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4 Different Ways to Think About Investment Risk – The Wall Street Journal

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Earlier this year, on the eve of what would have been the 11th birthday of a historic bull market, stocks started rewriting the history books in the opposite direction. As coronavirus fears gripped the world, huge daily declines piled up, leading to a bear market and an end to what some have called a magical decade.

Since then, market indexes have recovered some lost ground, and now—whether it feels like it or not—stocks are in a new bull market based on the rule-of-thumb definition of having risen 20% from their low without another 20% drop.

Clearly, markets are unsettled and may be for some time, which adds even more urgency to the following question: Do you know how risky your mutual funds or exchange-traded funds are?

For many investors, the honest answer is “probably not.”

U.S. markets “had this magical decade, and that’s pretty rare,” says Meb Faber, chief executive and chief investment officer of Cambria Funds. Now, some market veterans worry that many individual investors aren’t familiar enough with measures of risk to understand when they are flashing red.

Investors define risk in different ways. For some, it’s the market gyrations that make them fearful of staying in the market. For others, it’s the prospect of incurring big losses they won’t be able to recoup before they retire, or otherwise failing to accumulate the nest egg they know they need. Still others want to avoid being stuck in a fund that underperforms its peers and leaves them lagging behind the pack.

“We see lists of top-performing funds everywhere,” says Charlotte Beyer, the founder of the Institute for Private Investors, a networking and educational organization. But what really matters “is how much risk [investors] have to take in order to collect those returns,” she says.

Nailing that down is tougher than it seems, even in an investment world awash in metrics. Just ask the veteran Wall Street strategist Byron Wien, who tried to challenge the concept that “absolute performance is king” nearly a quarter-century ago. His attempt to create a metric that would capture risk-adjusted returns in a single, simple percentage figure (based on research done by Leah Modigliani, with whom he worked at

Morgan Stanley

at the time, and her grandfather, Nobel economics laureate Franco Modigliani) never became mainstream.

So, what’s an investor to do? The simplest answer may be to familiarize yourself with some of the main risk-adjusted measurements available, and determine which is most relevant for your purposes.

1. The Sharpe ratio

This gauge of risk is the granddaddy of them all and is relatively simple, perhaps too much so in the eyes of some experts. Named in honor of its architect, Nobel economics laureate William Sharpe, the ratio measures the additional amount of return a fund or portfolio manager provides per unit of increase in risk. It is calculated by subtracting the rate of return of a risk-free asset (such as U.S. Treasury bills) from the average rate of return of a fund’s portfolio. That amount is then divided by the standard deviation of the fund portfolio’s returns, or the degree to which those returns vary from their mean.

The higher the Sharpe ratio, the better the fund’s manager is doing at delivering lower-risk returns, without incurring the swings that make for great headlines. In other words, the ratio is largely about equating risk with volatility.

One factor that has made the Sharpe ratio the most familiar and widely used measure of risk (you’ll find it quoted on many financial data sites, as well as in mutual-fund disclosure documents) is that it’s easy to grasp that volatility is scary, and thus risky. But some experts take issue with the measure.

“We think [using volatility as a synonym for investment risk] is incomplete at best and dangerous at worst,” says Peter Chiappinelli, portfolio strategist on the asset-management team at GMO LLC, a Boston investment manager.

In 2007, volatility measures would have told you that U.S. equity funds had never been safer, on a risk-adjusted basis. Of course, investors who acted on that data would have lost their shirts in the stock-market bloodbath that led up to and followed the financial crisis of 2008.

“I remember funds that had a [very high] Sharpe ratio that blew up during the crisis,” says Eddy Vataru, a fixed-income investor who manages the San Francisco-based Osterweis Total Return Fund.

2. The Sortino ratio

Mr. Vataru says that downside volatility is more important than overall volatility because it captures the risk that investors will lose money and fail to meet their long-term investment objectives.

It is this kind of “downside risk” that tends to have the greatest impact on an investor’s long-term returns. The greater the probability that a fund takes bigger hits when the market falls, the more likely it is that investors (acting out of fear) will sell at precisely the wrong time.

“We have found that investors have an outsize reaction to losses,” says Amy Arnott, a portfolio strategist at Chicago-based fund tracker

Morningstar Inc.

