Time to Reset!

Figured we better get something out; it has been a little while and it’s probably a good time to catch up.

The world around us is being split into camps on nearly every single issue imaginable. Who knew wearing a mask to protect your community while out in public would be turned into such a goofy, partisan, raging argument?

It doesn’t seem like anyone can agree on anything, especially not where the markets and economies, which if you don’t know the difference, please read here; are headed. Up or down? crash or boom? Bubble or no? cheap or not? On and on the arguments rage!

 One thing we know, because we look at it all day, every day, is that we are making quite a bit of money in a world where it doesn’t seem like people believe it is possible.

For the most part, the portfolio is up about 7% and client contracts are up anywhere between 4-10%+ depending on fund weighting (control what we can) and some timing (nothing we can do about this.) I would put us at Pre-February numbers, and we are rapidly chasing down our all-time high from mid-February. Even in the middle of the summer, where we typically see a drop in markets, we see consistent ticks up in the portfolio we manage.

But there is uncertainty, and obviously, with the “hot” in the moment debate about re-opening schools (My roommate is a teacher, it doesn’t look good.) we wonder if we are headed for another series of shutdowns on a large scale. Apparently roughly 50% of children are susceptible to spread of the virus, as data is new and slow to emerge, one has to assume this data is a little corrupted as children have been trapped for the most part in their homes.

What I know about kids, maybe some people forget, but what I know to be true is that consistent games of COVID-tag are coming to a school near you. There is no amount of elbow grease that will keep schools clean enough, no amount of diligence, no matter how small and spread out class sizes are that will stop kids from being kids. Recent comments from Adrianna Lagrange suggest that everything will fall on the teachers…

 We are in danger here, opening schools is the culprit for potential hazards to the economy and we need to be prepared.

 “But Don & Darris…” you say, “you tell us all the time that we can’t time the market, it’ll beat us up!”

Yep!

Which is why we aren’t about to panic and try to make moves we can’t make quick enough. The administration alone will absolutely demolish us.

Instead, we can utilize a little-used tool called the “Reset” which we can use to reset all of your contractual guarantees upon deposit to the current market value. This guarantees your growth as well as your capital. Cool right?

 Here is a simple illustration of what I am talking about:

“Let’s say January 1st of 2019 you made a TFSA deposit of $1,000. 2019 saw us increase the value of the portfolio by 20-25%. Based on timing and weighting, let’s say you made on the low end of that spectrum, 20%.

Jan 1, 2020, you have $1,200 in your account and we go through everything we have gone through this year with C19, civil unrest, political strife, etc etc etc and we decide now is a good day to “Reset” your account.

If you have been following along, not only have we made money in 2020, we have made a good amount, actually on par with 2019 year to date (YTD). So you can add another 4-10% to that January 1st 2020 number.

Again, let’s be conservative and say you have earned 5% YTD 5% + $1,200 = $1,260.

We can reset the guarantees inside your account to $1,260.

We have grown and protected your capital!”

Pretty slick right?

 Let’s talk caveats.

 Not every contract has Resets available, if you have investments with us in contracts that do, we will be notifying you and sending out forms shortly. (Please be patient, it is a lot of paperwork.)

 We can Reset contracts that offer 75/100 or 100/100 contract guarantees. Meaning that 75% to 100% of your contract is guaranteed at maturity (a defined date in the future) and 100% at death.

  So, using the example above (using 75/100), a reset would provide an increase in Maturity Guarantee of $195 (from $750 to $945 or 75% of $1,000 to 75% of $1,260) and an increase in Guarantees at death of $260 (from 100% of $1,000 to 100% of $1,260).

NOTE: we generally don’t carry a 100/100 contractual guarantee because it is costly and not available on all funds.

If you’re younger, this isn’t a big deal, a 75/75 guarantee set is cost effective, but doesn’t provide resets at this date. You reset your contract after every deposit. As you near retirement or are into your retirement years; this is a big deal! Estate planning is part of a financial plan.

We can also now add Resets automatically once a year to any 75/100 or 100/100 fund and contract.

Resets are a great tool, but the administration headache to set them up has always been prohibitive. IA now allows us to set and change once per year these “Resets” at no additional cost to the investor. Kind of makes it a no brainer at this point. Another great reason we do so much business with this company.

 What we recommend is to set up this year’s reset immediately and to reset May 1st of every year. The hope will be to reset at the end of what we believe is the savings and spending season. From September to May is usually when we see market growth from consumer spending and corporate savings. From May to September is generally when we see markets contract.

If there is good timing, this would be it. From our perspective anyway.

So here is what I will leave you with today:

This has been a tough go, we know. It is unlikely to get any easier but was time for the markets to go through what they did and currently are, and perhaps again if nations can’t control the spread of the virus. This “recession” if we will call it that, has and will continue to provide opportunities, and we are capitalizing on one now.

This reset is not just a tool to be used when we can, but a great show of force for Financial Value. We haven’t been sitting and waiting for things to change, we have been creating it and I would urge any and all of you to log into your IA accounts and look at what we have achieved together. These positive returns are no easy feat, most Canadians are nowhere near the positive side of the ledger, so we ought to be giving ourselves a hearty pat on the back.

If you have family or friends who don’t have access to “resets” at a time like this, we are simply a phone call away. So far over the last number of months have received quite a few referrals from happy clients and would love to see more.

Thank you for reading and we hope to hear from you soon.

PS: this costs you nothing, it is a super good call!

 Darris Cameron,
 President & COO
 Financial Value Inc.