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Asset allocation funds are mutual funds that distribute their assets in accordance with all investors’ goals (consistent returns, diversified investments, etc.). Unlike balanced funds, they can shift their portfolio allocations between stocks, bonds and cash in order to capitalize on perceived investment opportunities in any one of those classes. If a fund’s name includes the term “asset allocation,” it means the fund’s managers, or sponsors, feel that they can enhance returns and/or reduce risks by switching back and forth among stocks, bonds and cash equivalents, often using a so-called “black box” – a computer program that makes trading decisions based on a pre-selected set of rules for interpreting financial statistics. For example, if the managers feel that the bond market is depressed and poised for an upswing, they may overweight the portfolio in fixed-income investments for a few months to take advantage of the change. Computer modelling makes this investment approach sound scientific, but it is just as likely to detract from a portfolio’s long-term return as it is to add to it....

When the economy is volatile, there seems to be more advertisements for forex (foreign exchange) investment products, or strategies for making forex investments. Dealing in forex investments through foreign currency futures or options can make sense for a business that has been forced to take on unacceptable currency risk. Futures and options let the business pass that risk on to speculators who wish to accept it. That’s the textbook explanation for the existence of futures and options. Textbooks often fail to emphasize that most speculators who succumb to the lure offutures or potions wind up losing money. It doesn’t matter if they trade foreign currency or a traditional commodity, such as wheat. In the end, they almost always wind up losing....

These are difficult times for income-seeking investors. Bonds yield around half of what they did 10 years ago, yet more and more investors are nearing retirement, when many pay close attention to investment income. Many also see income as a sign of investment quality. These factors have kept up investor interest in income trusts.

Despite Ottawa’s plan to start taxing trust distributions in 2011, income trusts should continue to pay above-average yields for years to come. Unfortunately, however, high current yields on the majority of trusts obscure their drawbacks.

Income seekers may mistakenly assume that yearly distributions on income trusts will hold steady, like interest on a bond, or rise, like dividends on a stock. But, in the long term, many trust distributions are apt to dwindle, or abruptly halt. That’s because many trusts own so-called “cash cow” businesses. These are businesses that can be milked for their cash flow for many years, but are likely to stagnate or stumble as the economy changes and competition grows.

Other income trusts borrowed to invest in cyclical industries. When the cycle turns downward, as it is now, profits and cash flow will evaporate overnight.

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Dividend reinvestment plans (or DRIPs) are plans offered by some companies that let shareholders receive additional shares in lieu of cash dividends. DRIPs can be a good way to slowly build wealth over a long period, for a number of reasons. First, they eliminate the nuisance of receiving small cash dividend payments. Second, some of them let you reinvest your dividends in additional shares at a 5% discount to current prices. Third, many dividend reinvestment plans also allow optional commission-free share purchases on a monthly or quarterly basis. To participate in these plans, you have to buy one or more shares of a company’s stock, and get a certificate registered in your name. Share registration (through a traditional or discount broker) can cost $40 or more per company. Then you call or write the company to ask for the form you fill out to enroll in the plan....

Capital gains tax must be paid on the profit that comes from the sale of an asset. An asset can be a security, such as a stock or a bond, or a fixed asset, such as land, buildings, equipment or other possessions. Let’s look at an example. Say you purchased 1,000 shares of TD Bank at $20 per share many years ago, and when it reaches about $40 per share, you decide to sell. Your proceeds from the sale are $40,000 ($40 per share multiplied by 1,000 shares) and your cost (the cost of purchase) is $20,000 ($20 per share multiplied by 1,000 shares). This means that your profit on the sale, also known as your capital gain, is $20,000. [ofie_ad]...

You hear a lot of comparisons these days between the current market downturn and the 1929 stock market crash. That’s mainly due to a lack of comparables. The recent market downturn is the worst since World War II. However, nothing since then has come close to the crash that lasted into the 1930s. When investors ask how bad it can get, we need to qualify our answer. If governments around the world were doing nothing to counter the crisis – or, worse, were doing all the wrong things as they did in the wake of the 1929 stock market crash – then the crisis could get a lot worse. However, our view is that they are taking the kinds of steps that will contain the crisis and eventually restore liquidity to the banking system. That didn’t happen after the 1929 stock market crash....

Many aggressive investors find stock option investing hard to resist. However, the vast majority of investors lose money with options. An option is a contract between a buyer and a seller that is based on an underlying security, usually a stock. The buyer pays the seller a fee, or premium, for certain rights to the stock. In exchange for the premium, the seller assumes certain obligations. Options trade through stock exchanges, and each options contract is for 100 shares of a particular company. So one contract quoted at $5 will cost you $500 (before commissions). Each contract has an expiration date, which gives it a limited life span (usually less than nine months). The strike price (or exercise price), is the price at which the buyer can exercise their rights under the contract. There are two types of options:...

DUNDEE CORP. $5.10 (Toronto symbol DC.A; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 74.3 million; Market cap: $378.9 million; Price-to-sales ratio: 0.3; SI Rating: Average) is a holding company with subsidiaries in three main areas: wealth management, real estate and resources. Its main asset is its 49% stake (63% voting interest) in Dundee-Wealth Inc. (Toronto symbol DW). DundeeWealth provides investment management, securities brokerage, financial planning and investment advisory services. It also owns the Dynamic family of mutual funds. In all, Dundee-Wealth manages $56.2 billion worth of assets. In 2008, Dundee lost $196.3 million, or $2.62 a share. The loss was largely caused by writedowns of securities, including a $113.8-million charge related to its holdings of asset-backed commercial paper. In 2007, Dundee earned $277.6 million, or $3.49 a share. This figure included a $136.6-million gain on the sale of subsidiaries. Revenue fell 12.2%, to $1.2 billion from $1.4 billion. Dundee’s stock continues to be held back by fears of more writedowns of illiquid securities. As well, lower prices for oil, gold and other commodities have hurt the value of its resource-related investments. The recession could also hurt Dundee’s residential real-estate development business....

