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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NASDAQ-100 TRUST SHARES $44.37 (Nasdaq Exchange symbol QQQQ; buy or sell through brokers) or ‘Qubes’, hold the stocks that represent the Nasdaq-100 Index. This index is made up of the 100 largest and most heavily traded stocks on the Nasdaq Exchange. The index reflects firms across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain financial companies. Expenses are about 0.20% of assets. The top 10 highest-weighted stocks are Apple Inc., Microsoft, Qualcomm, Google, Cisco, Intel, Research in Motion, Gilead Sciences, Oracle and Teva Pharmaceutical Industries. Nasdaq-100 Trust Shares are a buy for aggressive investors only.
ISHARES CDN LARGECAP 60 INDEX FUND $76.65 (Toronto symbol XIU; buy or sell through a broker) (formerly called iUnits S&P/TSX 60 Index Participation Fund) 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 Cott Corporation and Celestica. The index’s top holdings are: Royal Bank, 6.6%; Manulife Financial, 5.8%; TD Bank, 4.7%; Bank of Nova Scotia, 4.7%; EnCana Corporation, 4.4%; Suncor Energy, 3.9%; Research in Motion, 3.7%; Canadian Natural Resources, 3.5%; Bank of Montreal, 3.1%; CIBC, 3.3%; BCE Inc., 2.6%; Barrick Gold, 2.8%; Sun Life Financial, 2.9%; and Potash Corporation, 2.6%....
RBC CANADIAN DIVIDEND FUND $44.84 (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) has 38.1% of its portfolio in Financial services stocks. It has a further 14.4% in Energy stocks and 8.5% in Consumer discretionary. The $9.6 billion RBC Canadian Dividend Fund’s top stock holdings are Royal Bank of Canada, Bank of Nova Scotia, Toronto-Dominion Bank, Manulife Financial, Canadian Imperial Bank of Commerce, TransCanada Corporation, Bank of Montreal, BCE Inc. and Power Corporation. Over the last five years, RBC Canadian Dividend Fund has posted a 14.9% annual rate of return. That’s less than the S&P/TSX’s gain of 18.3% over the same period....
BMO DIVIDEND FUND $44.37 (BMO Mutual Funds, 77 King Street West, Suite 4200, Royal Trust Tower, Toronto, Ont., M5K 1J5, 1-800-665-7700; Web site: www.bmo.com. No load — deal directly with the bank) (CWA Rating: Conservative) currently holds about 49.0% of its portfolio in the Financial services industry. Its next-largest holdings are Energy at 15.1% and Consumer discretionary at 7.5%. BMO Dividend Fund’s largest holdings are Manulife Financial, Bank of Nova Scotia, CIBC, Royal Bank of Canada, Power Financial Corporation, Toronto-Dominion Bank, Canadian National Railway, TransCanada Corporation, Imperial Oil, Shaw Communications, Enbridge Inc., Husky Energy and Sun Life Financial. Over the last five years, the $5.8 billion BMO Dividend Fund has posted a 14.6% annual rate of return. That’s under the S&P/TSX’s gain of 18.3%. However, the S&P/TSX index held a high 40% or so of its holdings in Resources shares. That’s been one of the best-performing, although riskiest, sectors. The fund gained 1.8% over the last year, compared to a gain of 9.8% for the S&P/TSX index. BMO Dividend’s MER is 1.71%....
TRIMARK CANADIAN RESOURCES FUND $16.48 (CWA Rating: Aggressive) (AIM Funds Management Inc., 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7. 1-800-631-7008; Website: www.aimfunds.ca. Buy or sell through brokers.) includes firms we’d rate as 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 $527.1 million fund’s top holdings are Labrador Iron Ore Royalty Income Fund, West Fraser Timber Co. Ltd., Kinross Gold Corporation, Marathon Oil Corporation, Plum Creek Timber Co. REIT, Mayr-Meinhof Karton AG, Highpine Oil & Gas, Umicore S.A., Range Resources Corp. and Yamana Gold. Trimark Canadian Resources Fund is broken down by sector as follows: Golds, 21.9%; Oil, gas & combustable fuels, 17.6%; Paper & forest, 9.6%; Diversified metals & minerals, 8.0%; Energy equipment & services, 6.6%; REITs, 5.9%; Steel, 5.4%; Containers & packaging, 3.9%; and Commercial services & supplies, 3.5%....
