Risk/Return controls the Risk Profile, Rate of Return and Tax Efficiency of all liquid investments. Different settings can be defined for Pre and Post-Retirement investments as well as individually for Registered Investments and Non-Registered Investments/TFSA.
Registered Investments: Includes all RRSP/RRIF and Locked-In Plans.
Non-Registered/TFSA: Includes all Non-Registered Investments, Corporate Investments, and TFSA.
Risk Profile: Select the appropriate Risk Profile from the drop-downs and RazorPlan will set a Rate of Return and Tax Efficiency (Non-Registered only) that reflects the profile selected.
Rare of Return: Based on the Risk Profile selected, a Rate of Return has been established to ensure that it is reflective of the risk profile.
Tax Efficiency: This value is predetermined based on a common set of investments within each Risk Profile. Tax Efficiency allows the software to replicate the impact asset allocation may have on the growth of taxable investments; as Tax Efficiency is increased, the potion of taxable growth will decrease. This concept is easily illustrated when applied to the 3 main types of investment income.
- Interest income is fully taxable when earned and is therefore 0% Tax Efficient.
- Dividend income earned personally is approximately 35% Tax Efficient, depending upon the province.
- Capital Gains, which are 50% taxable when realized, are a minimum of 50% Tax Efficient.
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