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As investors near retirement, their advisors often recommend that they move a larger part of their portfolios from stocks and mutual funds to bonds and other fixed-return investments. To some extent, this is an understandable retirement investing strategy, since bonds provide steady income and a guarantee to repay the principal at maturity.

Bonds will lower the long-term returns that are key to successful retirement investing

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SCOTIA CANADIAN GROWTH FUND $47.00 (CWA Rating: Conservative) (Scotia Securities, 40 King Street West, 6th Floor, Toronto, Ontario M5H 1H1. 1-800-268-9269; Web site: www.scotiabank.com. No load — deal directly with the bank) attempts to use an investment’s fundamentals to determine whether it has the potential for above-average growth. The $394.5-million Scotia Canadian Growth Fund’s largest stock holdings include Royal Bank, TD Bank, Potash Corp., Canadian Natural Resources, Canadian National Railway, Bank of Nova Scotia, Crescent Point Energy and Manulife Financial. Scotia Canadian Growth holds 43.3% of its portfolio in the resource sector. Its next-largest segment is financial services, at 27.9%....

CIBC CANADIAN EQUITY FUND $19.69 (CWA Rating: Conservative) (CIBC Securities, 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7. 1-800-631-7008; Web site: www.cibc.com. No load — deal directly with the bank) looks at fundamentals like earnings, cash flow and debt level to identify companies that the managers see as having above-average growth potential. The $399.3-million fund’s top holdings are: Royal Bank of Canada, EnCana, Research in Motion, Bank of Nova Scotia, CN Railway, Goldcorp, TD Bank, Canadian Natural Resources and Manulife Financial. CIBC Canadian Equity holds 41.8% of its portfolio in resource stocks and 34.6% in finance stocks....

RBC CANADIAN EQUITY FUND $21.21 (CWA Rating: Conservative) (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) mainly invests in larger-capitalization stocks, but may also buy small- and mid-cap stocks. The $4.2-billion fund’s largest holdings are Royal Bank, Manulife, EnCana, TD Bank, Goldcorp, Bank of Nova Scotia, Canadian Natural Resources, Suncor Energy and Research in Motion. The fund is heavily weighted (44.9%) toward the resource sector; 33.2% of its investments are in finance. Over the last 10 years, RBC Canadian Equity posted a 6.7% annual rate of return. That’s just over the S&P/TSX’s 6.5% gain. The fund lost 19.9% over the last year, compared to a loss of 17.7% for the S&P/TSX. The fund’s MER is 1.96%....

TD CANADIAN EQUITY FUND $21.81 (CWA Rating: Conservative) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario. M5W 1P9. 1-866-222-3456; Web site: www.tdcanadatrust.ca. No load — deal directly with the bank) uses a “bottom-up” approach to pick stocks. The fund’s managers look at fundamentals, like earnings, cash flow and debt level, to identify what they see as undervalued companies. TD Canadian Equity Fund’s 10 largest holdings are Royal Bank, TD Bank, Manulife Financial, Bank of Nova Scotia, Canadian Natural Resources, Sun Life Financial, Suncor Energy, Ivanhoe Mines, EnCana Corp. and Research in Motion. The $2.5-billion fund holds 49.0% of its portfolio in resource stocks. It also has a bias toward financial services stocks, at 32.1%....

These five large mutual funds — one from each of Canada’s big-five banks — suffered last year and early this year. That’s because they were heavily weighted toward financial services and resource stocks. However, many shares in those sectors have moved up since March. We think they have room to go higher. We still feel that the best way to profit in the stock market is to stick with high-quality, well-established companies and to spread your money out among the five sectors. You should also ensure that your investments are diversified within each sector. These five funds continue to stick with high-quality investments. However, you still should adjust your portfolio to reflect the funds’ high weightings in certain sectors....

NEW IRELAND FUND $6.98 (New York symbol IRL; Shares outstanding: 7.2 million; Market cap: $50.3 million; CWA Rating: Aggressive) invests in Irish companies. Bank of Ireland manages the fund. Lower housing prices and a struggling banking sector have hurt the Irish economy. However, the country is open to foreign investment, and has invested heavily in education and training. It is also part of the euro currency zone. These factors should benefit the Irish economy over the long term. The New Ireland Fund’s top holdings are: CRH plc (building materials), 19.8%; Ryanair Holdings (airline), 10.7%; DCC plc (business services), 7.3%; Elan Corp. (health-care services), 5.7%, Aryzta AG (agriculture and food), 4.6%; Kerry Group (food products), 4.3%; Grafton Group plc (building materials), 4.2%; Allied Irish Banks, 4.0%; Dragon Oil plc, 3.7%; and Irish Life & Permanent plc, 3.5%....

