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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ALTAMIRA SCIENCE & TECHNOLOGY FUND $7.12 (CWA Rating: Aggressive) (Altamira Investment Services, The Exchange Tower, 130 King St. West, Suite 900, Toronto, Ont. M5X 1K9. 1-800-263-2824; Web site: www.altamira.com. No load — deal directly with the company) invests in the telecommunications, biotechnology, environmental technology, health care and computer industries. The $66.8 million fund gained 4.5% over the last year, compared to the Nasdaq’s gain of 7.7%. Its MER is 2.68%. Top holdings include: Microsoft, 6.5%; eBay, 4.8%; Cisco, 4.6%; Research In Motion, 3.5%; Apple Computer, 3.1%; Charles River Labs, 3.1%; Satyam Computer Services, 3%; Accenture, 2.8%; PDL BioPharma 2.7%; and St. Jude Medical, 2.6%....
TD SCIENCE & TECHNOLOGY FUND $12.96 (CWA Rating: Aggressive) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W1P9. 1-800-461-38 63; Web site: www.tdcanadatrust.com. No load — deal directly with the company) invests mostly in U.S. firms engaged in the research, development, production or distribution of products or services related to science and technology. The fund’s gain over the last year was 12.2%. The Nasdaq index rose 7.7%. The $145.8 million fund’s manager is well-respected U.S. mutual fund manager T. Rowe Price Associates. Its MER is 2.79% TD Science & Technology’s top holdings include: Microsoft, 7.1%; Samsung Electronics, 4.7%; Nokia, 3.1%; Juniper Networks, 2.3%; Yahoo!, 2.3%; Red Hat, 2.1%; Taiwan Semiconductor, 2.1%; Cisco Systems, 2%; CDNetworks, 2%; and Analog Devices, 2%....
SHININGBANK ENERGY INCOME FUND $23 (Toronto symbol SHN.UN; SI Rating: Speculative) focuses on natural gas production in west-central Alberta. Shiningbank’s revenues rose 32.3% in the three months ended March 31, 2006, to $106 million from $80.1 million a year earlier. Cash flow per unit rose 12.3%, to $0.91 from $0.81. Shiningbank’s average daily production of 21,828 barrels of oil per day equivalent is weighted 23% toward oil and liquids and 77% natural gas. In the latest quarter, the company’s average realized price for oil was $59.43 U.S. and $8.83 U.S. for gas....
PENGROWTH ENERGY TRUST $24.80 (Toronto symbol PGF.B; SI Rating: Average) produces oil and gas in western Canada. The company was one of the first Canadian royalty trusts, starting up in 1988. It’s now one of the largest energy trusts in North America. Pengrowth also holds an 8.4% interest in the Sable Offshore Energy Project. This project consists of six gas fields located near Sable Island, east of Halifax, Nova Scotia. In the three months ended March 31, 2006, Pengrowth’s revenue rose 21.7%, to $291.9 million from $239.9 million. Cash flow per unit rose 7.3%, to $0.88 from $0.82. Pengrowth’s average daily production of 58,825 barrels of oil per day equivalent is weighted 55% toward oil and liquids and 45% natural gas. In the latest quarter, the company’s average realized price for oil was $63.31 U.S. and $8.76 U.S. for gas....
ARC ENERGY TRUST $28.25 (Toronto symbol AET.UN; SI Rating: Speculative) produces oil and gas in western Canada. Like most oil and gas trusts, ARC holds mature, low-risk properties, with a focus on short-term cash flow for payout. In the three months ended March 31, 2006, ARC’s revenue rose 34%, to $318.9 million from $238.1 million. Cash flow per unit rose 25.3%, to $0.94 from $0.75. ARC’s average daily production of 64,600 barrels of oil per day equivalent is weighted 52% toward crude oil and liquids and 48% natural gas. In the quarter, the company’s average realized price for oil was $59.53 U.S. and $8.40 U.S. for gas....
