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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Given today’s low prices and interest rates, a lot of people seem to be thinking about real estate investing. It’s also a topic that members of my Inner Circle service ask me about from time to time. Personal real estate investing certainly has tax benefits. You write off your interest costs against current income; your gains are deferred and are taxed at capital-gains rates. It can also pay off in the long run, helped along by leverage available in a big mortgage. However, you should allow a number of years for any new real estate investment to pay off. Meanwhile, you need to be wary of bad tenants. First-time landlords sometimes find their tenants include lots of deadbeats, vandals and abusive complainers who are not at all like the tenants they know personally. The experience may be unpleasant enough to undermine their faith in human nature, and to spur them to sell their property as soon as possible....
MANULIFE FINANCIAL $20.19 (Toronto symbol MFC; Shares outstanding: 1.6 billion; Market cap: $32.5 billion; SI Rating: Above Average) sells life and other forms of insurance, as well as mutual funds and investment-management services. It operates in 19 countries and territories worldwide, including the U.S. and Asia. Manulife reported a loss of $1.1 billion, or $0.67 a share, in the three months ended March 31, 2009, compared to a gain of $869 million, or $0.57 a share, a year earlier. Excluding one-time charges, it would have earned $803 million, or $0.50 a share, in the latest quarter. The loss was largely caused by stock-market declines. Manulife also devoted $1.1 billion to strengthening its reserve for segregated-fund guarantees. This is the OSC’s main focus. The OSC may find that Manulife should have anticipated that the big drop in stock markets late last year would hurt its ability to meet those guarantees. Manulife subsequently issued debt and shares to boost reserves for those contracts, which pushed down its stock price. Either way, any OSC ruling shouldn’t hurt Manulife’s positive outlook....
TRIMARK CANADIAN RESOURCES FUND $13.58 (CWA Rating: Aggressive) (Invesco Trimark, 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7. Tel: 1-800-631-7008; Web site: www.invescotrimark.com. Buy or sell through brokers.) includes firms with Successful Investor Ratings of “Speculative” in its top picks. However, we like Trimark Canadian Resources Fund’s value-seeking, conservative approach to picking stocks in the volatile resource sector. The $428.9-million fund’s top holdings are EnCana Corporation, Canadian Natural Resources, Inmet Mining Corp., Husky Energy, Nexen, Cameco Corp., Mayr-Meinhof Karton AG, Goldcorp Inc., Talisman Energy and Addax Petroleum Corp. Trimark Canadian Resources Fund holds 50.3% of its portfolio in the Energy sector, 26.4% in Metals & Minerals and 6.3% in Industrials....
TD RESOURCE FUND $22.44 (CWA Rating: Aggressive) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario, M5W 1P9. Tel: 1-800-386-3757; Web site:www.tdcanadatrust.ca. No load: deal directly with the bank.) invests in companies which it sees as having strong asset bases, proven management and the ability to internally finance growth. The $173.1-million TD Resource Fund’s top stock holdings mostly have Successful Investor Ratings of “Average” or higher. They include EnCana, Suncor Energy, Talisman Energy, Goldcorp, Yamana Gold, Petro-Canada, Red Back Mining, BHP Billiton, Husky Energy, Chevron, Marathon Oil and Nexen. TD Resource Fund holds 59.1% of its portfolio in Energy and 38.1% in Metals & Minerals. It has an MER of 2.15%....
RIOCAN REAL ESTATE INVESTMENT TRUST $15.28 (Toronto symbol REI.UN; Units outstanding: 233.1 million; Market cap: $3.6 billion; SI Rating: Average) is Canada’s largest REIT. It has interests in a portfolio of 247 shopping malls across Canada, including 13 under development. In all, these contain over 59 million square feet of leasable area. RioCan’s occupancy rate stands at 97.5%. In the three months ended March 31, 2009, RioCan posted revenue of $191.1 million, up 4.2% from $183.4 million a year earlier. Cash flow per unit was unchanged, at $0.32. RioCan’s annual distribution of $1.38 gives the units a 9.0% yield. RioCan recently raised $150 million by issuing new units at $14.50 each. The trust didn’t need to raise capital, but will now have the funds to buy other companies, likely at low prices, as opportunities arise....
CANADIAN REIT $24.60 (Toronto symbol REF.UN; Units outstanding: 66.2 million; Market cap: $1.6 billion; SI Rating: Extra Risk) owns more than 160 properties. These consist of retail, industrial and office buildings located across Canada and in the Chicago, Illinois, area. Canadian REIT’s occupancy rate is 96.5%. The trust buys properties in prime locations, usually near major cities, that attract strong tenants, maintain high occupancy rates and deliver a reliable stream of rental income. In the three months ended March 31, 2009, Canadian REIT’s revenue was $85 million, up 9.9% from $77.4 million a year earlier. Cash flow per unit rose 10%, to $0.55 from $0.50. The units yield 5.5%....
H&R REAL ESTATE INVESTMENT TRUST $10.98 (Toronto symbol HR.UN; Units outstanding: 147.8 million; Market cap: $1.6 billion; SI Rating: Extra Risk) owns interests in 35 office properties, 123 industrial properties and 120 retail properties. Together, these contain over 41 million square feet. Over half of H&R’s properties are in the Greater Toronto Area. The rest are in other parts of Ontario, as well as in Quebec, western Canada and the U.S. H&R has an occupancy rate of 96.3%. In the three months ended March 31, 2009, H&R’s revenue was $160.1 million, up 8.3% from $147.9 million a year earlier. Cash flow per unit rose 2.6%, to $0.40 from $0.39. H&R’s units yield 6.6%. H&R REIT is a buy.
In our Financial Question of the Week, we recently asked TSI Network users how many stocks they own. The results were as follows: 33% of users owned 16 to 30 stocks, 29% owned five to 15, 21% owned less than five and 17% owned more than 30. So what is the right number of stocks to own? It’s a piece of investing advice we are asked about often, so it’s just one of the questions we answer in our free report: Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada....
A member of my Inner Circle recently asked us whether a reverse mortgage would be a good way to tap into the equity she had built up in her home. Reverse mortgages in Canada typically let homeowners (age 60 or older) borrow on their home equity (maximum 40%). The loan and accumulated interest are repaid only if the house is sold (or if the borrower moves out) or from the proceeds of the estate. Generally, the borrower will get between 28% and 33% of the value of their home, depending on their age and the location and type of home.
Reverse mortgages in Canada: Look closely at the costs
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Here are four classic, profit-killing errors that all investors make from time to time. All can seriously hinder your stock market returns. 1. “Averaging down” without reconsidering whether you should have bought in the first place. Many investors have made lots of money by “averaging in” to the stock of a well-established, well-managed company — that is, buying more as funds became available over a period of years....