How To Invest

Pat McKeough has been making investing for beginners simple—and profitable—by helping investors make big gains for more than 25 years. His advice tobeginning investors is the same as it is for all investors: buy high-quality, mostly dividend paying stocks (or ETFs that hold these stocks) and evenly spread your investments over the five main economic sectors (Resources, Manufacturing, Finance, Utilities and Consumer). Pat also believes investors should avoid stocks in the broker/media limelight and focus on those with hidden or little-noticed assets.

In addition, Pat thinks then beginner investors should cultivate two important qualities: a healthy sense of skepticism and patience.

Investors should approach all investments with a healthy sense of skepticism. This can help keep you out of fraudulent stocks that masquerade as high-quality stocks. It will also keep you out of legally operated, but poorly managed, companies that promise more than they can possibly deliver.

If you are a new investor, you should also realize that losing patience can cause you to sell your best choices right before a big rise. All too often, investors buy a promising stock just as it enters a period of price stagnation. Even the best-performing stocks run into these unpredictable phases from time to time. They move mainly sideways in a wide range for months or years before their next big rise begins. (Stock brokers often refer to these stocks as “dead money.”)

If you lack patience, you run a big risk of selling your best choices in the midst of one of these phases, prior to the next big move upward. If you lose patience and sell, you are particularly likely to do so in the low end of the trading range, when stock prices have weakened and confidence in the stock has waned.

capital gains exemption

Learn about capital gains exemption and REITS for real estate investing

Owning your house is a great tax shelter. That’s because gains on your principal residence involve a capital gains exemption. Note, though, that this benefit only applies to your principal residence. You must still pay tax on gains on the sale of a recreational property such as a cottage or a ski chalet. But these properties generally appreciate at a much slower rate than, say, a home in a major urban centre.

We continue to believe that ownership of a primary residence is all the real estate exposure most investors need. However, if you want to add to your real estate holdings, one good way to do it is through real estate investment trusts, or REITs.


Dividends make the difference

The best dividend stocks will turn an average portfolio into a strong, fast-growing one. Pat McKeough has spent years showing investors how to convert high-quality dividend stocks into greater earning power. Now he shows you how to make it work for you in his complete guide to dividend investing. Get his free report now.

Download this free report >>


Capital gains exemption: Making an adult child co-owner of your home or portfolio can have hidden taxable capital gains consequences

If you have capital gains on your portfolio, you are only liable for capital gains taxes when you sell. But if you put your son or daughter on as a co-owner, the Canada Revenue Agency could interpret that as a “deemed disposition” —a sale, in other words—of half the portfolio. That would leave you liable for capital gains tax this year, rather than deferring those gains until you sell or die.

When you die, you are deemed to have disposed of or sold your entire portfolio. But no matter how old you are, that day can still be years in the future. It’s a waste to pay capital gains tax any sooner than you have to. Worse, your stocks may have gone down by the time you die. The gain on which you’ve already paid taxes may have evaporated!

You won’t have this exact problem if you put an adult child on as co-owner of your home, since your principal residence experiences capital gains exemption. But each of us can only have one principal-residence capital-gains-tax exemption. If your adult child already owns a home, then any gains he or she makes on your home, after becoming joint owner, will be taxable.

In this case, putting your adult child on as co-owner of your home could convert some tax-free capital gains (in your hands) into taxable capital gains (in your child’s hands).

REITs can kick start your real estate investing in Canada

Real estate investment trusts invest in income-producing real estate such as office buildings and hotels. That’s a segment of the market that is difficult for most investors to access through direct ownership of property. Moreover, real estate investment trusts, REITs, save you the cost, work and risk of owning investment property yourself.

The best real estate investment trusts have good management and balance sheets strong enough to weather an economic downturn. They also have high-quality tenants, and they carefully match their debt obligations with income from their leases. The best ones still do well despite an economic slowdown, and they take advantage of low interest rates to refinance long-term mortgages.

Outside of REITs, if you’re investing in real estate primarily for profit, you should look at multiple-unit rental housing or commercial properties, especially those with big parking lots or extra land. Investments like these can give you current income, plus long-term development possibilities. That’s a potent combination for patient investors. And of course, location is the most crucial part when it comes to real estate investing in Canada and in any country.

