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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IVY CANADIAN FUND $26.71 (CWA Rating: Conservative) invests in high-quality, large capitalization stocks. The $3.0 billion fund’s top holdings include Shoppers Drug Mart, TD Bank, Manulife Financial, Canadian National Railway, Becton Dickinson & Co., Enbridge, McDonald’s Corp., Thomson Corporation, Diageo plc and Walgreen Co. Ivy Canadian’s breakdown by industry is: Consumer staples, 29.3%; Financials, 17.5%; Consumer discretionary, 15.2%; Industrials, 11.7%; Health care, 6.6%; Energy, 5.6%; Information technology, 4.0%; and Utilities, 4.0%....
IVY EUROPEAN FUND $14.39 (CWA Rating: Aggressive) holds mostly good quality stocks, although it has underperformed the longer-term benchmark Morgan Stanley indexes. We don’t see any reason to hold a mutual fund that concentrates in Europe. If you want European exposure, consider Ivy Foreign Equity Fund (see above), or the closed-end EUROPEAN EQUITY FUND $11 (New York symbol EEA; CWA Fund Rating: Conservative). Ivy European Fund is a sell.
IVY FOREIGN EQUITY FUND $28.85 (CWA Rating: Conservative) outperformed the Morgan Stanley benchmark international index over the last 10 years. The fund gained 4.1%, and that was better than the Morgan Stanley benchmark’s gain of 1.7%. Ivy Foreign Equity Fund lost 11.6% over the last year. The fund invests in companies based outside of Canada, but cuts risk by avoiding direct investment in emerging markets. Ivy Foreign Equity is one of our top foreign fund recommendations. Still, we think non-U.S. international funds should make up at most 10% of the holdings of a conservative investor. The fund’s top holdings are Reckitt Benckiser plc (UK household & healthcare products), McDonald’s Corp., L’Oreal SA (French cosmetics), Becton Dickinson (U.S. medical technology), Nestle SA, Henry Schein Inc., (U.S. healthcare), PepsiCo (U.S. food & beverage), William Demant (hearing health products) and Diageo plc (UK alcoholic drinks)....
IVY GROWTH AND INCOME FUND $21.37 (CWA Rating: Conservative) (Mackenzie Financial Corp., 150 Bloor St. West, Toronto, Ont. M5S 3B5. 1-800-387-0780; Web site: www.mackenziefinancial.com. Load fund — available from brokers) is a balanced fund, holding a mixture of stocks, bonds and cash. The fund has returned 5.6% annually for the 10 years. It lost 6.6% over the last year. The fund’s MER is 2.10%. The fund’s top stock holdings are Shoppers Drug Mart, PepsiCo, Manulife Financial, Enbridge, Thomson Corp., McDonald’s Corp., Becton Dickinson (U.S. medical technology), Sun Life Financial, TD Bank, Walgreen Co. (U.S. pharmacies) and Diageo plc (UK alcoholic beverages). This $2.5 billion fund holds 24% of its assets in bonds. Interest rates on bonds are now under 5% annually in Canada. That’s the total return that a bond can provide, from today until it matures. However, bonds leave investors at the mercy of inflation, which shrinks the purchasing power of all fixed-return investments. In fact, an upsurge in inflation could wipe out all returns on bonds, and some of their principal besides....
POWER CORPORATION $34.10 (Toronto symbol POW; SI Rating: Above average) is a diversified holding company. Power Corp. controls one of Canada’s largest mutual-fund companies, IGM Financial, and Great-West Lifeco, one of the largest life insurers. Power Financial, 66.4% held, is a holding company for Power Corp.'s financial assets, including 72.9% of Great-West Lifeco and 58.4% of IGM Financial. As well, Power Financial holds 50% of Parjointco, which in turn owns a 54.3% interest in Swiss-listed Pargesa Holdings SA. Pargesa has 95% of its assets in five large European companies: Imerys (minerals processing), Total SA (world’s fourthlargest oil firm), Pernod Ricard (wine and spirits), Suez (energy, water and waste services) and Lafarge SA (cement and building materials). Power Corp. also owns 100% of Gesca Ltée, which publishes Montreal’s La Presse and six other daily newspapers. In the three months ended December 31, 2007, Power Corp.'s earnings rose 21.1%, to $350 million or $0.70 a share, from $289 million or $0.57 a share. Great-West Lifeco contributed $250 million to Power Corp.'s earnings and IGM Financial contributed $87 million....
ISHARES CANADIAN BOND INDEX FUND $29.21 (CWA Rating: Income) (Toronto symbol XBB; buy or sell through a broker) mirrors the performance of the Scotia Capital Universe Bond Index. This index consists of a diversified range of investment grade Canadian government and corporate bonds, with a term to maturity of more than one year. At last report, the bonds in the index were 41.5% Government of Canada bonds, 26.7% Provincial government bonds, 2.1% municipal bonds and 28.8% corporate bonds....
ISHARES CANADIAN SHORT BOND INDEX FUND $28.73 (CWA Rating: Income) (Toronto symbol XSB; buy or sell through a broker) mirrors the performance of the Scotia Capital Short Term Bond Index. This index consists of a diversified range of investment grade federal, provincial, municipal and corporate bonds, with terms to maturity of between one and five years. Top issuers include Canada Mortgage and Housing, RBC Capital Trust, Province of Ontario, Province of Quebec and Royal Bank of Canada....
ISHARES MCSI CANADA INDEX FUND $30 (American Exchange symbol EWC; buy or sell through brokers) invests in most of the stocks in the Morgan Stanley Capital International Canada Index. These stocks represent Canada’s largest and most-established public companies, accounting for about 60% of the market capitalization of all publicly traded stocks. This fund has an MER of 0.54%. These shares are managed by Barclays Global Investors. There are now 30 different MCSI index funds. MCSI Canada’s MER is more than triple the 0.17% MER on the S&P/TSE 60 units, also managed by Barclays. We think that defeats the main advantage of index funds. The spread between iShares MCSI Canada’s high MER and that of a low-fee fund may not appear to make a lot of difference in a single year, but there is no point in paying more than you need to....
DIAMONDS TRUST SHARES $124 (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, 3M, Boeing Co., United Technologies, Caterpillar, Altria Group, Coca-Cola Co., Johnson & Johnson, Procter & Gamble and Exxon Mobil....
S&P DEPOSITORY RECEIPTS $135 (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....