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Active versus Passive Investing
 

Work harder, work longer hours, pay off our mortgage, put our savings away and we’ll be financially well off in the future. These are the words of wisdom that most Canadians have been following from generation to generation.

There are good standard rules to investing for the future that everyone should follow. The concepts of dollar cost averaging, diversification and long-term investing are well proven in their effectiveness and everyone should be using them.

One of the major problems with the way that we are investing though, whether it is our house, our Registered Retirement Savings Plans (RRSPs) or other investments is that we use a passive technique. What I mean by that is that we tend to invest and then let the investment sit there while we wait for the market to move upwards. We become very dependent on the market itself to provide growth, something that we cannot control, and get trapped in the emotional investment cycle of bears and bulls. The two main emotions fear and greed will cost you money every time and should be avoided at all costs.

One of the best techniques that I use to help clients avoid this fear/greed trap and make a positive difference to their finances regardless of the market is to make their investments actively do something for them today. I refer to this as active investing and each investment, be it your house, your RRSPs or other savings should all be doing more than one thing for you.

All Canadians have the right to arrange their financial affairs in such a way as to pay the least amount of taxes allowable under the law.

The Income Tax Act allows for certain tax breaks that cover different types of income, RRSPs, certain insurance contracts and interest paid on money that has been borrowed to invest and create income. There are numerous areas where the average Canadian can improve their financial position by using the Tax Act in their favor.

You may not be able to control the growth of your investments but you can control your assets in such a way as to produce tax advantages, cash flows, increase your investments and/or decrease your debts. The Mortgage Freedom Program has been designed to put your finances, both your cash flow and your assets, to work today in a conservative, responsible way to produce better results for tomorrow.

If you let your money work harder, longer and smarter then you won’t have to.

“The true path to financial independence is through debt elimination and superior asset accumulation.”

 
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