My answer is: Nonsense!
• Imperial Oil, Canada’s largest integrated oil company, with diversification through 2,000 retail gas stations—up 620.8% since we first recommended it.
• TransCanada Corp., the operator of a 59,000 kilometre pipeline network and owner of 20 electrical power plants—up 155.9%.
•Bank of Nova Scotia, with minimal remaining sub-prime exposure and strong international prospects—up 627.3%.
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Dear Cautious Canadian Investor,
Did your broker tell you about the investment that soared 119.1% in just 8 months while generating a hefty 5.7% current yield?
Imagine if you had invested $10,000 in this remarkably profitable but lower-risk investment. You would’ve ended the year with $22,480.
Or did your broker take the time to explain something as simple as how you can add an extra margin of safety to your mutual fund portfolio by not limiting yourself to the few fund families he is currently recommending?
Unfortunately, most don’t.
If you aren’t getting real, independent help from your broker (or if you don’t have a broker) read on. By the time you finish reading this Safe Investing Web Guide, you’ll have a working knowledge of investments that have lower risk than their returns would lead you to expect.
If you are like many investors, the recent market losses have made you more sensitive to risk.
Sadly, many brokers cash in on this aversion to risk by offering products and strategies that seem to offer safety and stability.
The reality is these investments are designed to make more money for the broker, not you.
Let me give you a few examples:
Example #1: Sophisticated options strategies that are designed to “protect” your stock portfolio by compensating for changes in price levels.
The basic premise is that if a stock drops in price, certain options go up, so your overall portfolio value remains about the same. What they don’t mention is that your transaction costs are so high, you’re lucky to break even.
Example #2: So-called “alternative investments,” like principal-protected notes.
These complex securities carry hidden risks. Though the principal is guaranteed, the main risk is that you won’t earn a significant return during the term of the investment.
Example #3: Certain insurance products, like equity-linked policies, which the law now lets stock brokers offer their customers.
These may look good on paper because of what appears to be a link to the stock market. But once you understand how weak that link is (usually based on some convoluted formula hidden in the fine print), you’ll discover your gains aren’t anywhere near the projections.