AIC DIVERSIFIED CANADA FUND $44.29 (CWA Rating: Conservative) mainly holds shares of Canadian companies of average or above-average quality. It also holds stocks of some U.S. firms. The $1.9 billion fund’s 10 largest holdings are Power Financial, Canadian Oil Sands Trust, TD Bank, Shoppers Drug Mart, Loblaw, Thomson Corp., Brookfield Asset Management, Royal Bank, Sun Life Financial and Royal Bank of Scotland. The fund holds just 25 stocks. Its turnover was 9.1% in 2005. Turnover of 24.3% in 2004 was on the high side. The fund holds 46.7% of its assets in Financial services stocks. The rest of the portfolio breaks down as follows: Consumer staples, 19.7%; Energy, 10.2%; Consumer discretionary, 8.5%; Health care, 6.1%; and Information technology, 3.8%. Over the last year, the S&P/TSX Index gained 28.4%, mainly due to strength in Resource sector stocks. The fund made 17.0%. Its MER is 2.42%....
AIC AMERICAN ADVANTAGE FUND $7.30 (CWA Rating: Aggressive) (AIC Group of Funds, 1375 Kerns Road, Burlington, Ont., L7R 4X8, 1-800-263-2144; Web site: www.aicfunds.com. Buy or sell through brokers) invests mostly in U.S. stocks, with almost 97% of assets in the financial services area. This segment breaks down as follows: Property & casualty insurance companies, 15.2%; Investment banking & brokerage, 14.0%; Multi-line insurance, 12.6%; Life & health insurance, 12.4%; Commercial Banks, 11.8%; Regional Banks, 7.5%; Diversified financials, 7.3%; Insurance brokers, 7.0%; Wealth management, 6.2%; and Consumer finance, 4.1%. AIC American Advantage’s top 10 holdings are Progressive Corp., ING Canada, AFLAC, Morgan Stanley, Hartford Financial Services, Washington Mutual, Northern Trust, Merrill Lynch, JP Morgan Chase and Willis Group Holdings. This fund holds just 17 stocks. Turnover was just 19.1% in 2005, after a high 28.7% in 2004. AIC American Advantage made 13.3% over the last year, compared to a gain of 7.8% for the S&P 500 Index. Its MER is 2.65%....
RBC DIVIDEND FUND $44.90 (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 43.3% of its portfolio in Financial services stocks. It has a further 17.4% in Energy stocks. The $7.3 billion Royal Dividend Fund’s top stock holdings are Royal Bank, Bank of Nova Scotia, TD Bank, Manulife Financial, CIBC, TransCanada Corp., Bank of Montreal, Petro-Canada and Power Corp. Over the last five years, Royal Dividend Fund has posted a 13.2% annual rate of return. That’s better than the S&P/TSX 60’s gain of 11.2% over the same period. The fund gained 24.9% over the last year, compared to the S&P/TSX 60’s gain of 30.2%. Royal Dividend’s MER is 1.74%....
BMO DIVIDEND FUND $45.82 (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 53.1% of its portfolio in the Financial services industry. Its next-largest holding is Energy at 13.3%. BMO Dividend Fund’s largest holdings are Manulife Financial, Bank of Nova Scotia, CIBC, Royal Bank of Canada, Enbridge, Toronto-Dominion Bank, Canadian National Railway, TransCanada Corporation, Imperial Oil, Power Financial, Shell Canada and Sun Life Financial. Over the last five years, the $5 billion BMO Dividend Fund has posted a 13.3% annual rate of return. That’s much better than the S&P/TSX 60’s gain of 11.2%. The fund gained 24.1% over the last year, compared to a gain of 30.2% for the S&P/TSX 60. BMO Dividend’s MER is 1.75%....
ISHARES MCSI CANADA INDEX FUND $25 (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. These shares are managed by Barclays Global Investors. There are now 26 different MCSI index funds.
This fund has an MER of 0.59%. That’s a lot higher than the 0.17% MER on the S&P/TSE 60 units, also managed by Barclays. It’s also no better than most open-end index funds, which have MERs as low as 0.54%.
We think MCSI Canada’s high MER 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.
We don’t recommend iShares MCSI Canada Index Fund.
This fund has an MER of 0.59%. That’s a lot higher than the 0.17% MER on the S&P/TSE 60 units, also managed by Barclays. It’s also no better than most open-end index funds, which have MERs as low as 0.54%.
We think MCSI Canada’s high MER 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.
We don’t recommend iShares MCSI Canada Index Fund.