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For most people, their largest asset is the equity in their principal residence. This is generally considered a lifestyle asset, not an income producing asset. If you are at least age 55 (Canada) or age 62 (USA) and want to continue to live in your own home, a reverse mortgage can create income for your retirement by giving you a way to access part of the equity in your home without having to sell or move.

You cannot invest capital without being exposed to one or more types of risk. It’s impossible to avoid risk entirely – but you can manage that risk through diversification of your assets. We’ve all heard the expression “don’t put all your eggs in one basket.” The objective is to ensure that no single event could significantly reduce the value of your assets.

Five major risks of investing are:

• Capital Risk - the loss of a portion of your investment capital on equity investments due to declining prices.
• Capital Default Risk (similar to capital risk) – failure by a debtor to repay the principal on a debt instrument such as a GIC or bond.
  
• Currency Risk - your investment is in a country whose currency is declining in value.
  
• Interest Rate Risk - the risk of locking into a long term debt instrument when interest rates subsequently rise or, alternatively, locking into a short term debt instrument when interest rates subsequently decline.
  
• InflationRisk - loss of purchasingpower due to rising inflation.
  

How Diversification Can Improve Your Returns Over the Long Term

Let’s assume that Bill and Sarah each decided to invest $100,000. Bill decides he will invest his capital in a fixed income investment for twenty years earning an 8% interest rate. Sarah has decided to diversify by investing her capital equally in 5 different investments at $20,000 each. The table below is a conservative estimate of how their investment returns could look in 20 years’ time.

Allocating Your Assets Among a Variety of Investment Types

As you accumulate assets for retirement, your objective is to achieve an adequate return on these assets at a risk level that is comfortable for you. Aportfolioconsistingentirelyormostlyofonetypeofasset is not going to perform as effectively or efficiently as a portfolio with a mix of assets.

You can diversify your investment capital in a number of different ways:

• first, a mix of asset classes of cash, fixed income and equity;
• second, geographic diversification which provides a mix of different performing economies and political situations, as well as currency diversification;
• third, within a specific asset type, you could utilize different categories such as government bonds and corporate bonds for fixed income, or using large capitalized equity and small capitalized equity;
• fourth, if you are investing in mutual funds, use a variety of managers with different investment styles.

The Life Cycle of Investing

Your investment strategy should change over time, as you get closer to retirement. As you begin your working life, you have many years to earn an income and are therefore in a stronger position to handle the volatility of equity. As you near the end of your working life, you have fewer years of income generation and should adopt more of a capital preservation strategy. This is called the life cycle of investing.

• As a young investor, your investment strategy can tolerate as much as 75% equity investing, with the balance in cash funds.
• By your 40s you should diversify into a mix of cash, fixed income and equity.
• As you head into pre-retirement, fixed income should make up about 50% of your overall investment portfolio.

Designing Your Portfolio

When designing an appropriate portfolio for yourself, you needtoconsiderbothinternalandexternalfactors.Internalfactorsinclude:

• your risk tolerance
• your investment objectives
• your time horizon
• your needs for liquidity
• your financial circumstances
• your marginal tax rate

External factors that you should take into consideration are:

• outlook for interest rates
• outlook for inflation
• outlook for the domestic economy and global economies
• outlook for your domestic currency
• outlook for national politics
• outlook for federal debt levels.

Review your portfolio each time any of these factors, both internal and external, change significantly.

Don’t fall into the pitfall of making decisions based solely on the risk and potential rate of return, but instead consider them in the overall context of your portfolio. You will want to have some low risk investments in your portfolio for cash emergency purposes. But for higher rates of return, keep some high risk investments as well, so long as these high risk investments are kept to an appropriate percentage of your overall investment strategy.

Are you thinking of buying an existing business? There are number of issues you should consider.Get the answers to the following 16 questions during your due diligence review. The answers will help you to determine whether the business is a sound investment.