These are just three examples of investments that look safe, but are fraught with high risks and hidden costs. You’ll find complete details of these investor pitfalls (and ways to avoid them) in my new Special Report Bay Street’s Dirty Little Secrets. It’s a $25 value, yours FREE when you subscribe to my investment advisory Canadian Wealth Advisor.
As readers of Canadian Wealth Advisor know, I primarily rely on four types of investments to bring them profits year in and year out:
[1] Income trusts. Investors are exposed to a wide variety and range of risk with trusts. So we think you should emphasize those with stable cash flows, a low need for capital expenditures and mature business operations.
[2] Stocks. We think investors will profit most — and with the least risk — by buying shares of well-established companies with strong business prospects.
[3] Exchange-traded funds (ETFs). These funds offer investors a great combination of low fees and top-quality stocks. What’s more, all of our ETF selections hold well-diversified, tax-efficient portfolios.
[4] Mutual funds. We look at a fund’s history and the safety and diversification of the stocks currently held by the fund, and we evaluate the track record of the fund’s managers.
If your broker’s recommendations have been big winners (and in safety-first investments), you can stop reading this web guide.
But if your portfolio hasn’t done as well as you’d like, or if you experienced too much uncertainty or are fed up with paying so much of your earnings out in fees, read on to learn how easy it is to get a no-risk “second opinion” that could give your investments a new lease on life.
Today’s low-interest-rate environment has investors scrambling for ways to generate income. Some brokers are responding by urging their customers to buy structured investments.
These are what I like to call Frankenstein investment products. They are created when a brokerage firm’s underwriting department takes genuinely desirable securities and slices ‘n’ dices them into a new structured investment.
These investments come with special characteristics, such as principal protection or a guaranteed interest rate, that make them superficially attractive to investors.
Yet they also come with far more fees that in the end make them far more profitable for brokers.
You may not lose much money buying these “Frankenstein” or “synthetic” investments. You may even make a few dollars.
But it is certain that these investments will generate big underwriting fees to pay for your broker’s new Porsche, second or third luxury homes and lavish vacations.
Then, when the structured investment gets redeemed a few years later, your broker gets an opportunity to do it all over again and sell you something new.
However, there are investments out there that will deliver a decent return without an excessive amount of risk and without ongoing fees.
With interest rates still at near-historic lows, it’s tough to find high-quality investments with a yield of at least 7%. Yet amazingly, as I write this, there are hundreds of income trusts trading on the TSX that are yielding 7% or more.
However, I say this with a word of caution.
Traditionally, income trusts, which are publicly traded entities, have had an advantage over regular corporations. In the past they paid no taxes; instead, they passed cash flow generated by their assets to unitholders (which is what shareholders in an income trust are called), who then paid taxes on these distributions at their personal tax rate.
Now, as you may know, the rules have changed. Starting in 2011, income trusts will pay full corporate taxes. This new change has already been devastating for many of the trusts. In fact, the sector as a whole dropped 20% when the changes were announced.
But as with any kind of investment, not all income trusts are created equal. In this case, the new rules have made the bad ones look all that much worse. However, I have always been skeptical of most income trusts and have been extremely careful to only recommend trusts that have been converted from already successful companies. And as a whole, my recommendations have continued to perform well and should continue to be good performers at least until the new rules take full effect. Some have accumulated tax losses that they can use to delay conversion to dividend-paying companies to 2013 or later.
Here are a few examples of the yields currently available from income trusts we have and continue to recommend. In our current income trust portfolio, there’s a trust that sells and distributes electricity. It yields 12.1%. Another trust, which produces oil and natural gas, delivers an amazing 7.9%. And a third, which specializes in retail shopping centres, generates a solid 7.7% yield.
Why are income trusts so profitable for investors? Income trusts own assets that have the potential to generate higher cash flows over time. Increasing cash flows mean higher distributions to unitholders, which in turn usually leads to higher unit prices. This puts them worlds apart from bonds, which pay the same amount year after year after year, until maturity. And even with the new tax changes, this factor remains key to the future for any income trust.
Of course, if you don’t pick the right income trusts, you could end up with capital losses instead of capital gains…
There are two steps to picking winning income trusts. The first is to analyze the trust’s assets. The procedure will vary, depending on the type of assets the trust owns.
The tools you’ll need to analyze royalty interests in oil wells are far different from those you’d need to value the ownership of a root beer trademark. (Yes, there’s actually an income trust that holds the A&W Root Beer trademark as one of its assets.)
The second, and more difficult, step is to check for hidden risk—the kind of risk you’ll only spot if you read between the lines of the financial statements.
I’ve been analyzing trusts for more than 25 years, and have reviewed hundreds. Some are great, but others are little more than over-the-hill businesses repackaged to temporarily generate income before sinking into oblivion.
Your broker probably works for a big financial institution that creates trusts to sell to investors. His research may be based on a “best-case” scenario, assuming everything will go right. And if his pick is, say, another Spinrite (an income trust that dropped more than 90% in less than a year)…well, that’s your problem.
The fact is that some trusts are far riskier than they appear. Unless you know how to spot and avoid these risks, it’s easy to make a costly mistake. And with the new tax changes the risks have become even higher.
When analyzing income trusts of any type, I look at 12 key criteria. Each tells me something specific about the quality of the underlying business assets and the likelihood that the trust will be able to sustain—and increase—its distribution of profits to unitholders in subsequent years. And how they should fare once that income faces an upfront tax bite.

You’ll find a more detailed explanation of this analytical process in my new Special Report Best Income Trusts to Hold Through 2011 and Beyond. It’s a $25 value, yours FREE when you subscribe to my investment advisory Canadian Wealth Advisor.
Currently I recommend around 14 income trusts to readers of Canadian Wealth Advisor. As I write this, these trusts are generating yields ranging from 5.2% to 12.1%.
That’s considerably higher than the current yield of just about every type of bond available today, including those risky junk bonds and emerging market debt.
Here is just one example of an income trust I recommended while markets were falling in 2008:
• In February, 2008, I recommended Fording Canadian Coal Trust at $47. I liked its prospects as a major producer of metallurgical coal used in steelmaking—as well as its steady cash distributions to unitholders. But I also liked Fording’s appeal as a takeover candidate. And after my recommendation, Teck Resources launched a successful takeover bid. That pushed Fording’s shares to a high of $103 in October, 2008—for a gain of 119.1% in just 8 months—all while the market tumbled to new lows.
Unlike many financial advisors, I never promise more than I can deliver. And despite my past success with income trusts, there’s no way I can guarantee that all of my future recommendations will be as successful as the 14 I currently recommend.
BUT…the methodology I used to select those 14 is the same one I used to select the 9 trusts I profile in my new Special Report (more about this in a moment). But first let’s preview what I am confident will be future winners:
• A profit-generating powerhouse with a 10.6% yield. This trust owns and operates 10 hydroelectric power generation plants in Canada and the United States.
• Canada’s largest REIT has a secret admirer and a 7.7% yield. This REIT is a financial juggernaut! With a market cap of more than $4.2 billion, it has ownership interests in 247 retail properties containing about 59 million square feet. Revenues in the first nine months of 2008 increased 7.0%, to $563.3 million. And if all that weren’t enough, it has a U.S. partner that just might make a takeover bid…sending the price of these units into the stratosphere.
• This energy trust’s conservative acquisition policy protects its 7.9% yield. Falling oil and gas prices will hurt revenues and cash flow. But even if prices drop further, its generous distribution looks safe.

