My first foray into investing was putting $5,000 into a labour-sponsored investment fund (LSIF) in early 2000. Nearly eight years later, the original stake is now worth $2,000. If you add the initial $1,500 tax-break, the capital loss over eight years is 30%. That’s not as bad as some other stinkers I’ve owned but the lack of liquidity even after I realized that venture capital funds are dogs always rankled me.
The general rule for redeeming LSIF shares is eight years from the date of purchase. However, if the eighth anniversary of the purchase falls within the second 30 days of the calendar year, you are allowed to redeem up to 30 days before the anniversary date. You are also allowed to reinvest eight years less one month from the date of purchase (who comes up with these complicated rules?). I purchased the LSIF shares on 28th February 2000, so I would be able to redeem the shares on 29th January 2008 without having to pay back the tax credits. I only wish I had bought the LSIF shares in my investment account instead of my RRSP because I would at least have a capital loss to offset gains elsewhere.
Note: If you get a chance check out The Globe and Mail’s new Globe Investor Magazine. There are lots of interesting articles worth reading, especially the ten commandments of investing by Rob Carrick.
