Investment UPDATE28263 (07/2017)

Summer 2017 Edition

In this issue§§ RESPs: An education savings plan can help kids

in learning and life

§§ Investing regularly when your income isn’t

§§ One-minute market update

RESPs: An education savings plan can help kids in learning and life

Helping kids make the grade

Above and beyond saving money, starting to save early for a child’s future can actually result in a number of positive changes in attitude and behavior, including improved financial literacy, higher confidence and greater academic motivation.

Plan for success – RESP basics

With the high and rising cost of education, many parents, grandparents and other family members are recognizing the need to start saving well before the expenses become a reality.

The Registered Education Savings Plan (RESP) combines flexibility, tax-deferred investment growth and government grants to help you save for a child’s post-secondary education. RESPs can fund many different educational journeys, including university, college, trade school, CEGEP (Quebec) and apprenticeship programs.

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School may be out but kids continue to learn. Summer is a great time to talk to school-age children about what they want to be when they grow up. And, to think about how you can help them get there!

Why saving for education matters1

Anticipated changes in student’s attitude and behaviours from education saving

Financial:• More informed about costs • Higher deposits in RESP• Improved financial literacy• Better financial management (incl. budgeting)

Educational:• Higher educational aspirations • Increased value placed on education • Improved academic focus and achievement• Improved self-esteem

Date of your child’s birth

Appropriate solution for most children

2000, 2001, 2002,

2003, 2004

RBC Target 2020

Education Fund

2005, 2006, 2007,

2008, 2009

RBC Target 2025

Education Fund

2010, 2011, 2012,

2013, 2014

RBC Target 2030

Education Fund

2015, 2016, 2017,

2018, 2019

RBC Target 2035

Education Fund*

2 Investment Update I Summer 2017

Getting a head start with the Canada Education Savings Grant

Perhaps the biggest advantage to contributing to an RESP is the Canada Education Savings Grant (CESG), a powerful incentive from the federal government to save.

Why? For an eligible beneficiary under the age of 18, the government will add 20% of the first $2,500 contributed annually to an RESP. That adds up to $500 per year to a maximum total of $7,200 per beneficiary up to the age of 18. If you don’t contribute enough to warrant the maximum grant in a given year, the unused entitlement can be carried forward to the next year – giving you flexibility to catch up when and how it works best for you.

For more information on grant eligibility and other additional government grants available, visit rbcroyalbank.com/resp or speak to your RBC advisor.

RBC Target Education Funds: One fund. One date. One goal. RBC Target Education Funds are a convenient way to invest for a child’s education. You simply choose the fund with the target date that most closely aligns with the year your child is expected to start post-secondary studies. The result is an asset mix that evolves over time, with a greater weighting in equities in the early years and a more conservative asset mix favouring fixed-income investments as your child’s target education date approaches. The advantage? You get investments that provide growth potential up front to help keep pace with the rising cost of education, and as the target date approaches, each fund becomes more conservative, reducing both volatility and the potential for erosion of capital.

Investing in a child’s future is a wonderful gift and a sound investment. To learn more about RBC Target Education Funds, visit rbcgam.com/targeteducationfunds or speak to your RBC advisor.

* Available for sale as of August 28, 2017.

Regular investment account:

$39,800RESP account + CESG:

$55,000

This example is provided for illustrative purposes only. Example assumes an investment rate of return of 6% and an investment time frame of 18 years. The regular investment account result assumes that all earnings are fully taxable at an average tax rate of 35%. The RESP example assumes that all growth is tax-sheltered and withdrawals are taxed in the hands of the student when withdrawn at an average tax rate of 15%. $100 monthly contribution is assumed to be indexed at 2% per year. All figures are rounded to the nearest $100.

Boost your savings by 20% with the CESG The following shows the comparative growth of $100 contributed monthly to two different investment account options.

Additional savings boost

of $15,200

Did you know?

A Canada Learning Bond (CLB) is available for children of families who are entitled to the Canada Child Benefit (CCB) and who are born after December 31, 2003 – and you don’t have to contribute to an RESP to be eligible.

How popular are RESPs?

72% of Canadians use

RESPs to save for a child’s post-secondary

education.1

Date of your child’s birth

Appropriate solution for most children

2000, 2001, 2002,

2003, 2004

RBC Target 2020

Education Fund

2005, 2006, 2007,

2008, 2009

RBC Target 2025

Education Fund

2010, 2011, 2012,

2013, 2014

RBC Target 2030

Education Fund

2015, 2016, 2017,

2018, 2019

RBC Target 2035

Education Fund*

Investing regularly when your income isn’tMany Canadians work part time, freelance or on contract and may lack a steady, reliable income. If this describes you, you may find it difficult to set up a consistent savings plan; here are a few tips that can help.

Investment Update I Summer 2017 3

3 approaches to regular investing when your income isn’t regular:

Set aside a $ amount This strategy makes it automatic; you can start with a manageable amount and watch it grow!

Tip yourself by setting aside a % amountYou tip everyone from baristas to hairstylists – do the same for yourself by putting 3%-5% of each paycheque aside to build for your future. Online transfers make it easier.