These are just 3 of the 9 income trusts profiled in my new Special Report 9 Safe Ways to Generate High Current Income. It’s a $25 value, yours FREE when you subscribe to my investment advisory Canadian Wealth Advisor.
Exchange-traded funds, or ETFs, are more appealing than ever before. That’s because ETFs have evolved, mainly because of increased competition.
ETFs offer unparalleled convenience and high liquidity
ETFs are set up to mirror the performance of a stock market index or sub-index. They hold a more-or-less fixed selection of securities that are chosen to represent the holdings that go into the calculation of the index or sub-index. These funds are not actively managed, so their management fees are quite low.
ETFs trade on stock exchanges, so you can buy or sell them any time the exchange is open. You can buy ETFs on margin, or sell them short. You pay brokerage commissions to buy ETFs, although over the longer term these would be offset by the lower management fees that ETFs charge.
ETFs can help you tap into emerging markets
There are now ETFs that cover every major North American stock market index and sector. That makes them a great way to hold the stocks in the TSX, S&P 500 and many other Canadian and U.S. markets.
As well, the past decade has seen the launch of many international ETFs. These can be a convenient way for North American investors to access the high profit potential of emerging markets. These markets are looking more attractive as emerging-market economies mature.
Even so, investing outside of Canada and the U.S. can expose you to more volatility and risk. That’s why I still think the best way for most investors to access these areas, and cut costs is by purchasing high-quality international ETFs.

In my new Special Report, 12 Top ETFs You Need to Buy Now, I spotlight 12 ETFs that would be strong additions to a conservative investor’s foreign holdings. You’ll get my full analysis of these funds, plus all the details on my top 5 ETFs for North American investing. A $25 value, this Special Report is yours FREE when you subscribe to Canadian Wealth Advisor.
To find stocks that meet my safety-first requirements, my staff and I use the McKeough ValuVesting System™, a labour-intensive stock picking discipline designed to uncover stocks whose built-in value limits investors’ losses during downturns.
The stocks my ValuVesting System locates are particularly resistant to the sickening drops that so many conservative investors dislike. Although they sometimes experience price declines just like other stocks, they tend to drop less and recover faster.
Of course, the same factors that prevent a stock from plummeting can also propel it higher. Here are just a few examples of my recommendations:
• Imperial Oil, Canada’s largest integrated oil company, with diversification through 2,000 retail gas stations—up 620.8% since we first recommended it.
• TransCanada Corp., the operator of a 59,000 kilometre pipeline network and owner of 20 electrical power plants—up 155.9%.
• Bank of Nova Scotia, one of the biggest banks in Canada, with minimal remaining sub-prime exposure and strong international prospects—up 627.3%.
I’ve been in this business for the better part of 40 years, and I’ve seen every sort of stock picking system known to mankind. Believe me when I tell you that nothing comes close to duplicating the success of my ValuVesting System.