Enter the Sortino ratio, developed by economist Frank Sortino, the managing director of the Pension Research Institute in Menlo Park, Calif. The Sortino ratio also subtracts the rate of return of a risk-free asset from the average return of a riskier asset, but unlike the Sharpe ratio, it divides the resulting amount by the riskier asset’s downside deviation, or the extent to which its returns fall below what is minimally acceptable to an investor.

This allows investors to compare two portfolios with similar returns, to see which does better at managing risk, especially when markets are volatile or falling. A higher Sortino ratio identifies a portfolio that earns more for every unit of risk that it takes.

If a fund doesn’t do well at capturing the upside either, then the math looks pretty grim. Remember, if your portfolio falls 40%, you’ll need it to generate not 40% but 66.66% just to get back to your starting point.

3. Downside capture

“Downside capture” provides a variation on the Sortino ratio in that it calculates a given fund’s risk-adjusted return as a function of its benchmark, such as the S&P 500 or an MSCI or Russell index. More specifically, it shows whether the fund has lost less than a broad market benchmark during periods of market weakness, and if so, how much less.

Stephen Atkins, portfolio strategist at Polen Capital, prefers to emphasize this raw number.

“This helps me more than either volatility measurements or looking at standard deviations does, in isolation,” he says. “It measures more directly how well the manager does compared to the market.”

Downside-capture ratios are calculated by dividing a fund’s monthly return by the benchmark’s return during the periods the benchmark is in the red. A score of less than 100 indicates that a fund lost less than the benchmark during periods of market weakness. (If a fund generates a positive return when its benchmark declines, the score will be negative.)

A score of less than 100 over the long haul in a variety of markets signals that a fund manager is doing a good job of hanging on to more of the investors’ capital.

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Measuring Risk

Returns are typcially the primary thing investors look at in an investment. However, risk is another important aspect to consider when investing. But how to calculate risk and what does it show? Below are three main tools (or measures) that investors use to assess risk.

Sharpe Ratio

This measure uses an asset’s volatility to gauge risk. That volatility is expressed in the asset’s standard deviation—a value that describes an average high and low for an asset. The Sharpe ratio then compares the standard deviation with an adjusted return, derived by subtracting a ‘risk-free’ asset like Treasury bonds from the return.

8

%

Pimco Total Return ESG Institutional (PTSAX)

6

Standard deviation

4

Treasury

2

0

Adjusted returns

–2

Sharpe ratio =

Adjusted returns

Standard deviation

–4

Jan.

’20

Jan.

2019

Sortino Ratio

Like the Sharpe ratio, the Sortino ratio uses an adjusted return as part of the equation. It differs from the Sharpe ratio in that it uses the downside deviation instead of the standard deviation. The downside deviation is calculated from the asset’s returns that fall below a minimum acceptable return (MAR).

8

%

PTSAX

6

4

Returns that fall below MAR

MAR

2

0

Downside deviation

Adjusted returns

–2

Downside deviation

Adjusted returns

–4

Jan.

’20

Jan.

2019

Downside Capture

Some investors feel using downside caption is a better assessment of an asset’s risk. With this measure, the investor looks at the points a benchmark (a comparable index) fell below a minimum acceptable return. Using those data points, the investor analyses the corresponding returns for the asset.

25

%

20

DJIA

15

MAR

10

Downside capture

5

0

Downside capture

–5

Index returns

–10

Jan.

’20

Jan.

2019

Sharpe Ratio

This measure uses an asset’s volatility to gauge risk. That volatility is expressed in the asset’s standard deviation—a value that describes an average high and low for an asset. The Sharpe ratio then compares the standard deviation with an adjusted return, derived by subtracting a ‘risk-free’ asset like Treasury bonds from the return.

8

%

Pimco Total Return ESG Institutional (PTSAX)

6

Standard deviation

4

Treasury

2

0

Adjusted returns

–2

Standard deviation

Adjusted returns

–4

Jan.

’20

Jan.

2019

Sortino Ratio

Like the Sharpe ratio, the Sortino ratio uses an adjusted return as part of the equation. It differs from the Sharpe ratio in that it uses the downside deviation instead of the standard deviation. The downside deviation is calculated from the asset’s returns that fall below a minimum acceptable return (MAR).

8

%

PTSAX

6

4

Returns that fall below MAR

MAR

2

0

Downside deviation

Adjusted returns

–2

Downside deviation

Adjusted returns

–4

Jan.

’20

Jan.

