As a visual aid, the planning pyramid helps you show clients how mutual funds fit into the investment universe. A very aggressive investor could consider investments such as OTC Securities.
Foreign dividend income is not eligible for any dividend tax credit and is taxed at an investor’s marginal tax rate.
The top of the cycle is called a peak. A peak is characterized by the following activities: demand begins to outstrip the capacity of the economy to supply it; wages increase; inflation rises; interest rates rise and bond prices fall; sales begin to decline; business investment slows, and stock market activity begins to decline.
The responsibility of regulating mutual funds lies with the securities commissions. The Mutual Fund Dealers Association regulates dealers of mutual funds, but not the mutual fund itself.
The loss-averse investor will choose a lower potential of loss over a more rational choice. In this example, a 25% chance of gaining $2,000 and a 75% chance of losing nothing has the lowest possible loss potential, and will typically be the statement selected by the loss-averse investor.
People who are subject to endowment bias place more value on an asset they hold property rights to than on an asset they do not hold property rights to.
Loss aversion bias states that people generally feel a stronger impulse to avoid losses than to acquire gains. Loss aversion can prevent people from unloading unprofitable investments, even when they see little to no prospect of a turnaround.
Suitability means ensuring that all recommendations are appropriate for the client’s unique situation and investment objectives. It also means that recommendations are based on a personal and financial knowledge of the client and knowledge of the investment products being recommended.
Discretionary income eligible for savings and investments is the difference between the amount of money coming in fromemployment and other sources and the amount of money going out to pay bills. In this example, $100,000 + $10,000 - $95,000 = $15,000.
Joanne’s tax-deductible RRSP contribution room would be calculated as (18% × $45 000) - $2,500 + $2,000 = $7,600.
The taxable amount of the dividend is the income received plus a 38% gross-up amount. In this example, $1,200 + ($1,200 ×38%) = $1,656. The dividend tax credit is 15.02% of the grossed-up amount, in this example, $1,656 × 15.02% = $248.73.
