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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DIAMONDS TRUST SHARES $86.04 (American Exchange symbol DIA; buy or sell through brokers) hold the 30 stocks that make up the Dow Jones Industrial Average. Currently, 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. Expenses are about 0.18% of assets. Diamonds Trust Shares are a buy.
S&P DEPOSITORY RECEIPTS $87.32 (American Exchange symbol SPY; buy or sell through brokers) are commonly called ‘Spiders’. The fund holds the stocks in the S&P 500 Index. This index is comprised of 500 major U.S. stocks chosen for market size, liquidity, and industry group representation. The 10 highest weighted stocks on the index are Exxon Mobil, Procter & Gamble, General Electric, AT&T, Johnson & Johnson, Chevron Corp., Microsoft, Wal-Mart Stores, JP Morgan Chase & Co. and Pfizer. Expenses for the fund are just 0.10% of assets. If you want exposure to the S&P 500 Index, S&P Depository Receipts are a buy.
ISHARES CDN LARGECAP 60 INDEX FUND $12.71 (Toronto symbol XIU; buy or sell through a broker) (units split 4-for-1 in August, 2008) is a good low-fee way to buy the top stocks on the TSX. The units hold a basket of stocks that represent the S&P/TSX 60 Index. The index is made up of the 60 largest and most heavily traded stocks on the TSX. Expenses on the units are just 0.17% of assets. Most of the 60 stocks in the index are good quality companies. However, to meet the requirement that all sectors are represented, the index holds a few firms we wouldn’t include, such as Biovail Corp. The index’s top holdings are: Royal Bank, 7.5%; EnCana Corporation, 5.8%; TD Bank, 4.8%; Bank of Nova Scotia, 4.7%; Manulife Financial, 4.6%; Barrick Gold, 4.3%; Canadian Natural Resources, 3.6%; Research in Motion, 3.5%; Suncor Energy, 3.5%; Goldcorp, 3.3%; Potash Corporation, 3.2%; Canadian National Railway, 2.8%; BCE Inc., 2.6%; Rogers Communications, 2.5%; and Bank of Montreal, 2.5%....
JAPAN SMALLER CAP FUND $6.41 (New York symbol JOF; CWA Rating: Aggressive) invests mainly in less-widely-followed Japanese over-the-counter stocks. The fund’s top holdings are Jupiter Telecom, Rohto Pharmaceutical Co., Moshi Moshi Hotline, Inc., Seven Bank, Ltd., Kuraray Co., Ltd. and Air Water Inc. Japan Smaller Cap Fund sells for a 12% discount to the current value of its assets. Japan Smaller Cap is a buy.
CIBC U.S. SMALL COMPANIES FUND $8.88 (CWA Rating: Aggressive) (CIBC Securities, 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7. 1-800-631-7008; Website: www.cibc.com. No load — deal directly with the company.) invests in small-cap U.S. companies that it sees as undervalued, and having above-average growth potential. The $109.4 million fund’s top holdings now include Children’s Place Retail (clothing stores), Amedisys (home health care nursing), Buckle Inc. (clothing stores), Syniverse Holdings (wireless telecom technology), Triumph Group (aircraft components), Interactive Brokers Group (electronic brokers), Collective Brands (operates Payless Shoe- Source), HealthSpring (healthcare benefits & services) and Deckers Outdoor (footwear). CIBC U.S. Small Companies Fund lost 16.8% in Canadian dollars over the last year, compared to a loss of 15.7% for the benchmark Russell 2000 index in Canadian funds. The fund’s MER is 2.60%....
