LESS THAN TWO WEEKS LEFT FOR RRSP CONTRIBUTIONS

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  There’s less than two weeks remaining to make your RRSP contribution for the 2005 tax year. So if you’ve been thinking about it but haven’t acted yet, don’t dawdle. The deadline is March 1.

Readers are always asking me about the best places to put their RRSP money. For most people, I suggest mutual funds for several reasons: they offer instant diversification, your money is managed by professionals, they are easy to buy, and you only need to own a few to achieve a well-balanced portfolio.

The simplest approach if you are just starting out is to choose a well-managed balanced fund. This will give enable you to have both stocks and bonds in your RRSP, all wrapped up in a neat package.

There are many fine balanced funds available. One of the better ones is Fidelity Canadian Balanced Fund. It has been a first or second-quartile performer since its launch in 1998 and has held up well in good markets and bad. I like that kind of consistency. Manager Bob Hager uses a target asset allocation of 50% equities, 40% investment-grade bonds, and 10% cash, so the portfolio has a truly balanced look and feel. Returns are very good over both the short and long term, with a three-year average annual gain of 12.8% to Jan. 31, two points above the category average. The one-year gain was 15.4%. Distributions are paid quarterly. This has emerged as one of the better Canadian balanced funds and gets my top $$$$ rating. Choose the B units.

Other good choices include Saxon Balanced Fund, which requires a $5,000 minimum investment; Harbour Growth and Income Fund, which is offered by CI Funds; Dynamic Focus+ Balanced Fund; and any of the big bank monthly income funds.

TD FUNDS 2006 PUBLISHED

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  You’ll also find several good RRSP choices in my new special report, TD Funds 2006. In it, I take a fresh look at more than 50 mutual funds offered by TD Asset Management and provide ratings and candid analyses for each. A new feature in this year’s edition is a special RRSP/RRIF Suitability Rating, which helps you to quickly identify the funds that I feel are most appropriate for registered plans.

This special report, which has just been released, is based on performance results to Jan. 31 so it is right up to the minute. If you have any TD funds in your portfolio or are thinking of buying some, it is must reading.

The price for the electronic version is just $23.95 plus tax. We also have a print version with binder for $39.95 plus shopping and taxes. For more details go to http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=578

My Top 50 Funds 2006 is also still available for those looking for a wider range of RRSP choices. For more information: http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=571 By the way, all members of our On-Line Buyer’s Guide to Mutual Funds receive all these special reports free as part of their subscription. The price for a full year is only $49.95 plus tax. Our Database contains reviews and ratings for 1,315 mutual funds and members are allowed unlimited access. Details at http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=72

WHY RRSPS ARE MORE IMPORTANT THAN EVER

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  Employer pension plans are under a lot of pressure. Many are underfunded and in some cases benefits have already been cut. Veteran money manager Tom Slee recently explained in an Internet Wealth Builder article why the pension crisis makes RRSPs even more important for your financial future. You can read his report at http://www.buildingwealth.ca/News/Featuredetails.cfm?NewsletterID=2460

RETIREMENT TIME BOMB FOCUSES ON PENSION MESS

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  The growing concern about private pension plans and what to do about them is also a central theme of my new book, The Retirement Time Bomb, which has been as high as #6 on the Amazon.ca best-seller list. To order a copy at 34% off the cover price, go to www.buildingwealth.ca and click on the Amazon link on the Home Page.

Recently, I was interviewed about the book by Patricia Lovett-Reid, host of ROB-TV’s popular MoneyTalk show. If you missed the broadcast, you can see the complete program at http://www.robtv.com/servlet/HTMLTemplate/!robVideo/robtv0726.20060209.00036000-00036851-clip1/h/220asf/

DON’T ROLL THE DICE IN YOUR RRSP

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  One of the biggest mistakes made by RRSP investors is to take big chances with their money. More often than not their gambles end with losses which cost them dearly. The way to avoid falling into this trap is to think of your registered portfolio as a personal pension plan, which it is in actual fact. Now think about how professional money managers handle pension accounts. They are very conservative and with good reason. These men and women have been entrusted with the retirement savings of all the contributors to the plan. Those people are depending on them to ensure that the money will be there when it comes time to draw on it. So the last thing they can afford to do is to take big risks that might result in heavy losses. Your RRSP should be handled the same way. Risk should be kept to a minimum and your securities should be chosen accordingly. Over the years, I have seen a tendency in people to throw caution to the winds in their RRSP accounts and suffer the consequences for their recklessness. I believe there are two reasons for this. One is the fact that retirement seems a long way off, especially to anyone under 40. As a result, the assets in an RRSP take on a sort of Monopoly money aura so taking some chances doesn’t seem like a big deal. If things don’t work out there will be no impact on the person’s lifestyle, so why not roll the dice? The second factor is greed. A conservative portfolio will not grow as quickly as a more aggressive one when markets are booming. I can still vividly recall the lady who was chatting with me after a seminar I gave in St. Catherines, Ontario in February 2000. She was very unhappy with what she regarded as too low a return on her RRSP money (as I recall it had been about 10% in 1999). High-tech stocks were flying and science and technology mutual funds were churning out annual gains of 50% and more. She wanted to get in on the action and told me she was planning to convert everything into an index mutual fund that tracked the Nasdaq Composite Index. I vigorously tried to dissuade her but I’m not sure that I succeeded. If she went ahead, it would have been disastrous for her retirement plan. The message is very simple. If you want to take more risk in the hopes of increasing your returns, do so in a non-registered account. At least if you suffer losses there you can claim them on your income tax.

CONSERVATIVES SILENT ON PENSION REFORM

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  The Conservative Party election platform covered a lot of issues but pension reform was notably absent from the list. In fact, there was very little in the document on the whole subject of retirement planning. That prompted me to write an open letter to our new Prime Minister, Stephen Harper. You can read what I have to say at http://www.buildingwealth.ca/News/Featuredetails.cfm?NewsletterID=2459

ANOTHER BIG SCORE FOR IWB MEMBERS

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  Readers of our Internet Wealth Builder newsletter are about to benefit from another corporate takeover (the last one was the purchase of Dofasco by a European company, which we reported last month). In this case, the target is Hughes Supply (NYSE: HUG), which we recommended in September at US$31.29. It was announced recently that Home Depot (NYSE: HD) is buying Hughes for US$46.50 a share which will give our members a profit of almost 50% in less than six months. Incidentally, Home Depot is also an IWB pick.

For a limited time, we are offering a three-month trial subscription to the e-mail edition of the IWB, which is published weekly, for only $32.95 plus tax. Please go to http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=562 for more details.

CORPORATE PROFITS A CONCERN

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  Fourth-quarter profits for U.S. companies are falling short of expectations. This could spell trouble ahead for stock markets. To find out more, read the full story at http://www.buildingwealth.ca/News/Featuredetails.cfm?NewsletterID=2468

That’s it for this month. We’ll see you again in March.