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Smith Falconer Financial Group

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Address West Tower, The Bay Adelaide Centre 333 Bay St., Suite 2800 Toronto ON, M5H 2R2
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Smith Falconer Financial Group

March 24, 2024

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Invested Capital vs Book Value

The distinction between invested capital and book value is an important one to make, when understanding one’s investment account performance.

 

Invested capital depicts the net contributions of an investor to a position in their portfolio.

 

Book value, in particular for equities and actively managed funds that Smith Falconer Financial Group (SFFG) recommends, depicts the net contributions of an investor to a position in their portfolio, plus any re-invested dividends or fund distributions. Book value is also known as the adjusted cost base (ACB).

 

Given this, an investment’s book value is increased by more factors than simply contributions. This is to ensure that re-invested dividends or fund distributions are not taxed twice, as book value is how capital gains and losses are calculated in non-registered accounts for income purposes.

 

However, that is why book value should be used for tax purposes, and not as a performance metric.

 

To calculate the most accurate performance of an investment, investors should use invested capital and current market value. In routine portfolio reviews with clients, Smith Falconer Financial Group (SFFG) sends out reports, to that end.

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<p class="x" style="margin:0in"><span style="font-family:&quot;Arial&quot;,sans-serif">This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. &copy; CIBC World Markets Inc. 2024.</span></p> <p class="x" style="margin:0in">&nbsp;</p> <p class="x" style="margin:0in"><span style="font-family:&quot;Arial&quot;,sans-serif">CIBC Private Wealth consists of services provided by CIBC and certain of its subsidiaries, including CIBC Wood Gundy, a division of CIBC World Markets Inc. The CIBC logo and &ldquo;CIBC Private Wealth&rdquo; are trademarks of CIBC, used under license. &ldquo;Wood Gundy&rdquo; is a registered trademark of CIBC World Markets Inc.</span></p> <p class="x" style="margin:0in">&nbsp;</p> <p class="x" style="margin:0in"><span style="font-family:&quot;Arial&quot;,sans-serif">Lois Smith and Rodney Falconer are Investment Advisors with CIBC Wood Gundy in Toronto. The views of Lois Smith and Rodney Falconer do not necessarily reflect those of CIBC World Markets Inc.</span></p> <p class="x" style="margin:0in">&nbsp;</p> <p class="x" style="margin:0in"><span style="font-family:&quot;Arial&quot;,sans-serif">Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors.</span></p> <p class="x" style="margin:0in">&nbsp;</p> <p class="x" style="margin:0in"><span style="font-family:&quot;Arial&quot;,sans-serif">If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.</span></p>
 
 
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CIBC Private Wealth” consists of services provided by CIBC and certain of its subsidiaries through CIBC Private Banking; CIBC Private Investment Counsel, a division of CIBC Asset Management Inc. (“CAM”); CIBC Trust Corporation; and CIBC Wood Gundy, a division of CIBC World Markets Inc. (“WMI”). CIBC Private Banking provides solutions from CIBC Investor Services Inc. (“ISI”), CAM and credit products. CIBC Private Wealth services are available to qualified individuals. Insurance services are only available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are only available through CIBC Wood Gundy Financial Services (Quebec) Inc.


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