate is only as good as the local economy the real estate is located in. In a nutshell, Jean Chretien and the Canadian liberals have pissed off GWB and US businessmen (Canada's biggest trading partner), they have taxed and spent their own economy pretty deep, and all Canadians are now taking some financial lumps as a result.

    I'll try to do some brain-picking the next time I run across some multinational banker types in the VIP room.

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    Default Re: Please advise

    Thanks Melonie ;" )
    I wonder what the laws are regarding Canadians investing in the US?


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    Default Re: Please advise

    I wonder what the laws are regarding Canadians investing in the US?
    There really isn't any difference in regard to tax laws as long as you 'repatriate' the proceeds of any stock sales and dividends - you'll still be paying taxes to the Canadian gov't. You might have to deal with US withholding issues (i.e. filing a US tax return to get the mistakenly withheld US tax money refunded), but if your broker has a Canadian office and is aware that you are a Canadian citizen you probably won't even have to deal with this.

    The biggest risk you face when investing in US stocks and bonds is the currency exchange rate issue. In order for you to earn a profit on US$ priced stocks and bonds, not only do those US stocks and bonds need go up in value in US$ terms, but more importantly they must go up even more in value to cover a rising exchange rate between the US$ and the CDN$. In other words, if you buy a US stock today with CDN$'s, and that stock goes up 5% on a US stock exchange, and you sell that stock next year, you'll only show a profit in CDN$ terms if the value of the CDN$ against the US$ increased less than 5% (plus commissions) when you reconvert the proceeds of the stock sale to CDN$. You can see the gist of your problem by looking at the graph at . The value of the US$ has declined nearly 20% against the CDN$ over the past 6 months, meaning any US investment which earned say 5% in that same time period would have lost you money to the tune of -15% in terms of CDN$'s !!!!

    I just got off the phone with an acquaintance in the Manhattan finance district, and he indicated that the only way that you can really avoid the currency risk is to invest in stocks of Canadian companies whose production costs are in CDN$ and where the market price for the product they make is also in CDN$ (or put another way, where the sale price of their product is rising faster than the CDN$ is rising against the US$). Basically, at the moment this boils down to Canadian oil and gas companies. My acquaintance also mentioned that Canadian precious metals mining companies are almost as good.

    But my acquaintance warned against Canadian companies who manufacture products where the vast majority of their market depends on export to the USA. Without the artificially low Canadian dollar exchange rate which existed 2 or 3 years ago, the high taxes and high benefit costs of Canadian labor and the high regulatory costs to Canadian businesses are now making these products too expensive to sell well in the USA. My acquaintance also cautioned against Canadian companies which depend on the US market for their commodities like lumber or beef or grain, because these are subject to tariff disputes, subsidy disputes, and also things like mad cow disease.

    As to diversification, you really can't do this without taking a currency risk. The reason is of course that the Canadian economy really isn't all that diversified. Yes there are some Canadian banks and some Canadian software companies available to invest in, but they are certainly not major players on a global basis.

    My acquaintance also pointed out that you may want to think about investing in tax exempt Canadian gov't securities, given the higher Canadian interest rates and tax rates, and given the degree of future profit risk now present in most Canadian companies as the CDN$ continues to rise and Canadian products become more and more expensive to US customers.
    Last edited by Melonie; 02-15-2005 at 11:01 AM.

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    Default Re: Please advise

    Wauw Mel, thank you soo much! That’s really informative, I hadn’t considered all of the above Canadian risk factors. So glad I asked!

    A friend of mine is suggesting I buy into real-estate, but it’s all really long term and I don’t want everything tied up.

    The Canadian guv investments have limits, it's a very small option for me.

    Hot tips anyone?


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    Default Re: Please advise

    A friend of mine is suggesting I buy into real-estate, but it’s all really long term and I don’t want everything tied up.
    As I said earlier, real estate is intimately tied to the local economy / population trend of whatever area the real estate is located in. If the economy is booming and 'professional' people are moving into the area then real estate is a reasonably good investment. However, if the economy is hurting and 'professional' people are moving out of the area then real estate can wind up being a big loser. There's also the issue of future property tax trends and comparable market rent trends over the life of whatever mortgage financing you'd be signing onto, which can create new expenses and reduce anticipated revenues.

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