INDIA FUND $26.02 (New York symbol IFN; Shares outstanding: 38.6 million; Market cap: $1.0 billion; CWA Rating: Aggressive) mainly invests in large-cap Indian stocks. Blackstone Group manages the fund. India’s economy has grown by more than 9% annually over the last few years. The global recession has hurt the country’s growth, but it could still expand by as much as 6% this year. The $1.1-billion India Fund’s top holdings are: Reliance Industries (conglomerate), 9.9%; Infosys Technologies (software), 9.1%; Bharti AirTel (telecom), 4.7%; Housing Development Finance, 4.0%; Oil & Natural Gas Corporation, 3.0%; HDFC Bank, 2.7%; Bharat Heavy Electricals (engineering and manufacturing), 2.7%; Jindal Steel & Power, 2.7%; ICICI Bank, 2.6%; and State Bank of India, 2.3%....

SINGAPORE FUND $11.65 (New York symbol SGF; Shares outstanding: 9.5 million; Market cap: $110.7 million; CWA Rating: Aggressive) is fully invested in Singapore-based stocks. The Development Bank of Singapore manages the fund. Singapore relies on exports for much of its growth. Major markets, like the U.S., China and Japan, are important to its economy. As these markets recover, Singapore’s prospects should improve. The $106.5-million Singapore Fund’s top holdings are: Singapore Telecom, 12.8%; United Overseas Bank, 9.8%; Overseas-Chinese Banking, 8.8%; Jardine Matheson (various industries), 5.2%; Hong Kong Land Holdings (property), 4.9%; Singapore Exchange (Singapore stock exchange), 4.4%; Wilmar International (agribusiness), 4.2%; Keppel (various industries), 3.7%; Capitaland (property), 3.6%; and City Developments (property), 3.5%....

Around the world, governments have increased spending in a bid to counter the recession. These efforts are now starting to show results. Global economic growth is resuming, and top-quality foreign stocks have rebounded. Here are four closed-end funds that trade on the New York exchange at discounts to their net asset values. All four funds have risen lately, but we still see them as buys. SWISS HELVETIA FUND $11.09 (New York symbol SWZ; Shares outstanding: 32.5 million; Market cap: $360.4 million; CWA Rating: Conservative) mainly invests in large-capitalization Swiss stocks. Hottinger Group, which dates back to 1786, manages the fund....

FORT CHICAGO ENERGY PARTNERS L.P. $8.47 (Toronto symbol FCE.UN; Units outstanding: 136.3 million; Market cap: $1.1 billion; SI Rating: Extra Risk) owns and operates energy infrastructure across North America. One of its major holdings is a 50% interest in the Alliance natural-gas pipeline, which runs 3,000 kilometres from Fort St. John, B.C., to Chicago. Enbridge Inc. owns the other 50%. Fort Chicago and Enbridge also own 85.4% of the Aux Sable natural gas liquids plant. As well, Fort Chicago owns 100% of the 1,324-kilometre Alberta Ethane Gathering System. Fort Chicago has added to its power-plant holdings over the last couple of years. It now owns natural gas-fired cogeneration plants in Ontario, California and Colorado, plus power plants in Ontario and Prince Edward Island....

EPCOR POWER, L.P. $15.04 (Toronto symbol EP.UN; Shares outstanding: 53.9 million; Market cap: $810.7 million; SI Rating: Extra Risk) has interests in 25 power plants in Canada and the U.S. These generate a total of 1,400 megawatts. In the three months ended June 30, 2009, EPCOR’s revenue rose 14.8%, to $165.2 million from $143.9 million. Cash flow per unit rose 29.1%, to $0.71 from $0.55. The trust’s plants generated and sold more power, including output from the Morris cogeneration facility in Illinois, which EPCOR bought late last year for $72.2 million U.S. Despite the improved results, EPCOR was still paying out almost all of its cash flow to unitholders, so it cut its quarterly distribution by 30.2%, to $0.44 a unit from $0.63, with the June 2009 payment. At this rate, it will pay out roughly 75% of its cash flow. EPCOR believes it can sustain this rate regardless of whether it remains a trust or converts to a corporation in 2011, when Ottawa’s new income-trust tax takes effect. EPCOR now yields 11.2%....

Economic statistics are big news these days, but they have a weak link at best with the value of your investment portfolio. A surprisingly good economic statistic can make the stock market jump. But a bad surprise can come along and reverse that move the next day. In retrospect, it’s clear that economic turning points do have an impact on the market. But nobody can consistently predict these points. That’s also true of key economic factors like interest rates, oil and gold prices....

The price of natural gas has fallen to around $2.50 U.S. per thousand cubic feet, a seven-year low. The price decline has been driven by lower industry demand during the recession. As well, consumers have cut their air-conditioner use because of cooler-than-normal summer weather in central Canada and the northeastern U.S. Another major factor is a buildup in gas inventories, to the point that the North American industry is running out of storage. According to the U.S. Energy Information Administration (EIA), natural-gas inventories are at 3.204 trillion cubic feet. That’s 21.3% higher than a year ago....