2019

Downside Capture

Some investors feel using downside caption is a better assessment of an asset’s risk. With this measure, the investor looks at the points a benchmark (a comparable index) fell below a minimum acceptable return. Using those data points, the investor analyses the corresponding returns for the asset.

25

%

20

DJIA

15

MAR

10

Downside capture

5

0

Downside capture

–5

Index returns

–10

Jan.

’20

Jan.

2019

Sharpe Ratio

This measure uses an asset’s volatility to gauge risk. That volatility is expressed in the asset’s standard deviation—a value that describes an average high and low for an asset. The Sharpe ratio then compares the standard deviation with an adjusted return, derived by subtracting a ‘risk-free’ asset like Treasury bonds from the return.

8

%

Pimco Total Return ESG Institutional (PTSAX)

6

Standard deviation

4

Treasury

2

0

Adjusted returns

–2

Standard deviation

Adjusted returns

–4

Jan.

’20

Jan.

2019

Sortino Ratio

Like the Sharpe ratio, the Sortino ratio uses an adjusted return as part of the equation. It differs from the Sharpe ratio in that it uses the downside deviation instead of the standard deviation. The downside deviation is calculated from the asset’s returns that fall below a minimum acceptable return (MAR).

8

%

PTSAX

6

4

Returns that fall below MAR

MAR

2

0

Downside deviation

Adjusted returns

–2

Downside deviation

Adjusted returns

–4

Jan.

’20

Jan.

2019

Downside Capture

Some investors feel using downside caption is a better assessment of an asset’s risk. With this measure, the investor looks at the points a benchmark (a comparable index) fell below a minimum acceptable return. Using those data points, the investor analyses the corresponding returns for the asset.

25

%

20

DJIA

15

MAR

10

Downside capture

5

0

Downside capture

–5

Index returns

–10

Jan.

’20

Jan.

2019

Sharpe Ratio

This measure uses an asset’s volatility to gauge risk. That volatility is expressed in the asset’s standard deviation—a value that describes an average high and low for an asset. The Sharpe ratio then compares the standard deviation with an adjusted return, derived by subtracting a ‘risk-free’ asset like Treasury bonds from the return.

Pimco Total Return ESG Institutional (PTSAX)

8

%

6

Standard deviation

4

Treasury

2

0

Adjusted returns

–2

Standard deviation

Adjusted returns

–4

Jan.

’20

Jan.

2019

Sortino Ratio

Like the Sharpe ratio, the Sortino ratio uses an adjusted return as part of the equation. It differs from the Sharpe ratio in that it uses the downside deviation instead of the standard deviation. The downside deviation is calculated from the asset’s returns that fall below a minimum acceptable return (MAR).

8

%

PTSAX

6

4

Returns that fall below MAR

2

MAR

Downside deviation

0

Adjusted returns

–2

Downside deviation

Adjusted returns

–4

Jan.

’20

Jan.

2019

Downside Capture

Some investors feel using downside caption is a better assessment of an asset’s risk. With this measure, the investor looks at the points a benchmark (a comparable index) fell below a minimum acceptable return. Using those data points, the investor analyses the corresponding returns for the asset.

25

%

20

DJIA

15

MAR

10

Downside capture

5

0

l

Downside capture

–5

Index returns

–10

Jan.

’20

Jan.

2019

Source: FactSet
John Gould/THE WALL STREET JOURNAL

4. Morningstar risk ratings

While many risk-adjusted returns are quantitative (you end up with a number or ratio, in absolute or relative terms), Morningstar emphasizes other aspects of risk that can’t easily be reduced to a quantitative figure. Yes, Morningstar boils down its results to a rating (from 1 to 5, with 5 being the best), but it also emphasizes whether a fund is “low risk” or “below average” (those that score in the bottom deciles).

Morningstar’s methodology emphasizes the risk that a fund will underperform its benchmark, but goes a step further by comparing how well the fund has fared in volatile or bear markets versus its peers in its category. So, an above-average rating should tell a prospective investor that a particular large-cap growth fund has done a good job of addressing risk relative to, say, the S&P 500, as well as other actively managed large-cap growth funds.

“A lot of risk measures are kind of abstract and hard to visualize,” says Morningstar’s Ms. Arnott. She says Morningstar studies a fund’s underlying holdings and asset allocation, which helps to address some of the flaws in purely quantitative risk-adjusted-return calculations. “You may have a fund that looks like it’s low risk and just hasn’t encountered a bear market,” she says. “Looking at historic trends can be a good starting point, especially if a fund has a longer track record, but it’s really hard to get a complete picture without digging into the portfolio.”

