Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on the fundamentals of successful investing. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away.

Today’s tip: “Stock portfolio turnover …read more »

One of our Successful Investor Wealth Management clients recently turned 70, and he wonders what effect this should have on his portfolio management. He now has 85% of his portfolio in stocks, 15% in short-term T-bills and zero in long-term bonds and other long-term fixed-return investments.

This Successful Investor Wealth Management client has a pension that provides most of the …read more »

Members of our Inner Circle service often ask for our portfolio investing advice on stocks they are thinking of buying that we don’t cover in our newsletters. These companies range from the most speculative penny mines to large multinational corporations.

Many of these stocks fall into a grey area. Sometimes our advice is that they are “okay to hold,” but we …read more »

There’s no limit to the range of investment questions that members of Pat McKeough’s Inner Circle get to ask me and my investment associates.

Many members ask us about specific investments (such as stocks, exchange-traded funds and income trusts), that they are thinking of buying or selling. However, they frequently ask us about more broad-based portfolio management and investing strategies, …read more »

Here are four common mistakes investors make when buying (or selling) stocks. By avoiding them, you stand a better chance of improving your returns — and cutting risk — in your stock portfolio:

1. Failing to take a broad view: When making investment decisions, it pays to take a wide range of relevant facts — positive and negative — into …read more »

No matter what kind of investing approach you follow, we feel that you can improve your overall results — and cut your risk — by avoiding these 5 common investment errors.

1. Failing to follow a realistic stock market trading strategy: Some investors, particularly newcomers, plan to buy a few hot stocks (or funds, or options or futures), and double or …read more »

Sometimes a stock moves downward and creates what we consider a buying opportunity. We apply the term when we feel an attractive stock has dropped in price for reasons that are of a passing nature, or that are exaggerated in investors’ minds.

This shouldn’t be confused with “averaging down.” That’s when you buy more of a stock you own that …read more »

Asset allocation funds are mutual funds whose managers feel they can enhance returns and/or cut risk by switching back and forth among stocks, bonds and cash equivalents.

For example, if the managers feel the bond market is poised for an upswing, they may overweight the portfolio in fixed-income investments for a few months to take advantage of the change.

Here are …read more »

At Successful Investor Wealth Management, we sometimes get questions from investors who are looking for one great stock pick, or one big idea, that can quickly make them rich.

Beginning investors often start their portfolio investing with these types of ideas. Some aim to stumble upon an investment that provides a 1,000-to-1 return, or find a course or guru that …read more »

A market slump like the one we’ve experienced since 2007 demonstrates the appeal of a conservative, risk-averse portfolio investing philosophy like ours. While the well-established companies we invest in may not fly as high as speculative stocks when the market is soaring, they hold up much better in market downturns.

As part of our portfolio investing strategy, we diversify by …read more »

When investors are considering hiring us to manage their portfolios through Successful Investor Wealth Management Inc., they sometimes ask about the difference between portfolio management and financial planning.

It’s a good question. Portfolio management involves choosing investments for your portfolio. These selections are based on your investment objectives, risk tolerance, age and personal circumstances. Financial planning, on the other hand, focuses …read more »

You can enhance the long-term investment results of your portfolio by developing an understanding of these “7 wonders of the investment world.” They’ve long been part of our investment philosophy, and we employ them every time we manage the portfolio of a client of our Successful Investor Wealth Management service.

1. Compound interest — earning interest on interest — can have …read more »

Lately, a number of readers have been asking me whether it’s worth holding onto their U.S.-stock holdings if the U.S. dollar keeps falling. Some wonder if they should follow their brokers’ suggestions and hedge against the risk of a drop in the U.S. dollar, using options, futures or other investment products.

If you knew that the U.S. dollar would keep falling, …read more »

Asset allocation funds are mutual funds that distribute their assets in accordance with all investors’ goals (consistent returns, diversified investments, etc.). Unlike balanced funds, they can shift their portfolio allocations between stocks, bonds and cash in order to capitalize on perceived investment opportunities in any one of those classes.

If a fund’s name includes the term “asset allocation,” it means …read more »

Cautious investors wonder if they own enough different stocks, or perhaps even too many.

The right number of stocks for investors to own for portfolio diversification depends, in part, on where they are in their investing careers.

When they’re just starting out, most people have modest amounts of money to invest. Even so, it generally pays to invest at least several …read more »

Registered education savings plans (RESPs) are one of the best ways to save for a child’s post-secondary education. RESPs are a government-assisted form of savings, similar to registered retirement savings plans (RRSPs).

How RESPs work
There are no annual limits for contributions to RESPs. However, RESPs have a lifetime limit (from birth to age 17) per child of $50,000. Only the first …read more »

Now more than ever we think you need to invest in only the highest-quality mutual funds. Here are some keys to building a sound portfolio with these mutual funds.

Diversify. Spread your portfolio out over several funds that practice a variety of investing styles. Vary your exposure to each style to reflect your individual financial circumstances, temperament and goals.

