La Cible

Octobre 2021

La Cible, magazine officiel de l’IQPF, est destinée aux planificateurs financiers et leur permet d’obtenir des unités de formation continue (UFC). Chaque numéro aborde une étude de cas touchant les différents domaines de la planification financière.

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Page 32 of 33

33 orange line is below the benchmark line (TFSA, in blue) since we are subtracting the income taxes on the return, and that it is less steep, meaning that for every incremental increase in after-tax beta, the after-tax return is lower. If the equities were not taxed as capital gains, the slope would be even less steep (grey line). FEATURE ARTICLE The beta of a portfolio is the weighted average of the betas of each individual security. With a beta of 1 for equities and 0.16 for fixed income, the different combinations lead to the same result as for individual securities, that is, the non-registered line (orange) is below the TFSA's blue line, mainly due to income taxes. After-tax beta is very similar to "unlevered" beta, also called debt-free beta or asset data. Debt- free beta measures the company's market risk without the impact of debt. We therefore have to remove the financial repercussions of leverage and isolate the risk related solely to the company's assets. Subtracting the taxes on the beta can be compared to determining the real impact of the after-tax return risk. In other words, not considering income taxes in the beta is a little like amplifying the volatility to determine the return. In conclusion, when working with different savings vehicles, it is just as important to calculate the after-tax risk as the after-tax return, especially in an account where the returns are not tax-sheltered.

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