The bottom line, Ms. Arnott says, is to try to find a way to analyze the “underappreciated” risks and their potential impact on returns.

These and other metrics—increasingly easy to locate—can give investors insight into how to balance impressive historic returns against the risk that those gains will evaporate in a bear market or in the midst of turbulence caused by a trade war or fears of a global pandemic. But most market veterans insist that emphasizing any single one in isolation could be just as troublesome as trying to evaluate a single fund or stock in isolation.

“Most investors should primarily be concerned about overall portfolio risk,” says PJ Marinelli, president of RiverGlades Family Offices LLC, a boutique investment adviser in Naples, Fla. For instance, an international fund might look risky when compared with most U.S.-stock funds, given the foreign funds’ relative levels of volatility, but adding a sliver to your portfolio mutes the overall impact of that volatility (and thus the risk) of the individual investment.

It is also important to evaluate risk-adjusted returns during specific historic time periods, such as the financial crisis of 2007 to 2009. Downside-capture calculations can help with this, but given that many funds may not have a 10-year track record, that data may be less readily available. Simply turning to price charts helps, says Mr. Marinelli.

“I’ll look at a fund’s performance during periods when the S&P 500 pulled back to see whether it consistently lost less than the index,” he says. “If it lost more, well, that may warrant more concern or investigation.”

Of course, no measure of risk-adjusted returns can answer the most important question of all: precisely how and when a rally or bull market will come to a screeching halt. But the current market upheaval does provide a great opportunity to talk about the multidimensional nature of risk-adjusted returns.

“Sadly, the easiest way to learn to focus on risk is a correction,” says Mr. Vataru. “You learn from experience rather than education.”

Ms. McGee is a writer in New England. She can be reached at reports@wsj.com.

Share Your Thoughts

How do you think about risk when investing? Join the conversation below.

Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Foreign Investment Review – A Warning In The Time Of COVID-19 – Government, Public Sector – Canada – Mondaq News Alerts

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Canada:

Foreign Investment Review – A Warning In The Time Of COVID-19

To print this article, all you need is to be registered or login on Mondaq.com.

The Canadian government, concerned about the impact of
COVID-19 on corporate valuations, has issued guidance that it will
pay particular attention to foreign direct investments of any value
(meaning, even investments that are not subject to review under the
Investment Canada Act (the “ICA”)).  The
government’s announcement does not amend the ICA, nor any
thresholds for review.  But it does issue a warning that the
government intends to use the tools it has to review investments,
including the national security review provisions under the
ICA.

While the enhanced scrutiny is to apply to any acquisition
of an interest in a Canadian business involved in public health or
the supply of critical goods and services to Canadians or to the
Government of Canada, all foreign investments by state-owned
investors, regardless of value, or private investors assessed as
being closed tied to or subject to direction from foreign
governments, are also considered targets for such
review.  

One can expect that Canadian companies involved in
manufacturing needed supplies to address COVID-19 healthcare
requirements (for example manufacturers of personal protective
equipment), or companies involved in vaccine research or other
health technology would be of particular concern.  As to
critical goods and services, we can look to the Government’s
own Guidance on Essential Services and Functions in Canada during
the COVID-19 pandemic for assistance.  In that guidance, the
Government cites energy and utilities, information and
communication technologies, finance, health, food, water,
transportation, safety and manufacturing. 

The first real test, however, of the Government’s
application of its enhanced review will be a gold miner, TMAC
Resources Inc., which operates the Doris gold mine in Nunavut’s
Hope Bay.  In a deal announced two weeks ago, China’s
Shangdong Gold Mining Co. Ltd. will pay just over C$207 million for
TMAC, which has been struggling financially.  TMAC is listed
on the Toronto Stock Exchange and has lost significant value since
its IPO.  Control and the majority equity interest in Shandong
is owned by the Chinese Government.  Whether Shandong can
establish that the acquisition is of net benefit to Canada, and
particularly so with such declared enhanced scrutiny, remains to be
seen.  There has been certain concern expressed by the
security community in Canada about Beijing’s control over
critical metals and minerals.  Gold is, in volatile financial
circumstances, a safe haven investment. 