With mortgage rates at historic lows, many investors, including some members of our Inner Circle service, are becoming more interested in Canadian real estate investing. A house is the biggest investment and consumer purchase most of us ever make. The house itself is the consumer purchase; the land underneath is the investment. Your house depreciates as surely as your car, but more slowly. Eventually, a house reaches the end of its economic life. But the land it sits on is as functional as ever.

It pays to be skeptical of bargains in Canadian real estate investing

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When investors ask us about our conservative investing strategy, they often wonder when they should dump a weak stock from their portfolio and replace it with something new. Knowing when to sell is part of our conservative investing strategy that we cover in our new special report, Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada.

Look beyond price in deciding when to sell

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Forecasts are now popping up regularly in the media predicting that the H1N1 virus (also known as “swine flu”) will flare up in North America when the flu season begins in just a few weeks. There is still a wide difference of opinion on the subject, and it’s far from certain that H1N1 will pose a significant threat. Nonetheless, health authorities around the world are mostly erring on the side of caution. In the United States, the Centers for Disease Control and Prevention (CDC) is working with federal and state agencies on an H1N1 vaccine-distribution effort that will include as many as 90,000 sites across the country. This massive H1N1 vaccination effort is benefitting McKesson Corp. (New York symbol MCK), one of the drug stocks we zero in on in the most recent issue of our Wall Street Stock Forecaster newsletter....

BROADRIDGE FINANCIAL SOLUTIONS INC. $20 (New York symbol BR; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 139.3 million; Market cap: $2.8 billion; Price-to-sales ratio: 1.3; WSSF Rating: Extra Risk) provides communication, processing and other back-office services to the investment industry. By outsourcing these activities to Broadridge, its clients can focus on their main businesses. Its clients include 250 banks, 500 mutual-fund families and over 5,000 publicly listed companies. The stock began trading on April 2, 2007, after former parent Automatic Data Processing Inc. (Nasdaq symbol ADP) distributed Broadridge shares to its own shareholders as a special dividend. Since it became a public company, Broadridge’s annual revenue has hovered around $2.15 billion. Earnings fell from $1.42 a share (or a total of $197.1 million) in 2007 to $1.36 a share (or $192.2 million) in 2008. Broadridge’s fiscal year ends on June 30. In 2009, its earnings rose to $1.58 a share (or $223.3 million). If you disregard unusual items, including a gain on the early retirement of debt and a tax credit that lowered its effective income-tax rate, Broadridge’s earnings per share rose 6.3%, to $1.51 from $1.42. The improved earnings came despite difficult conditions in the financial sector....

HARTE-HANKS INC. $14 (New York symbol HHS; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 63.6 million; Market cap: $890.4 million; Price-to-sales ratio: 0.9; WSSF Rating: Average) gets roughly two-thirds of its revenue by selling direct-mail and other marketing services to clients in a wide variety of industries. These help them attract new customers, and sell more goods and services to existing ones. The remaining third of its revenue comes from publishing free “shopper” newspapers in Florida and California. These papers rely solely on advertising. Both of these are cyclical businesses, and they have suffered during the recession as advertisers look to conserve cash. In response, Harte-Hanks has consolidated printing plants and closed call centres. These moves helped cut Harte-Hanks’s operating expenses by $49.3 million in the three months ended June 30, 2009. Despite the lower costs, overall earnings in the quarter still fell 28.3%, to $13.1 million, or $0.20 a share, from $18.2 million, or $0.29 a share, a year earlier. Revenue fell 21.5%, to $215.7 million from $274.8 million....

DIEBOLD INC. $30 (New York symbol DBD; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 66.3 million; Market cap: $2 billion; Price-to-sales ratio: 0.6; WSSF Rating: Average) is one of the world’s leading makers of automated-teller machines (ATMs). The company also makes safes, vaults, building-security systems and electronic-voting machines. Banks have been spending less on new ATMs because of the financial crisis. As well, the recession has prompted many retailers to close stores. This has hurt demand for Diebold’s building-security products and services. The company has aggressively cut its costs in response, including moving most of its manufacturing to China and Hungary. It also sold its manufacturing operations in Argentina. In the three months ended June 30, 2009, Diebold earned $30.4 million, or $0.46 a share. That’s up 11.8% from $27.2 million, or $0.41 a share, a year earlier. If you exclude unusual costs, most of which were in the year-earlier period, earnings per share would have fallen 29.0%, to $0.49 from $0.69. Sales fell 8.9%, to $700.5 million from $768.7 million....