Bonus! Take advantage of occasional cash flows – an extra gig or a tax refund for example – by putting part of it into your investment account.

2017

We are here to help you figure out which approach is right for you and set up a plan to get you to your goals. Speak to your RBC advisor or check out the Connect with us section on the next page for a variety of convenient ways you can contact RBC to get the advice you want.

With more than half of all account statements now being delivered electronically, we hope you are enjoying the convenience of 24/7 access to past copies of statements, and the satisfaction of knowing you are reducing paper consumption and waste.

Not signed up yet? Simply sign-in to RBC online banking at rbcroyalbank.com/online and update your profile and preferences.

Switching to eStatements:

A smart choice

1 Andrew Parkin, “Family savings for post-secondary education - A Summary of Research on the Importance and Impact of Post-Secondary Education Savings Incentive Programs.” The Omega Foundation. November 2016.

Financial planning services and investment advice are provided by Royal Mutual Funds Inc. (RMFI). RMFI, RBC Global Asset Management Inc. (RBC GAM), Royal Bank of Canada, Royal Trust Corporation of Canada and The Royal Trust Company are separate corporate entities which are affiliated. RMFI is licensed as a financial services firm in the province of Quebec.

Investment and economic outlook information contained in this report has been compiled by RBC GAM from various sources and reflects our view on June 30, 2017. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by RBC GAM, its affiliates or any other person as to its accuracy, completeness or correctness. RBC GAM and its affiliates assume no responsibility for any errors or omissions.

All opinions and estimates contained in this report constitute our judgment as of the indicated date of the information, are subject to change without notice and are provided in good faith but without legal responsibility. Interest rates and market conditions are subject to change.

Guaranteed investment certificates are offered through Royal Bank of Canada. RBC Funds are offered by RBC GAM and sold by Royal Mutual Funds Inc. There may be commissions, trailing fees, management fees and expenses associated with mutual fund investments. Please read the prospectus or Fund Facts document before investing. Mutual fund securities are not guaranteed or covered by the Canada Deposit Insurance Corporation or by another government deposit insurer. For funds other than money market funds, unit values change frequently. For money market funds, there can be no assurances that a fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in a fund will be returned to you. Past performance may not be repeated.

The GICs in the RBC MarketSmart® group guarantee the return of your principal, but do not pay regular interest income. For MarketSmart GIC products with Unlimited Return Potential, a variable return will be paid if the equity index to which the GIC is attached performs well and no return will be paid, if the equity

index performs poorly. For MarketSmart GIC products with Guaranteed Minimum return, a variable return up to a stated Maximum Return will be paid if the equity index to which the GIC is attached performs well and a guaranteed Minimum Return will be paid, if the equity index performs poorly. For full product details, including how the variable return is calculated, please visit http://www.rbcroyalbank.com/products/gic/marketsmart-suite.html or your nearest RBC branch or call 1-800 ROYAL ®1-1.

FSC FPO

ECONOMY§§ The economic uptick that began in the summer of 2016 has continued to grow and a synchronized global economic expansion is underway, with leading indicators pointing to a faster-than-normal clip across much of the world.

§§ We budget for a bit more economic growth over the next few years than was achieved over the past several, and the downside risks to our outlook – threat of protectionism, an aging business cycle and precarious international relations – appear manageable.

§§ There are still plenty of reasons why the sustainable growth rate is notably lower than it was a decade or two ago, and these are rooted in deteriorating demographics and a changing economic structure.

FIXED INCOME§§ Central banks are leaning toward tighter, if less accommodative, monetary policies in response to improving economic conditions.

§§ The Fed is again setting the pace with a handful of rate increases already delivered, and more on offer. China has also been raising rates and other major central banks are considering the next steps for dialing back stimulus.

§§ We expect the long-term direction for bond yields is higher and our models confirm this view. But receding enthusiasm about Trump’s policies has weighed on yields, reintroducing the fixed-income valuation risk that had been alleviated shortly after the U.S. election.

EQUITY MARKETS§§ Global equities have reached new highs and valuations may no longer be a driving force for stocks, at least in the U.S.

§§ Fortunately, U.S. profits have recovered from their two-year swoon and, if earnings continue to rise as analysts expect, the total-return potential for stocks remains quite positive.

§§ In our recommended asset mix for global balanced investors, we trimmed our equity overweight by one percentage point due to the aging business cycle, less compelling valuations and concern that complacency is beginning to seep into markets.

CONNECTWITH US

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Guaranteed Minimum Return §§ RBC U.S. MarketSmart GIC§§ RBC Canadian Banking MarketSmart GIC§§ RBC Canadian Utilities MarketSmartGIC

Unlimited Return Potential§§ Canadian Market-Linked GIC§§ Global Market-Linked GIC

RBC MarketSmart® GICs offer the best of both worlds:

§§ The higher return potential linked to the performance of equity markets

§§ The security of a GIC which guarantees 100% of your original investment

4 Investment Update I Summer 2017

ONE-MINUTE MARKET UPDATE

For the full Summer 2017 Global Investment Outlook, please visit rbcgam.com/gio.

1 min.

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