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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Part-time real estate investing can be very profitable. However, the best returns are mainly a result of three key factors that are easy to overlook when investing in real estate: leverage, sweat equity and higher risk. It’s easier to get financing to buy real estate than stocks, because real estate tends to be less volatile and easier to appraise, and it generally produces more current income. It also rarely drops drastically overnight, as some stocks do from time to time.
Leverage helps at times
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RBC CANADIAN DIVIDEND FUND $37.65 (RBC Funds, P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9. 1-800-463-3863; Web site: www.royalbank.com. No load — deal directly with the bank) invests in well-established, dividend-paying companies. In fact, it invests solely in common stocks. That’s why, despite the fund’s name, we rate it Conservative rather than Income. The $7.1-billion RBC Canadian Dividend Fund’s top stock holdings are: Royal Bank of Canada, Bank of Nova Scotia, TD Bank, Manulife Financial, Brookfield Asset Management, EnCana, Bank of Montreal, TransCanada Corp. and Power Corp. RBC Canadian Dividend is a Conservative buy.
GUARDIAN MONTHLY HIGH INCOME II FUND $9.16 (CWA Rating: Income) (BMO Guardian Group of Funds, Commerce Court West, Suite 4100, P.O. Box 201, Toronto, Ontario M5L 1E8. 1-800-668-5613; Web site: www.bmoguardianfunds.com. Available from brokers) is a fund we rate as Income. It invests in royalty and income trusts and real estate investment trusts (REITs). With assets of $479.5 million, this fund is large enough to diversify widely. It also focuses on stable REITs and high-quality, long-lived resource trusts. The fund’s top holdings are: Crescent Point Energy Trust, Canadian Oil Sands, RioCan REIT, ARC Energy, Boardwalk REIT, Keyera Facilities Income Fund, BFI Canada, Vermilion Energy Trust, CML Healthcare Income and Enerplus Resources. Guardian Monthly High Income II pays a $0.06 monthly distribution, for an 7.9% yield....
TD CANADIAN SMALL-CAP EQUITY FUND $21.56 (CWA Rating: Aggressive) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario M5W 1P9. 1-800-386-3757; Web site: www.tdcanadatrust.ca. No load — deal directly with the bank) is a fund we rate as Aggressive. The fund invests in small to medium-sized companies that its managers feel are undervalued or offer strong growth potential as the economy improves. These firms are mainly located in Canada, but the fund invests in other countries, as well. Its top 10 holdings are: RuggedCom Inc., Eldorado Gold, Red Back Mining, Celtic Exploration, Addax Petroleum Corporation, Industrial Alliance Insurance & Financial Inc., TMX Group Inc., Progress Energy Resources, Cogeco Cable and Aecon Group. TD Canadian Small Cap Equity Fund stands out among small-cap funds because it focuses on well-established companies with strong management and prominent positions in their industries. It also invests in Canadian stocks. The riskiest small-cap funds invest in less-regulated overseas markets....
IVY CANADIAN FUND $20.73 (CWA Rating: Conservative) (Mackenzie Financial Corp., 150 Bloor Street West, Toronto, Ontario M5S 3B5. 1-800-387-0780; Web site: www.mackenziefinancial.com. Load fund — available from brokers) is a good example of a Conservative fund. Ivy Canadian’s managers keep risk low by investing in well-established, high-quality stocks. The fund also invests in politically stable areas, with 47.3% of its portfolio in Canadian stocks, 27.8% in the U.S., 5.1% in Switzerland, 4.1% in the U.K. and 4% in France. Moreover, Ivy Canadian has $1.9 billion in assets, so it can easily meet redemption requests without having to sell parts of its holdings. Ivy Canadian Fund holds just 29 stocks. The top 10 are: Thomson Reuters, Shoppers Drug Mart, Imperial Oil, Tim Hortons, Becton Dickinson, McDonald’s Corp., Nestle SA, Colgate-Palmolive, Bank of Nova Scotia and Reckitt Benckiser. The fund is well-balanced among industry segments, with consumer staples making up the largest part of its portfolio, at 35.5%. Ivy Canadian holds 11% of its assets in cash. Ivy Canadian Fund is a Conservative buy.
RENAISSANCE GLOBAL HEALTH CARE FUND $13.79 (CWA Rating: Speculative) (CIBC Asset Management, 1500 University Street, Suite 800, Montreal, Quebec. Web site: www.renaissanceinvestments.com. Available from brokers) invests in companies from across the health-care industry. These may include pharmaceutical and biotechnology firms, and companies that design and make medical equipment. The $579-million fund’s managers look at a firm’s financial strength, the quality of its management and whether it is developing new products that could fuel future growth. The fund’s top holdings include Schering-Plough Corp., UnitedHealth Group, Merck & Company, Sanofi-Aventis, Abbott Laboratories, Wyeth, Forest Laboratories, Shionogi & Co. and Eli Lilly & Co....
ISHARES MCSI CANADA INDEX FUND $20.94 (American Exchange symbol EWC; buy or sell through brokers) is like a market-cap-based index fund, but its managers tinker with the index-fund formula in order to try and improve performance. They do this using their proprietary Morgan Stanley Capital International Canada Index. The U.S.-based fund also has to work around Canadian foreign-ownership restrictions. iShares MCSI Canada Index Fund is managed by Barclays Global Investors and has an MER of 0.52%. If you want to own a Canadian index fund, you should buy the iShares CDN LargeCap 60. You’ll pay about a third of the management fees. We don’t recommend iShares MCSI Canada Index Fund.
NASDAQ-100 TRUST SHARES $35.03 (Nasdaq Exchange symbol QQQQ; buy or sell through brokers), or “Qubes,” hold the stocks that represent the Nasdaq 100 Index, which is made up of the 100 largest, most heavily traded stocks on the Nasdaq exchange. The index contains firms from a number of major industries, including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain financial companies. The shares’ expenses are about 0.20% of assets. The index’s 10 highest weighted stocks are: Apple, Microsoft, Qualcomm, Google, Cisco, Intel, Research in Motion, Gilead Sciences, Oracle and Teva Pharmceuticals....
DIAMONDS TRUST SHARES $85.20 (American Exchange symbol DIA; buy or sell through brokers) hold the 30 stocks that make up the Dow Jones Industrial Average. The fund’s top 10 holdings are: IBM, Exxon Mobil, Chevron Corp., 3M, Procter & Gamble, McDonald’s Corp., Johnson & Johnson, Wal-Mart Stores, United Technologies and Coca-Cola. The fund’s expenses are about 0.17% of its assets. Diamonds Trust Shares are a buy.
S&P DEPOSITORY RECEIPTS $92.14 (American Exchange symbol SPY; buy or sell through brokers) are commonly called “Spiders.” The fund holds the stocks in the S&P 500 Index, which consists of 500 major U.S. stocks that are chosen based on their market share, liquidity and industry group.
The index’s 10 highest-weighted stocks are: Exxon Mobil, Procter & Gamble, General Electric, AT&T, Johnson & Johnson, Chevron, Microsoft, Cisco Systems, JP Morgan Chase & Co....
The index’s 10 highest-weighted stocks are: Exxon Mobil, Procter & Gamble, General Electric, AT&T, Johnson & Johnson, Chevron, Microsoft, Cisco Systems, JP Morgan Chase & Co....