One of the biggest risks for any small business owner is the possibility of facing a lawsuit or a debt collection from creditors. If you have invested a lot of your personal assets into your business, you may lose them if your business becomes insolvent or bankrupt. Therefore, it is important to take proactive steps to protect your business from creditors before any financial problems arise. Here are some strategies that you can consider to safeguard your business assets and your investment from creditors.

a. The time to protect your business investment from creditors is before any financial problems arise.

If you fail to protect your business assets before you borrow money, incur substantial debt, or encounter significant financial problems, you may be giving your business creditors a better chance of accessing your assets and challenging any future planning you have done.

b. Understand your exposure as a principal of the business.

As a shareholder of the business, your exposure is generally limited to the amount of your investment, including your shareholdings and any shareholder loans you make to the corporation. However, various situations may arise which impose additional liability upon you.

If you have given a personal guarantee to guarantee the debts and obligations of the business, creditors may be able to sue you and attach your personal assets (by way of garnishment or seizure) to cover the amount guaranteed.

As a director or officer of the company, you may also have additional personal liability for such things as unpaid employee salaries, uncollected or unremitted sales or other taxes, unremitted payroll deductions, and breach of contract.

c. Protect your personal assets.

Prior to signing a personal guarantee, engaging in a new business opportunity or agreeing to be a director or officer of a company, you should consider the following strategies:

• If you haven’t already done so, incorporate the business as a for-profit company or an LLC to separate your personal assets from your business’ liabilities, limiting creditor access to business assets only.
• Transfer your personal assets to your spouse or some other party (at fair market value).
• Invest your money in assets which are exempt from creditors’ claims.
• Set up an asset protection trust in a foreign jurisdiction.

d. Protect the company's bottom line.

There are similar steps you can take to protect the profits of your business:

1. Establish a holding company to hold the shares in the corporation. The profits of the business could then be paid on a tax-free basis to the holding company through dividends on the shares. Those profits can be reinvested or loaned back to the business in the form of a shareholder’s loan, which would ensure that cash flow remains unaffected. The business can grant security back to the holding company for repayment of the loan, making the holding company a secured creditor. In addition, the holding company can purchase equipment or land required by the business and then lease it back to the business, at a profit. These assets could then be out of reach from business creditors.
   
   A holding company is a separate legal entity that owns shares in another company, usually the operating company that runs the business. The profits of the business could then be paid on a tax-free basis to the holding company through dividends on the shares. Those profits can be reinvested or loaned back to the business in the form of a shareholder’s loan, which would ensure that cash flow remains unaffected. The business can grant security back to the holding company for repayment of the loan, making the holding company a secured creditor. In addition, the holding company can purchase equipment or land required by the business and then lease it back to the business, at a profit. These assets could then be out of reach from business creditors.

2. Set up a trust. Any shares in the holding company could be transferred to the trust, and any funds paid by the holding company to the trust by way of a dividend would belong to the trust for the benefit of the trust beneficiaries. These funds would not be available to creditors even if one or more of the beneficiaries signed personal guarantees, or have other personal obligations.
   
   A trust is a legal arrangement that allows a person or an entity (the trustee) to hold and manage assets for the benefit of another person or group of persons (the beneficiaries). Any shares in the holding company could be transferred to the trust, and any funds paid by the holding company to the trust by way of a dividend would belong to the trust for the benefit of the trust beneficiaries. These funds would not be available to creditors even if one or more of the beneficiaries signed personal guarantees, or have other personal obligations.
   
   All creditor proofing strategies require careful consideration of taxation issues so as to avoid income attribution problems or the unexpected triggering of capital or income gains. The above opportunities and strategies represent only a sample of what ought to be considered. Each circumstance will offer its own opportunities and restrictions on planning.You should consult with a professional accountant and a lawyer before implementing any of these strategies to ensure that they are suitable for your situation and comply with the relevant laws and regulations.

3. Make a secured shareholder loan to the business secured by business-owned assets as collateral. You will then have a priority creditor claim against those assets if the business defaults.