Calculating your capital gains tax

To calculate your total capital gain on a share you sold during the previous tax year, subtract the adjusted cost base of the shares you sold from the total proceeds of the sale. The adjusted cost base of the shares is equal to the cost of the shares plus any costs associated with owning them, such as brokerage commissions.

Capital gains exemption: Make sure you claim all of your deductions against taxable capital gains

Commissions and brokers’ fees aren’t the only expenses you can deduct when you sell your capital property. You can deduct many other outlays and expenses that you incur to sell your property, including fixing-up expenses, finder’s fees, surveyor’s fees, legal fees, transfer taxes and advertising costs. To ensure that you claim all of the deductions you can, and do so correctly, we advise that you consult a knowledgeable tax professional.

Should baby boomers sell their homes early in order to help their adult children buy their own homes?.

Read More

How To Invest Post Archives

Capital gains exemption and real estate investing

Capital gains exemption and real estate investing

Learn about capital gains exemption and REITS for real estate investing
Owning your house is a great tax shelter. That’s because gains on your principal residence involve a capital gains exemption. Note, though, that this benefit only applies to your principal residence. You must still pay… Read More

What are stock investment clubs?

Stock investment clubs can help new investors find quality stocks and help them develop their own investing style. But watch out for the drawbacks.
In 2017, learning about stocks is as easy as connecting to the Internet. But if you want to further your knowledge of investing,… Read More

7 ways Canadian stock options will cost you money

7 ways Canadian stock options will cost you money

Canadian stock options can generate a lot of money for your broker, but here’s seven ways they can cost you even more
Trading Canadian stock options can generate a lot of brokerage commissions, which is why some young, aggressive brokers recommend them for their clients. That’s despite… Read More

TD HEALTH SCIENCES FUND $13.54

In 2017, mutual funds face increasing competition from ETFs as a low-cost alternative. But here’s a look back at a fund that continues to attract the same interest as it did here in May 2009…

TD HEALTH SCIENCES FUND $13.54 (CWA Rating: Speculative) (TD Asset Management, P.O. Box 7500, Station… Read More

Canadian capital gains tax is one of the lowest you’ll ever pay

Canadian capital gains tax is one of the lowest you’ll ever pay

Last year’s stock market volatility spurred a rise in investor questions about capital gains tax. This year’s early bull run as spurred even more.
There are three forms of investment income in Canada: interest, dividends and capital gains. Each is taxed differently. Here’s a reminder of how smart… Read More

How to make stock picks from the TSX index

How to make stock picks from the TSX index

Financial, safety, and survival factors are important to consider while looking for stocks on the TSX index
The TSX is the abbreviated name for the Toronto Stock Exchange. You will often see our stock recommendations on TSI Network accompanied by a TSX symbol. When we’re looking… Read More

What do playing the stock market and chess have in common?

Successfully playing the stock market—like chess—is never about going for broke.

Many investors like to use analogies from sports or the military to describe their investment approach, so they’ll often use the phrase playing the stock market. But if I had to compare our… Read More

Pendulum theory: An imperfect way of understanding the stock market

Pendulum theory: An imperfect way of understanding the stock market

The “pendulum theory” grew out of Sir Isaac Newton’s 17th-century studies of gravity and physics, particularly his second law of motion. Yet the theory turns up in discussions of all sorts of non-mechanical topics. This includes investors’ efforts at understanding the stock market.

You could sum… Read More

How to invest: Tips for new (and established) investors

How to invest: Tips for new (and established) investors

Positive everyday behaviours—not big ideas—are the keys to successful investing for beginners

Our advice to beginning investors is the same as it is for all investors: buy high-quality, mostly dividend paying stocks (or ETFs that hold these stocks) and evenly spread your investments over… Read More

The presidential election effect on the stock market

The presidential election effect on the stock market

Here’s our view on the presidential election effect on the stock market
Lots of Canadian and international investors were worried about the U.S. political situation and the subsequent election effect on the stock market.
Some worried that if Democrat Hillary Clinton won the U.S. Presidency, lots of… Read More