Invest in just …read more »

When stock prices go down as much as they have lately, it generally means the stock market offers some highly attractive buying opportunities. But many investors now wonder if we are headed for a period of years of weak stock markets.

In fact, we’ve already gone through more than a decade of unsettled stock markets. Stock prices have dropped more than …read more »

Economic turmoil over the past few months, and the sharp drop in stock prices, have rekindled investor interest in bonds. This is understandable, since bonds provide steady income streams and a guarantee to repay the principal at maturity.

However, bond prices will likely fall over the next few years as interest rates inevitably rise again. Big government budget deficits could spur …read more »

Canadian banks have recently issued new preferred shares to raise capital. To attract investors in a time of weak stock markets, they’ve issued these preferreds on especially attractive terms.

The preferreds pay dividends that give them yields of 6.25% to 6.50%. That’s higher than current Government of Canada long-term bond yields of 4% or so.

What’s more, preferred dividends are treated the …read more »

Some investors base buy and sell decisions in part on p/e ratios (the ratio of a stock’s price to its per-share earnings). When we provide a p/e, we try to eliminate all one-time items from earnings. These include writedowns, investment gains or restructuring charges. This gives you a clearer, truer view of a company’s profitability.

For decades, investors have used p/e’s …read more »

At times like this, when deciding what to do with your portfolio, you should resist the urge to dump high-quality investments just because you think they may get dragged down by a further decline in the market.

After all, when things look bleakest (as they do today), the market often turns around and begins rising. That’s especially true of high-quality stocks …read more »

Investors today often focus on two key questions: When is the market likely to turn around and start to rise again, and which stocks are likely to lead the way upward?

On the first question, my view is that the rise could start any time from now through May. Many stocks are cheap at current prices, even in view of the …read more »

NORTHBRIDGE FINANCIAL CORP. $38.80 (Toronto symbol NB; SI Rating: Speculative) (416-366-9544; no web site; Shares outstanding: 47.7 million; Market cap: $1.9 billion) jumped over 25% recently after Fairfax Financial Holdings, symbol FFH on Toronto announced that it will make an offer to acquire the shares of Northbridge it does not already own. Fairfax hopes to complete the transaction in the …read more »

Starting in 2009, Ottawa’s new Tax-Free Savings Accounts (or TFSAs) will let you earn investment income — including interest, dividends and capital gains — tax free. The new accounts are open to Canadian residents who are at least 18 years old and have filed at least one tax return.

A nice complement to RRSPs
Unlike RRSP contributions, TFSA contributions DON’T give you …read more »

If you want to invest in index funds, we think you should stick with exchange-traded funds (ETFs) like those we recommend as buys.

ETFs are like open-ended index funds in that they trade at net asset value. But ETFs trade on stock exchanges, just like stocks.

You’ll have to pay brokerage commissions to buy ETFs. But you’ll make that back quickly with …read more »

As you can see, more than a quarter of our recommendations are U.S. stocks. We’ve long felt that Canadians should have around a quarter of their portfolios in U.S. stocks.

This advice helped moderate our readers’ losses in the bear market. The U.S. dollar bottomed out around $0.92 Cdn. a little more than a year ago, and is now around $1.23 …read more »

Investors worry that President Obama will hurt the economy by raising taxes and working against free trade.

However, Obama may turn out to be more conservative in action than you’d guess from looking at his circle of friends and associates, or some of his earlier writings.

U.S. politicians are rarely as bad or extreme in office as you’d expect, based on their …read more »

Investors worry President Obama will hurt the economy by raising taxes and working against free trade.

However, it’s encouraging that Warren Buffett was an early Obama supporter and will undoubtedly have a big impact on his programs, as will former Fed chairman Paul Volcker.

If Obama pursues pragmatic economic policies, he could bring an unexpected boost to the U.S. dollar and the …read more »

The Dow’s 11.1% gain on October 13, 2008 was the fifth biggest percentage gain on record. The 9.8% gain on Toronto the next day was the biggest ever.

Markets have been volatile since those big moves. But my view is that governments around the world are now taking the kind of steps that will contain the crisis and eventually restore …read more »

Savings accounts at banks and trust companies pay annual interest rates as low as 0.20% and require minimum balances or monthly service plan charges to avoid transaction fees and maintenance charges. But these two institutions offer you much better deals:

ING Direct (1-800-464-3473) offers a no-fee, high-interest savings account that currently pays 3.00%. ING’s Investment Savings Account has no minimum deposit …read more »

Our three-part investment approach focuses on where you should put your money. Our advice is to invest mainly in well-established companies, spread your money across the five main economic sectors and downplay investments in the broker/media limelight.

Investing this way takes a lot of the risk out of the more difficult question of when to buy and sell.

Still, it’s a …read more »

“Penny” mining stocks are some of the riskiest stocks you can buy. These companies are trying to find mineral deposits that can be mined at a profit, and such finds are exceedingly rare. Because of this, it’s even more important to look for investment quality in Canadian penny stocks.

It may seem contradictory to use the terms “investment quality” and “Canadian …read more »

Is it a good time to bargain hunt for Canadian income trusts? According to one school of thought, Ottawa’s planned 2011 removal of income trusts’ tax advantages has unduly rattled investors and spurred unwarranted selling.

