Are you looking for some different reading? Well, according to The Seattle Times, Robert Shields of Dayton, Wash., has written what may be the most boring personal diary ever. The diary is over 37.5 million words long (the equivalent of about 422 300-page books), stored in 81 cardboard boxes and covers his life since 1972 -- in five-minute increments.
On July 25, 1993, at 7 a.m., for example, Mr. Shields "cleaned out the tub and scraped my feet with my fingernails to remove layers of dead skin."
Only the annual federal budget plan tabled in recent years has been less riveting to read. This year's budget wasn't much better - with the exception of the foreign content changes for registered plans. Let's look at some tips.
As you've likely heard, the government repealed the 30-per-cent foreign content restriction that has been dogging registered plans. A 10-per-cent foreign content limit was introduced in 1971, increasing to 20 per cent in the 1990s and 30 per cent in 2001.
Foreign property has generally consisted of shares, units and debt issued by non-resident entities, investments in trusts (including mutual funds) that hold excess foreign property and investments in limited partnerships.
Now that the foreign content restriction is gone, what should investors be doing?
Don't assume changes are necessary. Just because you can hold more foreign content doesn't mean you should, although you should take the time to reassess your portfolio diversification. Remember, foreign investments can add risk and costs resulting from foreign exchange, withholding taxes and simply being unfamiliar with other parts of the world.
Monitor your RRSP clone funds. Eventually you'll want to exit your high-cost RRSP clone funds that were created to side-step the foreign content limit. Fund companies may do this for you since most will merge their clone funds into the cheaper underlying foreign funds as soon as is practical.
Beware of deferred sales charge (DSC) fees. Some financial advisers may use the new rules as an opportunity to move you to different mutual funds. Be sure you don't pay a DSC when this happens, or you may be better not to switch. And if your adviser does move you, ask to buy the new funds on a front-end load basis, which allows you to negotiate a zero upfront commission with your adviser.
Rebalance all you want. I've got Nortel shares in my RRSP that have dropped in value. Selling them would have reduced the cost amount of the Canadian content in my RRSP, reducing the foreign content I could hold in the plan in the past. No longer. Selling your Canadian losers and foreign winners will no longer hurt from a foreign content perspective.
Forget LSIFs for more foreign content. Many Canadians have purchased Labour Sponsored Investment Funds (LSIFs) because they created an additional $3 of foreign content room for every $1 invested in LSIFs. Now, invest in LSIFs for the tax credits if you want, but not for the foreign room.
Get ready for a wave of limited partnerships. You think income trusts have been popular? Just wait. We'll likely now see a proliferation of businesses structured as limited partnerships. LPs have always been considered foreign content in a registered plan, which no longer matters. LPs can offer some of the same tax advantages as income trusts. More on this later.
Tim Cestnick, FCA, CPA, CFP, TEP, is a tax specialist and author of Winning the Tax Game 2005 and The Tax Freedom Zone.
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