As a general caution, foreign buyers should consider the
guidance from the Canadian government on the ICA.  Foreign
investment is still recognized as beneficial with a compelling case
for the transaction.  But at the least, potential acquirors
should be alive to the potential for a greater degree of review,
and should consider the time-frame for review and when to submit an
application for review, including a pre-closing notification under
the ICA. 

Originally published May 25, 2020

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

POPULAR ARTICLES ON: Government, Public Sector from Canada

COVID-19: Cross Country Update (May 11, 2020)

Miller Thomson LLP

Today Prime Minister Justin Trudeau announced support for large and medium-sized businesses so they can keep their workers on the payroll and survive the COVID-19 pandemic.

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Should Mark and Meredith invest their surplus or pay off their mortgages? – The Globe and Mail

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Mark and Meredith, seen here, should catch up on their TFSAs first, lower the extra payments on their original house and invest the difference.

Lars Hagberg/The Globe and Mail

As a military couple, Mark and Meredith have relocated seven times in the past 10 years, so they’re looking forward to moving back to their original home – now rented out – when they eventually retire.

Mark, an officer with the Canadian Armed Forces, is age 44 and earns about $142,400 a year. Meredith, an employee at the Department of National Defence, is 47 and earns $72,660 a year. Her income has suffered from long spells in places where no work was available. They have a 12-year-old daughter, two houses and substantial mortgage debt.

Mind you, they’ll be well-fixed when they retire from the military. At the age of 55 Mark will be entitled to a defined benefit pension, indexed to inflation, of $116,000 a year plus a bridge benefit of $12,838 to the age of 65. From 65 on, he will get $134,623 a year.

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At 58, Meredith will also be entitled to a DB plan: $35,427 a year plus a bridge benefit of $988 until she’s 65. After that, she will get $39,315 a year.

First, though, they want to pay off their mortgages. They’re not sure which one to tackle first or whether they would be better off investing their surplus funds. “My husband thinks that it would be better to invest extra dollars [in financial markets] because our mortgage interest rates are low,” Meredith writes in an e-mail.

We asked Robyn Thompson, president of Castlemark Wealth Management Inc. in Toronto, to look at Mark and Meredith’s situation. Ms. Thompson is also a certified financial planner.

What the expert says

Mark and Meredith have $2,715 a month in surplus cash flow that they can use for debt repayment, investing, or increased lifestyle spending, Ms. Thompson says. They are using $1,000 of this to make prepayments to the mortgage on their original family home, now rented out.

In addition to their two properties, they have investment assets in their various accounts totalling $305,515, with 60-per-cent equity, 30-per-cent fixed income and 10-per-cent cash. Both have unused RRSP room that they are carrying forward to reduce taxes payable on their retiring allowances (a taxable, one-time payment on retirement in addition to their pensions) – $80,000 for him and $25,000 for her.

The couple would like to retire at the age of 55 with an annual after-tax income stream of $72,000 in today’s dollars (or $106,234 at retirement, indexed at 2 per cent), the planner says. When they do, they plan to move back to their original house and rent out their current residence.

Complicating matters is the fact that they have, at different times, declared one property or the other as their principal residence, Ms. Thompson says. “This will create a taxable capital gain on the property that is eventually sold,” she notes.

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For example, renting out part or all of a principal residence changes its use to an income-earning property. So capital-gains tax may apply for the period during which the property was used to earn income. Mark and Meredith would still be able to claim the principal residence exemption for the period in which they used the house as their primary residence.

“It is therefore critically important for Mark and Meredith to keep detailed records of when and how each property was used along with receipts for any improvements made, no matter how minor,” Ms. Thompson says.

Given their substantial income and relatively modest living expenses, Mark and Meredith will be able to achieve their short- and long-term financial goals, the planner says. “They have some catching up to do with their tax-free savings account contributions and prepayments toward the mortgage, but they are in a rock-solid financial position,” she adds.

The couple’s investments have done well, delivering an annualized rate of return of 8 per cent going back to 2013, Ms. Thompson says. The value of their portfolio shrank somewhat in early 2020 as a result of the stock-market meltdown triggered by the COVID-19 pandemic, the planner says. “But they have a long time horizon and view the market downturn as a short-term event.”

Their portfolio consists mainly of Canadian and U.S. large-cap, blue-chip stocks, exchange-traded funds and a small mutual-fund allocation. They use an investment adviser to whom they pay 1.65 per cent a year. The adviser does not provide planning or tax services.