TD RESOURCE FUND $32.78 (CWA Rating: Aggressive) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-800-386-3757; Web ite:www.tdcanadatrust.ca. No load — deal directly with the bank) invests in companies with superior asset bases, proven management and the ability to internally finance growth. The $259.3 million TD Resource Fund’s top stock holdings are mostly of ‘Average’ quality or higher. The fund’s holdings include Suncor Energy, EnCana Corporation, Talisman Energy Inc., Timminco Ltd., Goldcorp, Yamana Gold Inc., Petro- Canada, Nexen, Alcoa, BHP Billiton, Husky Energy, Chevron Corporation, Marathon Oil Corporation, Coeur d’Alene Mines Corporation and FNX Mining Company....
RIOCAN REAL ESTATE INVESTMENT TRUST $20.80 (Toronto symbol REI.UN; SI Rating: Average) is Canada’s largest REIT. RioCan has ownership interests in a portfolio of 207 retail properties across Canada, including 10 under development. These properties contain over 53 million square feet of leasable area. RioCan is Canada’s largest owner of neighbourhood shopping centres. These are enclosed malls in smaller urban centres. But where the company is 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 largely of ‘Big Box’ stores with lots of parking and room for new building. RioCan’s revenue in the three months ended September 30, 2007 was $172.5 million, up 7.3% from $160.7 million a year earlier. Cash flow was unchanged at $0.36 per unit. Total occupancy is 97.6%, and anchor tenants account for 82.6% of RioCan’s rental revenue. That should let RioCan keep paying monthly distributions of $0.1125 a unit. The units yield 6.5%....
RBC CANADIAN DIVIDEND FUND $44.84 (RBC Mutual 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) has 38.1% of its portfolio in financial-services stocks. It has a further 14.4% in energy stocks and 8.5% in consumer discretionary. The $9.6-billion RBC Canadian Dividend Fund’s top stock holdings are Royal Bank of Canada, Bank of Nova Scotia, Toronto-Dominion Bank, Manulife Financial, Canadian Imperial Bank of Commerce, TransCanada Corporation, Bank of Montreal, BCE Inc. and Power Corporation. Over the last five years, RBC Canadian Dividend Fund has posted a 14.9% annual rate of return. That’s less than the S&P/TSX’s gain of 18.3% over the same period....
SUN LIFE FINANCIAL $54.45 (Toronto symbol SLF; SI Rating: Above-average) offers savings, retirement, pension and life and health insurance products and services to individuals and corporations. The company operates mainly in Canada, the U.S. and the UK, and also in Asia, China and India. It has assets under administration of $427 billion. In the three months ended September 30, 2007, Sun Life’s earnings rose 6.7%, to $577 million or $1.02 a share, from $541 million or $0.94 a share a year earlier. Revenue fell 16.9%, to $3.5 billion from $4.2 billion, due to new accounting rules for investments. Sun Life’s shares yield 2.4%. Sun Life is still a buy.
GREAT-WEST LIFECO $34.93 (Toronto symbol GWO; SI Rating: Above-average) is a leading Canadian insurance company, with $404 billion in assets under administration. The company also provides wealth management and other financial services. It also operates in the U.S. and Europe. Power Financial controls about 75% of Great-West. Great-West’s earnings in the three months ended September 30, 2007 excluding one-time items rose 17%, to $558 million or $0.63 a share from $477 million or $0.54. Revenues rose 1.2%, to $6.64 billion from $6.57 billion. The shares yield 3.2%. Great-West closed the $3.9 billion U.S. acquisition of U.S.-based investment management firm and mutual fund company Putnam Investments Trust in August, 2007. The purchase more than doubled Great-West’s assets under administration. Great-West is also making a series of small acquisitions in the U.S. employer-sponsored health insurance market....