CINTAS CORP. $28 (Nasdaq symbol CTAS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 152.8 million; Market cap: $4.3 billion; Price-to-sales ratio: 1.1; WSSF Rating: Average) provides a variety of products and services to over 800,000 businesses, mainly in North America. These include selling and renting uniforms, entrance mats, fire extinguishers, first-aid kits and cleaning products. The company also shreds documents. Many of its clients cancelled these services to cut costs during the recession. In response, Cintas closed some of its uniform-making plants in 2008. This has already saved it $60 million. Moreover, the company plans to lay off 1,200 of its 31,000 employees over the next year. It has set aside $59.1 million for severance and other costs. In the fiscal year ended May 31, 2009, Cintas earned $226.4 million, or $1.48 a share. If you exclude restructuring costs, it would have earned $1.83 a share. In the prior year, the company earned $335.4 million, or $2.15 a share. Revenue fell 4.1%, to $3.8 billion from $3.9 billion, mostly due to lower demand for uniforms and cleaning services. Cintas sells scrap paper from its shredding operations, and lower paper prices have also hurt its revenue....

TERADATA CORP. $27 (New York symbol TDC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 171.8 million; Market cap: $4.6 billion; Price-to-sales ratio: 2.6; WSSF Rating: Average) makes computers and software that capture and store large amounts of a business’s data, including its sales and inventory. Teradata then analyzes this information and identifies buying habits and trends. This helps its clients make better decisions. In the three months ended June 30, 2009, Teradata’s earnings dropped 10.1%, to $62 million from $69 million a year earlier. Earnings per share fell 5.3%, to $0.36 from $0.38, on fewer outstanding shares. However, Teradata is selling more high-margin services. At the same time, it is cutting overhead and travel expenses. As a result, its gross margin (gross profits as a percentage of revenue) rose to 55.3% from 54.7%. Revenue fell 7.5%, to $421 million from $455 million. Teradata gets about half of its revenue from its international operations, and the higher U.S. dollar hurt the value of this contribution during the quarter....

XEROX CORP. $8.72 (New York symbol XRX; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 869.1 million; Market cap: $7.6 billion; Price-to-sales ratio: 0.5; WSSF Rating: Average) makes copiers, laser printers and other high-end publishing equipment. The company spends about 5% of its revenue on research. Over the past few years, this has let it develop new colour printers that have helped its customers cut their paper use. It has also produced other innovations, such as its proprietary solid-ink technology, which is less expensive on a per-page basis than traditional ink cartridges. The recession weighed on Xerox’s revenue and earnings in the latest quarter. In the three months ended June 30, 2009, Xerox earned $140 million, or $0.16 a share. That’s 34.9% less than the $215 million, or $0.24 a share, it earned a year earlier. Revenue fell 17.7%, to $3.7 billion from $4.5 billion....

BHP BILLITON LTD. ADRs $63 (New York symbol BHP; Conservative Growth Portfolio, Resources sector; ADRs outstanding: 2.8 billion; Market cap: $176.4 billion; Price-to-sales ratio: 3.5; WSSF Rating: Average) is the world’s largest mining company, with major operations in Australia, South Africa, Chile and the U.K. It produces iron ore, coal, oil, aluminum, manganese, diamonds and titanium. In its latest fiscal year, which ended June 30, 2009, BHP’s revenue fell 15.6%, to $50.2 billion from $59.5 billion a year earlier. Lower resource prices were the main reason for the drop. Earnings before unusual items fell 30.2%, to $10.7 billion from $15.4 billion. Earnings per ADR fell 29.9%, to $3.85 from $5.50. (Each American Depositary Receipt represents two BHP common shares.) The stock has jumped by 70% since we first recommended it at $37 in our March 2009 issue. The gain was partly caused by BHP’s new agreement to merge its iron-ore mining operations in Western Australia with those of Rio Tinto Ltd. (New York symbol RTP) to form a new 50/50 joint venture. The deal should close in 2010, and save BHP $5 billion a year....

ALCOA INC. $12 (New York symbol AA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 974.4 million; Market cap: $11.7 billion; Price-to-sales ratio: 0.6; WSSF Rating: Average) is one of the world’s largest aluminum producers. Its customers are mainly in the aerospace, automotive and construction industries, all of which have struggled lately. Aluminum prices fell 49% in the second quarter of 2009 from a year earlier, but are 9% higher than they were in the first quarter. In response to the lower prices, The company will lay off 16% of its 87,000 employees by the end of this year. This should save it $2.4 billion a year. As well, Alcoa cut its quarterly dividend to $0.03 a share from $0.17. It now yields 1.0%. This will save an additional $430 million a year. Alcoa lost $256 million, or $0.26 a share, in the second quarter of 2009, excluding severance costs. A year earlier, it earned $553 million, or $0.67 a share. Revenue fell 41.4%, to $4.2 billion from $7.2 billion....