Adrian Mastracci, president of KCM Wealth Management says "If asset allocation is not the focus in your investment portfolio, it ought to be."

Adrian Mastracci, president and fee-only investment counsel with Vancouver's KCM Wealth Management, comments, "Year-end planning is about objectively reviewing your situation to ensure that you receive maximum benefit in managing your serious money."

"I am often asked what the best way is to manage serious money," says Mastracci, "My reply is that managing money is a marathon, not a 100-yard dash. The proven and consistent approach to create, grow and retain your wealth is with the long-term investment perspective. The 2001 year-end review is an excellent time to initiate changes appropriate for you."

"Too many investors have become distracted by the noises and flavours of the day. They devote too much time and effort on selecting their stocks and funds and not enough time on the investment policies and strategies they ought to follow to reach their unique goals," noted Mastracci, "As long as investors make stock and fund selection their first priority, they will have a poor investment experience."

"Practically all financial plans are feeling some bruises. There may be some provisions you can implement to soften the impact of the everlasting economic malaise," indicated Mastracci, "However, pay special attention to your investment policies and strategies. This will provide you with the biggest dividend."

Mastracci offers these ten venerable suggestions to enhance your nest egg:

1. Review your investment plan
Take the time to review your investment game plan, which contains all the policies and strategies you will follow to reach your chosen destination. If you're unsure about the plan's appropriateness, resolve to pay for professional counsel. Above all, you must have confidence in your plan. This removes the tendency to make investment decisions based on emotions. There are no easy answers to investing. It's a game of probability. You want to be right more often than you are wrong.

2. Focus on asset allocation
Forget market timing and picking your favourite stocks. These strategies don't work often enough. The 1990 Nobel Prize studies concluded that asset allocation decisions have the greatest impact on your portfolio returns. Asset allocation means choosing asset classes, such as cash, bonds, and equities, and choosing the mix, such as large companies versus small companies, in your portfolio.

Those asset allocation decisions explained, on average, 94% of the contribution to total return. Clearly, if this is not the focus in your investment portfolio, it ought to be.

3. Pay yourself first
Adopting these three principles will assist your marathon. First, time is your biggest ally so start as soon as you can. Second, discipline yourself to a savings program that you can stay with over time. Third, don't get in over your head with debt, especially consumer debt. Regularly allocate some of your earnings to savings, perhaps by automatic deposit. Aim for 5% to 10%.

4. Tax loss selling
The approaching year-end is an excellent time to determine if your current portfolio will meet your expectations. If what you are doing now doesn't seem to steer you towards your chosen goals, such as financial independence or retirement, then it's time to make some changes. Sometimes a more suitable mix or a rebalancing within the game plan may be all that is required. If you entertain tax loss selling, don't just sell something to realize a loss. Act in context of your overall portfolio and how the individual security fits your investment plan.

The last tax loss trading day is December 24 for Canada, and December 26 for the USA. If all the losses cannot be used in 2001, you may carry them back up to three years or forward until they are used. Do take into account the mutual fund distributions of gains and losses that normally take place in December. Those are the ones where you get to pay tax on the gains without receiving the cash.

Remember that what is most detrimental to portfolios is not incurring losses; rather it's keeping them far too long.

5. RRSP deposits
Don't wait until the first 60 days of 2002 to make your RRSP deposits for 2001 and for unused RRSP contributions from prior years. Even if you don't want to take the deduction in 2001, at least the money will begin to compound earlier in time. If you don't have sufficient cash for the deposit, you can borrow the money or contribute eligible assets to it, such as stocks and mutual funds. However, be careful of any existing capital gains or losses on the contributed assets.

You can ask your employer to send your last one or two paychecks in 2001 directly to your RRSP. This may allow you to send the full amount to the RRSP, without deductions, which in effect gives you the tax refund now.

6. RRIF if you turn 69 in 2001
Those youngsters turning age 69 in 2001 must convert their RRSP into a RRIF not later than December 31. Eligible RRIF investments are the same as the RRSP. Hence, investment strategy need not change if it's appropriate, with the exception that you will be withdrawing a minimum annual sum, and perhaps more. All RRIF withdrawals are governed by a formula and are fully taxable.

The first withdrawal commences in 2002 and if you elect to receive it at the end of the year, the plan will grow to its maximum. You may also elect to receive your formula RRIF payments according to the age of the younger spouse. All RRSP deposits must also be made to your account before you convert to a RRIF. Where applicable, you may contribute them to a spouse who is younger than you.

7. RESP deposits
You may contribute for 2001 to a Registered Educational Savings Plan for a child not later than December 31. The annual maximum is $4,000 per child, to a lifetime maximum of $42,000. Where two or more children are related, you may consider a family RESP plan. Keep in mind that the RESP deposits are not deductible for tax purposes. The accumulated funds will ultimately be used by the child to pay for post secondary educational pursuits. The federal government will also assist the RESP with a grant of up to $400 per child deposited into the plan.

8. Bonus deferral
Those fortunate to be receiving a bonus in the near future, may ask the employer to consider deferring its payment to you until January 2002. That will defer the income tax on the bonus for another year and you may be taxed at a lower rate. That's real a bonus!

9. Deductions and tax credits
Review your situation to ensure that you deduct all amounts paid in calendar 2001 for expenses incurred. These include interest costs, professional dues, alimony, maintenance, child care costs, investment counsel fees, safety deposit box and accounting fees. Some of the outlays will result in tax credits on your 2001 income tax return. Hence, review tuition paid, political contributions, charitable donations and medical expenses so that you can take advantage of the applicable credits.

10. Business owners
If your business employs family members, consider paying their salaries before the end of 2001. This provides them with CPP contributions in 2001 and RRSP room in 2002. Review your own salary, bonus and dividend remuneration mix at the same time. If your business is contemplating purchasing capital assets, such as furniture or equipment, consider making the purchase before the year-end and claim depreciation, albeit at one half the regular rates in 2001.

Take some time to review your vision for the business succession. Planning for this is critical for the long-term survival of the business. Another is using the $500,000 capital gain exemption for qualifying small businesses and family farms. For those that sell an eligible small business and buy another one, there may be the potential to defer the tax on up to $2,000,000 of capital gain.

And just in time for the holidays, the tax department has changed the administrative policy that allows employers to now provide gifts to employees up to $500 per year. The gift is not taxable to the employee and the cost is deductible to the employer.

"The centerpiece of financial success for my clients is the game plan that outlines the policies and strategies they will follow to reach their unique personal goals," comments Mastracci, "Building a home and an investment portfolio have one common thread; things go far better if you start with a plan."

"My experience is that investors who focus on policies and strategies make better investment decisions," concluded Mastracci, "They are also rewarded with returns more in keeping with expectations."

"Take an in-depth look at your finances before the close of 2001," summarizes Mastracci, "You may just retain more of your nest egg."

NOTE: The information provided above is intended for general informational purposes only. It does not constitute advice for anyone's specific situation. Everyone should always first consult directly with their advisors to determine the appropriateness of any information contained above before taking any action. KCM Wealth Management Inc. assumes no responsibility for any loss or damage arising from the use of, or reliance upon the above information.