You’ll find a detailed explanation of my ValuVesting System in my new Special Report Pat McKeough’s Secrets of Safe Investing. It’s a $25 value, yours FREE when you subscribe to Canadian Wealth Advisor online.
Your broker has probably recommended that a portion of your portfolio be allocated to traditional mutual funds. That in itself is great. Traditional mutual funds can be a great way to earn a safe income.
However, most brokers select only a handful of fund families that they will work with. First, this simplifies your broker’s paperwork. But more often your broker is going to select mutual fund families that offer special rewards to brokers who sell a lot of their funds.
But that doesn’t do anything for you except limit your choices (and make more money for your broker).
By contrast, for Canadian Wealth Advisor we look at all the fund families because we don’t have special deals with any of them. Here is just a sampling of the funds I recommend…
• A U.S. growth fund that takes a bottom-up approach to finding undervalued stocks.
• A Canadian equity fund that invests mostly in larger-capitalization stocks, but also looks for opportunities in small and mid-cap stocks.
• One of the best-performing resource funds that invests in companies with superior asset bases, proven management and the ability to internally finance growth.

As I mentioned above, mutual funds can be an important part of any portfolio. To help you in making the right mutual fund selections and avoid costly mistakes, read my Special Report The Cautious Investor’s Guide to Huge & Safe Mutual Fund Profits. It’s a $39 value, yours FREE when you subscribe to Canadian Wealth Advisor.
So far, we’ve looked at some low-volatility investments that can help conservative investors make serious money in pretty much any market environment, without losing sleep.
But the secret to successful investing isn’t just to have a collection of various investments. The key is to have a combination of investments that will work together to tame volatility and help you meet your financial goals.
That’s why my safety-first approach helps give you easy direction on how to properly diversify your portfolio, reducing risk and encouraging growth.
Readers tell me that, in addition to providing typically market-beating recommendations, Canadian Wealth Advisor acts as a sort of “second opinion” on investments recommended by their brokers.
As you can see, the information we provide in each monthly issue can not only prevent you from making some serious investing mistakes, it can help you generate substantial returns while reducing risk.
But the best way to appreciate Canadian Wealth Advisor is for you to experience it firsthand.

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This is a GREAT DEAL. Subscribe for 2 years for just $119 (a $90 savings off the regular subscription price) and you’ll receive a copy of all 5 FREE Special Reports (a total value of $139), including:
• Bay Street’s Dirty Little Secrets (a $25 value)
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• 9 Safe Ways to Generate High Current Income (a $25 value)
• 12 Top ETFs You Need to Buy Now (a $25 value)
• The Cautious Investor’s Guide to Huge & Safe Mutual Fund Profits (a $39 value)
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If you like what you see, DO NOTHING. Your credit card will be automatically billed $14.75 every 3 months until you tell us to stop. That adds up to just $59 per year—which is actually less per year than my 2-year deal.
Plus, no matter what deal you choose, you’ll receive this additional FREE Bonus Report, Pat McKeough’s Secrets of Safe Investing, just for subscribing online! (A $25 value—yours FREE.)
If you aren’t 100% satisfied with Canadian Wealth Advisor at the end of your trial, just tell me and I won’t bill your credit card—and you can keep the Special Reports, including the 6th Bonus Report, as my gift to you for giving Canadian Wealth Advisor a look.
Take advantage of Canadian Wealth Advisor for 90 days to double-check the advice your broker is giving you and as a source of low-risk investment ideas.
At the end of the 90-day period, if you’re not 100% satisfied, you may cancel your subscription and receive a prompt refund of every penny you paid.
And if you do decide to cancel, you may keep the Special Reports I’ve sent you as my way of saying thanks for giving us a try.
This money-back guarantee is ironclad. If you decide to cancel, that’s fine. It’s totally up to you. Just tell us you want out and we’ll send your money back—period.
You’re not likely to find a more straightforward guarantee than that. And you won’t find investments like the ones I recommend in Canadian Wealth Advisor by talking to your broker.
Yours for safe and profitable investing,

Patrick McKeough
P.S. Much of what brokers and other experts are saying about risk is just plain wrong. Learn the facts. Take advantage of my 5 new Special Reports, a $139 value, yours FREE when you subscribe to Canadian Wealth Advisor.
P.P.S. Don’t miss out on my Best Offer Ever. Subscribe to my Easy-Pay Plan and you’ll receive all 5 FREE Special Reports plus my additional 6th Special Report, Pat McKeough’s Secrets of Safe Investing. Plus you’ll save on the regular subscription rate.
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The Successful Investor Inc., owner of tsinetwork.ca, is affiliated by common ownership with Successful Investor Wealth Management Inc., an Investment Counselor/Portfolio Manager. Past returns do not guarantee future results.