Michael Grenby DOLLARS AND SENSE SUDDENLY A change eccurs — in your life, the economy, the tax rules — that raises some financial * question. - Heré are some questions from readers who have’ gone through some changes lately. (1 do reply to as many zeader letters as possible through this column but unfortu- nately cannot respond individually.) - + Question #1: “I'm getting con- flicting advice. I've been told to borrow $100,000 against the equity ‘.. in my home for investment — but -; L’ve also been advised not to do this, simply to let the value of the home appreciate. I’m a teacher, a singic parent with one young adult » ‘child still at home. I have a home :° worth $175,000 with a $25,000 mortgage; | also have $38,000 in my RRSP and make the maximun : contribution each year because T BC. "t qualify for a full pension.” ae x3 , >. Amswer: Borrowing te invest . (leveraging) is a more aggressive ‘and risky approach than simply sav- ‘ing to invest. Using other people's . Money can certainly pay off. But it can also leave you in debt. ’. A plus of leveraging is that you : Can usually deduct your interest, which saves you tax. As long as “your investment goes up in value, . you make money without having to “ invest any of your own. Example: Borrow that $100,000, make an investinent which increases 20% to $120,000, pay back the $100,000 loan and you will have tumed a zero savings balance into $20,000 (minus your after-tax expense). On the negative side, Ottawa could change the rules about deducting interest. Or interest rates could rise, and your investment could go down in value. Example: Barrow $100,000, make an invest- ment which drops 20% to $80,000 and your net debt load has just jumped $20,000 (plus your after-tax interest expense). Conclusien: If you feel com- fortable with the risks because you can afford a possible loss, go for it. But unless you're an astute investor, I don’t think you should borrow to invest. If you do decide to go ahead, limit your exposure by bor- rowing only $10,000-$ 15,000. Question #2: “I want more information on foreign investments; a USS. doilar account doesn’t excite me. As I am 70, my money. must be secure.” — E.L. . Answer: Investing in an interna- tional mutual fund is the easiest way for the ordinary person to diversify. if the fund’s portfolio grows and the value of the Canadian dollar declines, you’li get double the bang for your buck. But how secure will you feel if the portfolio and exchange rates move the other way? You can also buy individual . securities with an international fla- vor, whether bonds denominated in a foreign currency, shares in Canadian companies that do busi- ness abroad, or shares in foreign companies. But again weigh reward against risk: there are no guaran- tees. Also, do your research to find the best investments and take a long-term approach - which means being prepared to commit your money for at least 10 years. Question #3: Should we claim the capital gains exemption this year on our cottage, which is willed to our sons, even if our tax bill goes up? And if we do, can we split the claim between the two of us?” — RW, Answer: You may split the claim according to whose money went into the place. Fill out the form Revenue Canada expects to have available at the end of the year. Look at the costs and decide if you are willing to incur them now to reduce the tax your sons will probably have to pay when they inherit the cottage. Question #4: Should we transfer our RRSPs into RRIFs? My hus- band is 67.” — G.M. PUBLIC NOTICE WEST VANCOUVER PU PROPOSALS - West Vancouver council has been asked to allow additional applications for neighborhood pubs. Two new proposals are underway in your area. One is Park Royal South; the other is a local night Club. As residents we urge you to express your views on liquor policy to: The Pub Committee Planning and Development . Department The District of West Vancouver, 750 17th Street, West Vancouver B.C. V7V 3T3 This ad has been paid for by Squarerigger Pub Ta serer eens} tis NEWS photo Hike Wakefiold TWENTY-THREE YEAR employee Veronica Judd cuts the ribbon to officially opan Wal-Mart store No. 3057. The new store is focated in Capilano Hall in North Vancouver. Answer: Unless you need the mioney now or expect to be in a higher tax bracket in the near future, leave al! your money in your RRSPs to grow tax-free as long as possible. Mike Grenby is a North Shore- based columnist and independent Financial adviser who works with individuals; he will answer your questions in this column as space allows — write to Mike c/o 2444 Haywoed Ave., West Vancouver, w7v 1Y1. {wuTuaL FUND LINITED PARTNEASHIP TAX SHELTER —Possibl the last availble for 1994 CLOSING DATE: DECEMBER Sth (or earlier) Jb CM. 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