B15 - Friday, May 18, 1984 - North Shore News

HE oursimess (eff |

By PAUL ROCKEL

FIFTEEN per cent a year for
10 years —- compounded!

Do you know what that
means?

In dollar terms, it means
that a $1,000 investment
would be worth more than
$4,000 or a $10,000 invesc-
ment more than $40,000.

But ,today people = ask:
*‘Where can you get 15% re-
turn On your investments?’’ |
believe the answer can be
found in investment (mutua])
funds.

MAJOR FUNDS
SURVEYED
The Financial Times’ Jan.

23 issue carried the results of
all Canadian investment
funds, showing the com-
pounded average per year for
those funds for the past one,
three, five and 10-year
periods.

1 counted all the ‘‘equity’’
funds that had achieved 15%
gain or more, and discovered
there were 97 of them that
had achieved that 15% or
more average a year over the
past five years, and 31 that
had done so over the past 10
years (many funds are not yet
10 years old).

Compare that return with
the average available today in
banks, trust companies, mor-

REA nestle gest oY

tgages, etc., where the max-
imum seems to be 11% or
11.5%.

Compare that also to the
fact that the 11% ‘‘interest’’
return is fully taxable,
whereas the 15% ‘‘equity.”’
return — made up of divi-
dends and capital gains — is
only half (or less) subject to
tax.

Today it’s difficult to
‘“‘make money’’ by earning
interest. It’s not the fault of
the ‘‘interest’’ but the fault
of those twin eyils called
‘“inflation’’ and ‘‘taxation’’.

Years ago, in the 30s and
40s, if my Dad_ invested

$1,000 in a bank and earned

SORROW Se OTERO

= +

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3%, he had an ‘‘actual’’ 3%
gain. Inflation ate away next
to nothing, and he paid no in-
come taxes. He had a 3%
gain.

But today, if | earn 11% in
interést and am in the 50%
tax bracket, I have only 5.5%
left after taxes. And if infla-
tion is only 5%, my ‘‘pur-
chasing power’’ gain is only
half of 1%. My Dad's 3%
‘‘purchasing power gain’’ is
500% greater than my 11%
investment earns me.

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about how we put our savings
to work.

If we can get 15%, we
should seek it out. If that
15% is indeed capital gains
and dividends, with half or
less taxable (7.5%), my tax
costs at the $0% bracket
would be (7.5% divided by 2)
3.75%. That leaves me with
(15% minus 3.75% taxes)
11.25%. Take away 5%
inflation, and | have 6.25%
increase in purchasing power.

I've beaten my Dad’s in-
vestment return.

The past 10 years have pro-
ven it can be done. We expect
the next 10 years to equal the

Overcoming the bite of inflation

past, and that 15% average
per year could still be the
result.

It’s worth looking into.

Paul J. Rockel is President of
Regal Capital Planners Ltd.
and The Independent Invest-
ment Fund Dealers § As-

sociation of Canada.

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N.S. News

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Dacy

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