Finance “What if [some unforeseen event] happens?” Trouble in the White House. A trade war with China. Real war in the Middle East. The breakup of the European Union. These days, if you’re looking for reasons to worry about the world, you don’t have to look very far. And it’s true that any one of these events could have a significant impact on the stock market. What if some of these worries come to pass? Your best bet is to diversify before they do. Macroeconomic and geopolitical events are difficult to predict, but you can mitigate their effect by spreading your holdings among different parts of the world. Let common sense be your guide here: conservative investors will want to keep most of their holdings in stableWestern economies. If you’re comfortable withmore risk, feel free to invest in emerging or frontier markets, but keep those allocations to a reasonable size in order to minimize exposure to dictators, strongmen and regimes that may not last. “What if they change the tax laws?” Death and taxes: two things we can count on in life. But while we know that April 30th is the day we have to file, we don’t always knowwhat changes will occur from year to year. And while radical changes (remember the elimination of income trusts?) don’t happen too often, it remains a possibility that the federal or provincial government may change the rules of the game to our disadvantage. What can you do about this what if? Start by asking yourself: does the success of this investment depend on the tax advantages expected from it? If so, ask yourself whether it’s likely that those tax laws will change. Better yet, ask a qualified tax accountant or lawyer. While they may not be able to provide a definitive answer, they may well be able to provide some context for further discussion and thinking. “What if the loonie dives?” Every year, this is the big question on the minds of most snowbirds as they try to figure out exactly when they should convert some of their loonies into U.S. dollars, euros or other currencies. While exchange rates can obviously have a significant impact on your overseas purchasing power, currency movements are notoriously difficult to predict – even for seasoned, well-paid professionals who try to do it every day. One way to deal with this “what if ” is to use an averaging-in strategy. Instead of buying foreign currency all at once and hoping that you timed your purchase right, buy a little each month, or every two weeks as you get closer to your departure date. Sure, it’s a bit of a pain. But it helps you get on with your life rather than continually worry about whether you timed your purchase correctly. We’d be remiss if we didn’t mention that the Canadian Snowbird Association has a currency purchase program. It works like this: on the first of every month, Canadian dollars will be withdrawn from your chequing account. That money is then pooled with others, and U.S. dollars will be deposited into your U.S. chequing account on the fifth of the month. With so many people buying all at the same time, you’ll be getting better rates than the banks will give you – sometimes, much better. We publish an online chart every month that compares our rate to three other financial institutions. Check it out and you’ll see that it’s the best way to get the biggest bang for your Canadian buck. “What ifs” you should keep an eye on (but probably can’t do anything about) This category includes risks that are significant and real, but are notoriously difficult to predict and plan for. While they’re sure to get a lot of attention in the financial press, it’s important to realize that they remain largely out of your control. 32 | www.snowbirds.org
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