SCOTIA U.S GROWTH FUND $6.49 (CWA Rating: Conservative) (Scotia Securities, 40 King Street West, 6th Floor, Toronto, Ontario M5H 1H1. 1-800-268-9269; Website: www.scotiabank.com. No load — deal directly with the company.) looks at a company’s fundamentals such as earnings, dividend yield, book value, cash flow and low debt, as well as its management, to find undervalued stocks. The $36.0 million Scotia U.S. Growth Fund’s top holdings include Wells Fargo (diversified financial services), Oracle Corporation (software), Snap-on Inc. (professional tools), JP Morgan Chase (financial services), ExxonMobil Corporation, Microsoft, Lockheed Martin (space & aeronautics), PepsiCo, Conoco- Phillips and Eli Lilly & Co. (pharmaceuticals). The fund’s one-year loss in Canadian dollars is 21.3%, compared to a loss of 18.2% for the S&P 500 in Canadian funds over the same period. The fund’s MER is 2.56%....
RIOCAN REAL ESTATE INVESTMENT TRUST $12.83 (Toronto symbol REI.UN; Shares outstanding: 220.4 million; Market cap: $2.8 billion; SI Rating: Average) is Canada’s largest REIT. RioCan has ownership interests in 238 retail properties across Canada, including 14 under development. These contain over 58 million square feet of leasable area. Occupancy stands at 97.0%. RioCan is Canada’s largest owner of neighbourhood shopping centres. These are enclosed malls in smaller urban centres. But where it’s showing the strongest growth is as the largest owner of ‘New Format’ malls. These are in the suburbs of larger cities, and are made up of ‘Big Box’ stores with lots of parking and room for new building. RioCan’s revenue in the three months ended September 30, 2008 was $185.5 million, up 7.6% from $172.5 million a year earlier. Cash flow per unit rose 2.8%, to $0.37 from $0.36. RioCan recently increased its monthly distribution by 2.2%, to $0.115 a unit from $0.1125. The new annual rate of $1.38 yields 10.8%....
Many aggressive investors find the lure of stock option investing hard to resist. However, despite their appeal, the vast majority of investors lose money with options. An option is a contract between a buyer and a seller, based on an underlying security, usually a stock. The buyer pays the seller a fee, or premium, for certain rights to the stock. In exchange for the premium, the seller assumes certain obligations. Options trade through stock exchanges, with prices quoted each day in the financial section of newspapers. Each options contract is for 100 shares of stock. So one contract quoted at $5 will cost you $500 (before commissions). Each contract has a limited life span, or time to expiry — usually less than nine months. The expiry date is the date on which the contract expires. The strike, or exercise price, is the price at which the rights granted to the buyer can be exercised. There are two types of options:...
SCOTIA CANADIAN GROWTH FUND $44.12 (CWA Rating: Conservative) (Scotia Securities, 40 King Street West, 6th Floor, Toronto, Ontario M5H 1H1. 1-800-268-9 269; Website: www.scotiabank.com. No load — deal directly with the company.) uses fundamental analysis to identify what the managers see as investments that have the potential for above-average growth. The $460.9 million Scotia Canadian Growth Fund’s largest stock holdings include Manulife Financial, Royal Bank, TD Bank, Research in Motion, Potash Corp., Canadian Natural Resources, Suncor Energy, Bank of Nova Scotia and EnCana Corp. Scotia Canadian Growth currently holds 39.9% of its portfolio in the Resources sector. Its next-largest holding is Financial services at 29.4%....
CIBC CANADIAN EQUITY FUND $18.87 (CWA Rating: Conservative) (CIBC Securities, 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7. 1-800-631-7008; Website: www.cibc.com. No load — deal directly with the company.) uses a “bottom-up” approach (using fundamentals such as earnings, cash flow and low debt) to identify companies that trade at reasonable valuations and also have growth potential. The $450.5 million fund’s top holdings are Manulife Financial, EnCana, Research in Motion, Bank of Nova Scotia, TD Bank, Potash Corp., Suncor Energy, Canadian Natural Resources and CN Railway. The fund’s MER is 2.20%. CIBC Canadian Equity holds 38.8% of its portfolio in Resource sector stocks and 33.5% in Financial services stocks....