Currently, CPP at age 65 is $934 per month.   Starting in 2011, CPP will begin phasing in higher payments to those of us who wait beyond age 65 to start our pensions, and lower payments for those of us who decide to collect them earlier.

Under the proposals, deferring our pension will add $78 each year, up to $1326 per month by age 70.  On the other hand, if we start to collect early, we will lose $67 each year, and receive only $598 at age 60.  (Our actual pension will depend on our contribution history, and annual inflation adjustments.)

Also, starting in 2012 we no longer have to stop work or reduce our earnings for at least two months in order to apply for CPP.  If we collect early and continue working, both we and our employer will still be required to contribute to CPP.  (This means a higher pension the following year.) At  age 65, contributing to CPP will then be optional.

Exchange Traded Funds (ETFs) seem to be multiplying daily, and evaluating how they might fit into your portfolio can be confusing.

ETFs give investors exposure to a group of securities, and trade on exchanges like stocks.  Most of us think of ETFs based on well known market benchmarks like the S&P/TSX index, but now ETFs can also be based on very specific sectors like natural gas, gold, REITs, etc…  and are often traded actively.

Outside of institutional investors, sophisticated investors with adequate time, knowledge and access to quality research, may be comfortable acting as their own portfolio manager.  However, most investors find they are better served by the biggest funds in Canada, which on the whole have delivered good returns, with more stability and less drama.

An actively managed portfolio is often more diversified amongst companies, sectors and geographic regions, avoiding many of the excesses and flaws inherent in simply tracking an index.  Unlike ETFs, many of the biggest funds have beaten the indexes over numerous time periods.   
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Everyone’s situation is different.  Your personal and family circumstances, risk tolerance, age, investment capital available, existing sources of guaranteed income, and retirement income expectations are all important considerations.

A life annuity is for those of us who want safety and guarantees, and don’t want any management responsibilities.  It will guarantee you income for life, or provide income for the lifetimes of you and your spouse. Because you give up flexibility and access to your capital, you need to keep other money available for the unexpected, or have access to money with a secured line of credit against your home.

Annuities can be great for a healthy individual or couple with longevity on their side, and for the financially unsophisticated (or when one spouse is more knowledgeable than the other, it can protect the surviving spouse if they outlive the more financially experienced one).

If you have ever spent sleepless nights worrying about your investments because of market volatility, locking part of your money into annuities will provide risk-free income at a high rate of return relative to current low interest alternatives like term deposits and bonds.  Annuity income is also very tax advantaged, if you invest non registered money.  
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Canada is definitely in the global spotlight these days. Our financial system is envied by most, our currency is strong, and our natural resources are in demand. It should be no surprise then to find energy, financial, and material companies making up almost 80% of the TSX index. This kind of market concentration means that most Canadians portfolios are influenced by those three sectors.  Much of last year’s market rebound was focused on these very sectors; however, in the process the other side of the market received little attention and has yet to fully participate in the market recovery. Fortunately, that is good news as it means that there is still value in the market if you look hard enough.

While most Canadian’s investment exposure is in the big three sectors, attention should be paid to the other 20% of the index which offers potentially better opportunities for relative and absolute growth. Which sectors make up the other smaller half of the market? They are mostly less cyclical sectors like utilities, consumer staples, telecommunications, and health care. It is these sectors that were ignored last year and potentially offer better value going forward. Often in investing, the best opportunities are where no one is looking.
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