The ever-increasing reliance of content producers on artificial intelligence apps to generate content for online use begs the question of what legal obligations and liability risks arise from the use of that content.

The statutory and regulatory requirements governing the use of AI to generate online content varies widely by jurisdiction. While there is no universal set of laws, certain general legal principles apply across the spectrum.

1. Copyright and Intellectual Property Rights

When an AI bot generates content, the first questions that arise are: “Where did it obtain this content? Is it original or was it derived from an existing source? If it is derivative, who holds the copyright to that material? Who should be credited as the author?”

Is the “author” the AI bot, the human who programmed or trained it, the human who provided the input data, or the human who edited or published the output? Different jurisdictions may have different criteria for determining authorship and ownership of AI-generated works, and some may not recognize AI as a legal entity or a “creator” at all.

It is important to determine whether the AI is creating “original work” or if the content is derivative of existing copyrighted material. Additionally, the use of AI to replicate copyrighted content without permission may infringe on the copyright holder’s rights.

AI-generated content may fall under the doctrine of fair use or transformative use, which allows the use of copyrighted material for purposes such as criticism, comment, news reporting, teaching, scholarship, or research. However, this is not a clear-cut rule and depends on factors such as the purpose and character of the use, the nature of the original work, the amount and substantive nature of the portion used, and the effect of that use on the potential market.

2. Liability and Accountability

AI-generated content may also entail legal risks and responsibilities for the parties involved in its creation and distribution. For example, who is liable if the AI-generated content infringes on someone’s rights, causes harm, or violates laws or regulations? How can the AI bot be held accountable for its actions and decisions? How can the human users or beneficiaries of the AI-generated content ensure its quality, accuracy, and reliability?

3. Privacy and Data Protection

AI-generated content may involve the use of personal data, such as names, images, or biographical information, to create realistic or personalized content. This could violate any number of privacy and data protection laws that regulate how personal data can be collected, processed, and shared online.

If the AI uses personal data to generate content, it must comply with data protection laws such as the General Data Protection Regulation (GDPR) in the European Union, the California Consumer Privacy Act (CCPA), the Personal Information Protection and Electronic Documents Act (PIPEDA) of Canada, and other similar regulations. These laws require obtaining consent from individuals before processing their personal data and ensuring the protection of that data.

4. Transparency and Disclosure

Depending on the jurisdiction, there may be requirements to disclose to your site visitors that content has been generated by AI, especially in cases where the content might be mistaken for human-generated content. This is particularly relevant in advertising, news articles, and other media where trust and authenticity are important.

AI-generated content may pose ethical challenges, such as opportunities to mislead or deceive the audience, harm the reputation or dignity of individuals, or undermine the credibility or diversity of information sources. From an ethical standpoint, it is important for content developers to disclose the use of AI to generate content and provide clear and accurate information about the source, purpose, and quality of the content. It’s also important to avoid creating content that is harmful, offensive, or discriminatory.

5. Consumer Protection Laws

AI-generated content must not mislead consumers. This falls under broader consumer protection laws that prohibit deceptive practices. Content that is designed to deceive or mislead users may result in legal action and penalties.

6. Liability for Harmful Content

If AI-generated content is defamatory, discriminatory, or otherwise harmful, there may be legal consequences. The entity responsible for the AI may be held liable for the content it produces, depending on the legal framework governing speech and publication in the relevant jurisdiction.

7. Accessibility

Laws such as the Americans with Disabilities Act (ADA) in the United States may require that online content, including AI-generated content, be accessible to individuals with disabilities. This includes ensuring that content is compatible with screen readers and other assistive technologies.

8. Platform-Specific Rules

Online platforms (such as X, Facebook, Instagram, etc.) have their own terms of service and/or community guidelines that govern the use of AI to generate content. These rules may go beyond legal requirements and can result in content being removed or accounts being banned for non-compliance.

