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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ISHARES CANADIAN BOND BROAD INDEX FUND $28.47 (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 42.5% Government of Canada bonds, 27.5% Provincial Government bonds, 1.3% Municipal bonds and 28.7% Corporate bonds....
ISHARES CANADIAN SHORT BOND INDEX FUND $28.03 (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, Royal Bank of Canada and Bank of Nova Scotia....
RBC CANADIAN DIVIDEND FUND $49.82 (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 43.8% of its portfolio in Financial services stocks. It has a further 16.9% in Energy stocks and 8.1% in Materials. The $8.9 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 Suncor Energy. Over the last five years, RBC Canadian Dividend Fund has posted a 15.8% annual rate of return. That’s less than the S&P/TSX’s gain of 18.4% over the same period....
BMO DIVIDEND FUND $50.82 (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 57.3% of its portfolio in the Financial services industry. Its next-largest holdings are Energy at 13.3% and Consumer discretionary at 6.5%. BMO Dividend Fund’s largest holdings are Manulife Financial, Bank of Nova Scotia, CIBC, Royal Bank of Canada, Power Financial, Toronto-Dominion Bank, Canadian National Railway, TransCanada Corporation, Alcan, Imperial Oil, Brookfield Asset Management, Thomson Corporation, BCE Inc. and Sun Life Financial. Over the last five years, the $5.9 billion BMO Dividend Fund has posted a 15.3% annual rate of return. That’s under the S&P/TSX’s gain of 18.4%. 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 15.4% over the last year, compared to a gain of 20.1% for the S&P/TSX index. BMO Dividend’s MER is 1.73%....
JAPAN SMALLER CAP FUND $11.39 (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, Suruga Corp., Nichias Corporation, Tokai Rubber, Futuba Industrial, Aeon Delight, Disco Corp., Kansai Urban Banking, Nagase & Company and Yokahama Rubber. Japan Smaller Cap Fund sells for a 0.4% premium above the current value of its assets. Our long-standing advice is that you only buy closed-end funds trading at close to or below net asset value. Japan Smaller Cap is a buy.
JAPAN EQUITY FUND $8.12 (New York symbol JEQ; CWA Rating: Aggressive) invests mostly in large capitalization stocks on the Tokyo Stock Exchange. The Japan Equity Fund’s top holdings include: Toyota Motor, Mitsubishi UFJ Financial Group, Mizuho Financial, Matsushita Electric Industrial, Nomura Holdings, Mitsubishi Heavy Industries, Canon, Takeda Pharma, and NTT. Japan Equity Fund is available for 6% less than the current value of its assets. It’s a buy.
RIOCAN REAL ESTATE INVESTMENT TRUST $22.30 (Toronto symbol REI.UN; SI Rating: Average) is Canada’s largest REIT. RioCan has ownership interests in a portfolio of 206 retail properties across Canada, including nine under development. These properties contain over 52.1 million square feet of leasable area. RioCan’s revenue in the three months ended March 31, 2007 was $174.5 million, up 9.6% from $159.2 million a year earlier. Cash flow per unit was unchanged at $0.35. RioCan’s annual distribution of $1.32 gives it a current yield of 5.9%. RioCan is focusing its future development on six high-growth markets — Toronto, Ottawa, Montreal, Calgary, Edmonton and Vancouver. Although land costs more in these markets than other areas, RioCan feels their strong growth prospects offset the higher building costs....
CANADIAN REIT $28.99 (Toronto symbol REF.UN; SI Rating: Extra Risk) owns a portfolio of more than 140 income properties consisting of retail, industrial and office properties across Canada and in the Chicago, Illinois area. The company’s portfolio contains more than 19 million square feet of space. CREIT’s revenue in the three months ended March 31, 2007 was $72.7 million, up 11.7% from $65.1 million a year earlier. Cash flow per unit rose 10.9% to $0.51 from $0.46. The units now yield 4.7%. CREIT focuses on acquiring properties in prime locations, usually near major metropolitan centres, that attract strong tenants, maintain high occupancy rates and deliver a reliable stream of rental income....
H&R REAL ESTATE INVESTMENT TRUST $21.95 (Toronto symbol HR.UN; SI Rating: Extra risk) holds interests in 35 office properties, 115 single-tenant industrial properties and 143 retail properties. Over half are in the Greater Toronto Area. The rest are elsewhere in Ontario, in Quebec, western Canada and the U.S. H&R aims to acquire only properties that it can lease long-term to creditworthy tenants. It now has an industry-leading portfolio occupancy rate of 99.7%. Revenue in the three months ended March 31, 2007 was $153.7 million, up 19.1% from $129.1 million a year earlier. Cash flow per unit rose 2.3%, to $0.44 from $0.43. H&R’s units now yield 6.1%. H&R REIT is a buy.
MANULIFE FINANCIAL $39.07 (Toronto symbol MFC; 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. Manulife has assets under administration of $426 billion. In the three months ended March 31, 2007, Manulife’s earnings excluding one-time items rose 10.8%, to $1.1 billion or $0.68 a share, from $952 million or $0.60 a share a year earlier. Revenue rose 2.6%, to $8.6 billion from $8.4 billion. Manulife has raised its dividend 10%, to $0.22 from $0.20. The shares now yield 2.3%. Manulife’s operations are diversified among life and health insurance, segregated mutual funds, and reinsurance. Its geographic diversification in the U.S. and Asia, including China, offers growth prospects....