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The registered education savings plan for their daughter is allocated 50 per cent to fixed income and 50 per cent to equities. Using a 4.5 per cent expected rate of return and a 2 per cent inflation rate, at their current contribution rate the RESP will grow to $73,028 by the time their daughter starts university at the age of 18.

Now for the mortgages. Mark and Meredith are paying 1.95 per cent interest on the $468,560 mortgage on their original home (rented out for $36,000 a year). Their current mortgage payment on the original house is $40,685 annually. In addition, they are making an extra payment of $1,000 a month, or $12,000 a year.

When the mortgage comes up for renewal next year, the interest rate could well be higher, the planner says. She assumes a 2.39 per cent interest rate at renewal. Instead of paying $1,000 a month, they could cut their prepayment to $500 monthly and redirect the surplus cash flow of $6,000 a year to their tax-free savings accounts, where they have unused contribution room. There the investments are forecast to grow tax-free with an expected real rate of return of 4.5 per cent annually, the planner says. “They will still have the property paid off by [Mark’s] age 55.”

As for the house they are living in now, they plan to rent it out for $2,000 a month after they retire. Rather than paying off the $215,000 mortgage, the planner recommends they continue with it, deducting the mortgage interest along with the other expenses. They could use the net cash flow first to contribute to their TFSAs and then invest any surplus in a non-registered, balanced portfolio.

“Meredith’s first inclination is to pay off the mortgage as fast as possible,” Ms. Thompson says. “This is not always the best option in a low-interest rate environment.” For Mark and Meredith, using cash flow to maximize TFSA contributions makes more sense at this point, the planner says. “With a properly diversified, balanced portfolio, the after-tax compounded annualized rate of return on their investments inside the TFSA is likely to exceed the compound interest payable on their mortgage.”

At Mark’s age 56, the first full year they are both retired, Mark and Meredith will have after-tax income of $169,160 a year. After-tax lifestyle needs and the mortgage payment on the rental will total $120,408 a year, giving them plenty of room to expand their goals if they choose to.

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Client situation

The people: Mark, 44, Meredith, 47, and their daughter, 12

The problem: Should they invest their surplus or pay off their mortgages?

The plan: Catch up on their TFSAs first. Lower the extra payments on their original house and invest the difference. Leave the mortgage on the second house when they retire.

The payoff: Making the best use of their money.

Monthly net income: $16,160 (includes gross rental income).

Assets: Cash $7,000; emergency fund $20,000; her TFSA $52,300; his TFSA $30,815; her RRSP $96,905; his RRSP $80,375; RESP $38,120; residence $450,000; rental $750,000; estimated present value of his DB pension plan $2.36-million; estim. PV of her DB plan $863,000. Total: $4.7-million

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Monthly outlays (both properties): Mortgages $4,570; property taxes $990; water, sewer, garbage $115; home insurance $150; electricity, heat $215; maintenance $895; garden $100; transportation $780; groceries $800; clothing $180; gifts, charity $315; vacation, travel $1,250; other discretionary $30; dining, drinks, entertainment $700; personal care $30; club membership $15; pets $15; sports, hobbies $120; other personal $450; health care $25; disability insurance $370; phones, TV, internet $130; RESP $200; TFSAs $1,000. Total: $13,445

Liabilities: Residence mortgage $215,000; rental mortgage $468,560. Total: $683,560

Want a free financial facelift? E-mail finfacelift@gmail.com.

Some details may be changed to protect the privacy of the persons profiled.

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Legault won't rule out another investment in Bombardier – Montreal Gazette

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Article content

QUEBEC — Premier François Legault has not ruled out another government bailout of struggling Bombardier Inc., which announced Friday it plans to eliminate 2,500 jobs because a slump in demand for business jets.

But Legault said if his government did proceed, it would not make the same “mistakes” of the former Liberal government, which chose to invest in the C-Series program and not Bombardier in general.

He said he also would obtain guarantees on the preservation of jobs, the head office and make sure the company’s executives not pay themselves fat salaries and bonuses.

The former Liberal government of Philippe Couillard invested $1.3 billion in Bombardier’s C-series program, which was later sold to Airbus. Quebec still holds its shares in the firm, which were valued at $700 million in the last provincial budget.

Legault Friday seemed to suggest in his remarks that the money is lost.

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