9. Export Controls and Sanctions

In some cases, AI technologies are subject to export control laws and sanctions, guidelines and requirements for disclosing AI generated content.

TAKEAWAYS

Full Disclosure. Always disclose which content is AI-generated and clearly label it as such. This can be done through disclaimers or specific mentions within the content that it was generated or assisted by AI.

Quality Assurance. Regardless of whether content is AI-generated or human-written, the focus should always be on producing high-quality, original content that provides value to the audience. 

Compliance with Laws and Regulations. The very nature of the worldwide web means that content on your website is accessible anywhere in the world. Be aware of any legal requirements or industry standards – both within your own jurisdiction and globally - that may apply to AI-generated content, and ensure that your content is compliant.

Image courtesy Pixabay.Com. Content partially researched using Microsoft Copilot AI.

Investing can be a powerful tool for building wealth and achieving financial security.

However, it’s essential – especially for rookie investors – to set clear investment goals and develop a well-thought-out strategy to reduce risk and sidestep the common pitfalls.

1. Define Your Investment Goals

The first step in any investment journey is to define your goals. What is the principal purpose of the investment? Is it to accumulate a nest egg for retirement, a down payment on a house, or your child’s education? Your goals will dictate your investment strategy, including the types of assets you invest in, the length of the investment, and your level of risk tolerance.

2. Understand Your Risk Tolerance

Risk tolerance refers to the degree of uncertainty an investor is willing to accept in connection with the return on their investments. It’s vital that you assess your risk tolerance prior to investing in order to ensure your investment strategy aligns with your comfort level regarding any potential losses. Remember: Never invest any more than you can afford to lose.

3. Diversify Your Portfolio

The team “diversification” means spreading your investment dollars across various types of asset classes to reduce your risk and exposure. This strategy can help protect your portfolio from significant losses, since poor performance in one asset class can potentially be offset by strong performance in another.

4. Review and Adjust Your Portfolio Regularly

Your investment needs and goals will most likely change over time, and you should adjust your investment strategy to accommodate those changes. A regular review of your portfolio can help to ensure that it remains aligned with your current financial situation and long-term goals.

5. Seek Professional Advice

Investing can be complex, and if you’re not an expert you should seek expert advice. A financial advisor can provide valuable guidance and help you develop a personalized investment strategy. They can also introduce you to investment opportunities you may not have been aware of and advise you of potential tax liabilities.

6. Learn to Avoid the Pitfalls

There are several reasons that investors fail to achieve success with their investment strategy:

• Lack of knowledge. Not understanding the investment landscape or the appropriate strategies and tactics that should be used to navigate it.

• Lack of guidance.Not seeking financial guidance if one has a lack of knowledge, time or suitable investment temperament.

• Lack of diversification, or poor diversification choices.
  • Poor asset class diversification.
  • Poor geographic diversification.
  • No rebalancing of asset mix over time, based on changing needs and investment landscape.
  • Failing to utilize managed money when purchasing different asset entities without sufficient capital to diversify effectively.

• Investor Behavior.

• Trying to time the market.

• Trying to switch to “hot” performing investments with the best rates of returns over the past 6-12 months.

• Insufficient monitoring of investment performance over time.

Conclusion

Achieving your investment goals requires careful planning, regular review, and a willingness to adapt your strategy as needed. By following these steps, you can navigate the investment landscape with confidence and move closer to your financial goals.

Created and developed with some assistance from AI.

   Whatever you are celebrating this season, we wish you and yours a very Happy Holiday spent with those you hold dear.

   May the New Year bring you peace, happiness and love!

You've given notice to your landlord and now it's time for you to move. Are you worried about getting your damage deposit back? If you follow this checklist, your landlord will not only have no reason to deduct money from your deposit, but they will recommend you to other landlords as an exemplary tenant!

The key to fostering a mutually profitable franchise relationship is understanding (i) the basic principals of franchising and (ii) how the franchisor and franchisee work together toward a common goal – the success of the franchise business.