That’s the kind of assumption that makes sense, but it’s unlikely to make you any money.

Tax-law changes are a drawback for some investors in Canadian …read more »

The world is full of conflicts of interest, especially when it comes to stock advice, so investors need a healthy sense of skepticism. That’s especially so with junior companies, because they sometimes pay for their stock to be recommended in an investment publication.

A stock promoter may pay all or a large part of the cost of sending an investment publication …read more »

Two more of our recommendations — Fording and TransAlta — have attracted takeover bids.

Investors often ask how we manage to recommend so many stocks that get taken over at a big profit, here and in our other Successful Investor publications. One key: we aim to identify and recommend stocks with hidden assets.

Hidden assets come in various forms. The classic example …read more »

Despite the bear market underway in the U.S., the resources boom continues here in Canada. Some investors think it will keep on rising indefinitely, due to slower but continuing growth in India and China.

Resources prices may be headed much higher in years and decades to come, but they remain cyclical. That means you’ll see periodic collapses along the way.

We see …read more »

Every investor would like to find a fits-on-a-T shirt formula or stock philosophy for deciding when to buy or sell. It would make investing life so much simpler.

In my experience, however, these formulas and the solutions they give you never provide dependable guidance. Sometimes a stock philosophy will work and other times it will not. The outcome of applying …read more »

You may want to have a look at my June 20, 2008 interview on the Business News Network “Market Call” program with Michael Hainsworth. (You can find it at www.bnn.ca).

The show got way more calls than we could handle. Many came from investors who hoped to profit from investing ‘themes’ such as uranium, or fertilizer, or even water. Many callers …read more »

We avoid most new stock issues for a very simple reason: Human nature dictates that new issues will generally come to market when it’s a good time for insiders or the company to sell. That needn’t be, and often isn’t, a good time for you to be buying.

If, while you were investing in the stock market, you bought every new …read more »

Portfolio diversification is an important strategy for cutting risk. We like all five big Canadian banks. But we still think adding non-bank stocks like these three insurance companies to your finance-sector holdings is a good idea for portfolio diversification:

MANULIFE FINANCIAL $39.37 (Toronto symbol MFC; SI Rating: Above-average) sells life and other forms of insurance, as well as mutual funds and …read more »

Years from now, I suspect we’ll look back on the Bear Stearns collapse as having happened around the end of the 2007-2008 market downturn. That doesn’t mean the market will turn around tomorrow. The bottom could come in a month or two, or prices could fluctuate around the lows for some time.

Even if the bulk of the drop in the …read more »

Continued weakness in the U.S. dollar worries many investors. Some are dumping their U.S. stocks out of fear that the U.S. dollar is going to collapse altogether. Others are loading up on gold because they are worried that the drop in the U.S. dollar will lead to a global financial crisis.

U.S. stocks have been a drag on Canadian investors’ investment …read more »

We created our Stock Pickers Digest Hotline to keep you up-todate on our recommendations, and tell you when they change. We also make the Hotlines available to you on the Internet, so you’ll never need to worry about missing a Hotline.

As a subscriber, you can receive our Stock Pickers Digest Hotline every week (48 or more time per year) by …read more »

Before letting any investment rule for tax shelters play a role in your retirement investing decisions, make sure it makes sense for you in today’s market.

For instance, one long-standing retirement investing rule for tax shelters says you should hold fixed-return investments, like bonds, in your RRSP and hold stocks outside your RRSP.

Its rationale is two-fold. First, bonds are safer …read more »

My guess is that we are now closer to the end of a market downturn than the start of one. However, you need to distinguish between the two main kinds of market downturn.

One is the stereotypical bear market — the kind of long-term decline that drags on for a year or more and is generally accompanied by a painful recession …read more »

Many members of my Inner Circle have asked the same question this week: Is it time to buy?

If I had to choose between “Buy” and “Sell”, I’d say “Buy”, by a big margin.

Having said that, I’m obliged to repeat a caveat you’ve often heard from me over the years: Nobody can predict these things consistently. If you could do that, …read more »

Savings accounts at banks and trust companies pay annual interest rates as low as 0.20% and require minimum balances or monthly service plan charges to avoid transaction fees and maintenance charges. But these two institutions offer you much better deals:

ING Direct (1-800-464-3473) offers a no-fee, high-interest savings account that currently pays 3.75%. ING’s Investment Savings Account has no minimum deposit …read more »

Long-term studies show that stock market performance as a whole generally produces total pre-tax annual returns of 10% to 11%, or around 7.5% after inflation.

Returns will vary widely from year to year, of course. But I think the market will generate average annual compound returns of 10% to 11%, or 7.5% after inflation, over the next couple of decades as …read more »

Like any year, 2008 could turn out good or bad for investors. But everything I see leads me to believe it will be a year of rising stock prices.

First, 2008 is the year of the next U.S. presidential election. As long-time readers know, I view the U.S. presidential election year cycle as the single best indicator for American stock prices. …read more »