How To Invest
In addition, Pat thinks then beginner investors should cultivate two important qualities: a healthy sense of skepticism and patience.
Investors should approach all investments with a healthy sense of skepticism. This can help keep you out of fraudulent stocks that masquerade as high-quality stocks. It will also keep you out of legally operated, but poorly managed, companies that promise more than they can possibly deliver.
If you are a new investor, you should also realize that losing patience can cause you to sell your best choices right before a big rise. All too often, investors buy a promising stock just as it enters a period of price stagnation. Even the best-performing stocks run into these unpredictable phases from time to time. They move mainly sideways in a wide range for months or years before their next big rise begins. (Stock brokers often refer to these stocks as “dead money.”)
If you lack patience, you run a big risk of selling your best choices in the midst of one of these phases, prior to the next big move upward. If you lose patience and sell, you are particularly likely to do so in the low end of the trading range, when stock prices have weakened and confidence in the stock has waned.
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POWERSHARES QQQ ETF $53.53 (Nasdaq symbol QQQQ; buy or sell through brokers; www.invescopowershares.com), formerly called Nasdaq 100 Trust Shares, holds the stocks that represent the Nasdaq 100 Index. That index is made up of the 100 largest shares on the Nasdaq exchange, based on market cap. The Nasdaq 100 Index contains shares of companies in a number of major industries, including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain financial companies. The fund’s expenses are about 0.20% of its assets. The index’s highest-weighted stocks are Apple, Microsoft, Qualcomm, Google, Cisco Systems, Intel, Amazon.com, Oracle Corp., Comcast Corp. and Amgen Inc....
SPDR DOW JONES INDUSTRIAL AVERAGE ETF $109.28 (New York symbol DIA; buy or sell through brokers; www.spdrs.com) holds the 30 stocks that make up the Dow Jones Industrial Average. The fund’s top holdings are IBM, ExxonMobil, Chevron Corp., 3M, Johnson & Johnson, McDonald’s Corp., Coca-Cola Co., Caterpillar Inc., United Technologies and Procter & Gamble. The fund’s expenses are about 0.18% of its assets. SPDR Dow Jones ETF is a buy....
SPDR S&P 500 ETF $114.42 (New York symbol SPY; buy or sell through brokers; www.spdrs.com) holds the stocks in the S&P 500 Index, which consists of 500 major U.S. stocks that are chosen based on their market cap, liquidity and industry group. The index’s highest-weighted stocks are Exxon-Mobil, Microsoft, Procter & Gamble, Apple, Wells Fargo & Co., Johnson & Johnson, IBM, Chevron, General Electric, Pfizer Inc., Coca-Cola Co. and AT&T. The fund’s expenses are just 0.10% of its assets....
ISHARES DOW JONES CANADA SELECT DIVIDEND INDEX FUND $19.60 (Toronto symbol XDV; buy or sell through a broker; ca.ishares.com) holds 30 of the highest-yielding Canadian stocks. Its selections are based on dividend growth, yield and payout ratio. The weight of any one stock is limited to 10% of its assets. The fund’s MER is 0.50%. Its yield is 2.7%. The fund’s top holdings are CIBC, 6.6%; Bank of Montreal, 5.3%; Bonterra Energy, 5.2%; National Bank, 4.9%; TD Bank, 4.9%; Telus, 4.8%; IGM Financial, 4.3%; Enbridge, 4.2%; BCE, 4.2%; Canadian Utilities, 3.7%; and Manitoba Telecom, 3.7%. The fund holds 50.2% of its assets in financial stocks. Utilities are next, at 26.4%. The top Canadian finance stocks have sound prospects. However, if you invest in this ETF, be sure to adjust the rest of your portfolio so it won’t be overly concentrated in the financial sector....
ISHARES S&P/TSX 60 INDEX FUND $16.56 (Toronto symbol XIU; buy or sell through a broker; ca.ishares.com) is a good, low-fee way to buy the top stocks on the TSX. The units are made up of stocks that represent the S&P/TSX 60 Index, which consists of the 60 largest, most heavily traded stocks on the exchange. Expenses are just 0.17% of assets. Most of the stocks in the index are high-quality companies. However, as it must ensure that all sectors are represented, it holds a few we wouldn’t include. The index’s top holdings are Royal Bank, 6.7%; TD Bank, 6.4%; Bank of Nova Scotia, 5.5%; Barrick Gold, 4.8%; Suncor Energy, 4.1%; Potash Corp., 3.9%; Goldcorp, 3.8%; Bank of Montreal, 3.7%; Canadian Natural Resources, 3.2%; CN Railway, 3.2%; BCE Inc., 3.0%, TransCanada Corp., 2.9%, CIBC, 2.9%; Enbridge, 2.6%; Cenovus Energy, 2.3% and Manulife Financial, 2.1%....
ISHARES DEX UNIVERSE BOND INDEX FUND $31.08 (CWA Rating: Income) (Toronto symbol XBB; buy or sell through a broker) mirrors the performance of the DEX Universe Bond Index. The 502 bonds in the portfolio have an average term to maturity of 9.31 years. The fund’s MER is 0.32%. The bonds in the index are 70.6% government and 29.4% corporate. The fund yields 3.6%, compared to the Short Term Bond Fund’s 3.2%. Its yield to maturity is 2.40%, 0.88% above the Short Term Fund. That reflects the added risk of holding long-term bonds....
When you seek investment advice on what to do with a particular stock you should always consider the source. Most investors get their advice from brokers.
ISHARES DEX SHORT TERM BOND INDEX FUND $29.29 (CWA Rating: Income) (Toronto symbol XSB; buy or sell through a broker) mirrors the performance of the DEX Short-Term Bond Index. This index consists of a wide range of investment-grade federal, provincial, municipal and corporate bonds with between one- and five-year terms to maturity. The fund holds 264 bonds with an average term to maturity of 2.85 years. The bonds in the index are 66.7% government and 33.3% corporate. The fund’s MER is 0.26%. iShares DEX Short Term Bond Index Fund yields 3.2%. However, this high yield is due to the fact that some of the fund’s bonds pay above-market interest rates. But as a result, they trade above their face value. When these bonds mature, holders will only get the bonds’ face value, which means the portfolio will incur predictable capital losses. These losses will offset some of the appeal of the above-market yields....
BCE INC. $38.22 (Toronto symbol BCE; Shares outstanding: 777.1 million; Market cap: $30.3 billion; TSINetwork Rating: Above Average; Dividend yield: 5.4%; www.bce.ca) is Canada’s largest provider of telephone, Internet and wireless services. It also sells wireless and satellite-TV services across Canada. In the three months ended June 30, 2011, BCE’s earnings per share rose 10.3%, to $0.86 from $0.78. Revenue rose 11.6%, to $5.0 billion from $4.4 billion a year earlier. Revenue fell 2.0% at the wireline division, which accounts for 53% of total revenue. This division, which includes BCE’s traditional land-line business, faces rising competition. As well, many customers are cancelling their land lines and switching to wireless devices. Revenue from wireless services (26% of total revenue) rose 6.1%. The company’s recent network upgrades continue to attract new subscribers and prompt existing customers to upgrade their mobile-phone plans. BCE is also benefiting from rising use of smartphones, which generate higher monthly fees....
Stock option investing includes selling options; covered call writing is where you sell a call option against a stock you currently own.