GREAT-WEST LIFECO INC. $16 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 943.9 million; Market cap: $15.1 billion; Price-to-sales ratio: 0.6; SI Rating: Above Average) is Canada’s largest insurance company. Great-West administers $339 billion worth of assets. The company also offers wealth-management services. It operates in Canada (55% of its earnings), Europe (35%) and the U.S. (10%). Power Corp. (Toronto symbol POW) owns 72.7% of Great-West’s shares. In August 2007, Great-West paid $4.2 billion for U.S.-based mutual-fund manager Putnam Investments. Buying Putnam gave Great-West an opportunity to cross-promote its products to Putnam’s large base of individual and institutional clients. The stock market downturn has lowered the value of Putnam’s assets. This hurts Putnam’s earnings, since its fees rise and fall with the value of the securities in its funds. Moreover, the market’s volatility has caused many of Putnam’s clients to redeem their funds. Consequently, Putnam’s assets under management fell 27% in 2008, to $129 billion U.S. from $176.7 billion U.S. in 2007....

CANADIAN TIRE CORP. $45 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.5 million; Market cap: $3.7 billion; Price-to-sales ratio: 0.4; SI Rating: Above Average) operates 475 stores that sell automotive, household and sporting goods. It also operates 86 PartSource auto-parts stores, 372 Mark’s Work Wearhouse casual-clothing stores and 273 gas stations. Canadian Tire continues to replace its older stores with new ones that are more shopper-friendly. The new stores have wider aisles, brighter lighting and clearer signage. On average, its stores are a third larger than they were five years ago. These improvements contributed, at least in part, to a rise in Canadian Tire’s sales last year. Its sales rose 6%, to $9.1 billion from $8.6 billion the previous year. Same-store sales rose 0.3%. However, earnings fell 4.5%, to $572.5 million from $599.9 million. Per-share earnings fell 2.2%, to $4.85 from $4.96 on fewer shares outstanding. These figures exclude writedowns of hedging contracts and other items. The earnings drop was largely caused by higher administrative and advertising costs....

PENGROWTH ENERGY TRUST $7.13 (Toronto symbol PGF.UN; Aggressive Growth Portfolio, Resources sector; Units outstanding: 256.1 million; Market cap: $1.8 billion; Price-to-sales ratio: 1.0; SI Rating: Average) is one of North America’s largest energy royalty trusts. It owns all or part of several oil and natural-gas properties in Alberta, British Columbia and Saskatchewan. Properties that Pengrowth operates account for 63% of its production. The remaining 37% comes from minority investments in other energy projects, including an 8.4% interest in the Sable Offshore Energy Project south of Nova Scotia. Natural gas provides 60% of Pengrowth’s production. Oil supplies the remaining 40%. Pengrowth prefers to focus on proven properties with sizeable reserves and predictable production rates. It has interests in six of western Canada’s top nine oil-producing areas....

HOME CAPITAL GROUP INC. $25 (Toronto symbol HCG; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 34.4 million; Market cap: $860 million; Price-to-sales ratio: 1.9; SI Rating: Average) is the parent company of Home Trust Company, a federally regulated firm that specializes in residential first mortgages and credit cards for borrowers who don’t meet the criteria of traditional lenders. The credit crisis and Home Capital’s reliance on less-creditworthy customers caused the stock to drop from $41 last May to $14 in November. However, Home Capital is safer than it appears. Its stringent screening process eliminates most of the problem borrowers. Still, 0.86% of Home Capital’s loans were in default in 2008. This is up from 0.72% the previous year. Despite the volatile economy, Home Capital’s 2008 earnings rose 20.4%, to $108.7 million, or $3.13 a share. It earned $90.2 million, or $2.59 a share, in 2007. Revenue rose 23.3% in 2008, to $454.7 million from $368.9 million in 2007....

IGM FINANCIAL INC. $33 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 262.4 million; Market cap: $8.7 billion; Price-to-sales ratio: 3.2; SI Rating: Above Average) is Canada’s largest mutual fund company. It manages $98.8 billion of assets. Power Corp. owns 56.4% of IGM. IGM has three divisions. Investors Group sells funds through its own network of advisors. Mackenzie Financial sells its funds through independent brokers. IGM also owns 74.5% of Investment Planning Counsel, whose 700 advisors provide wealth-management services to individuals. IGM has few operations outside of Canada. The sharp stock market drop in the latter half of 2008 hurt demand for IGM’s mutual funds. As a result, the company’s earnings dropped 11.3%, to $766.1 million from $863.8 million in 2007. Per-share earnings fell 10.5%, to $2.89 from $3.23, on fewer shares outstanding. IGM owns around 4% of Great-West Lifeco, and these figures exclude its share of Great-West’s writedown of its purchase of Putnam Investments. IGM’s 2008 revenue fell 6.6%, to $2.7 billion from $2.9 billion....

Investors are interested in wind power stocks, solar power stocks and other green stocks because they like the idea of making money and helping the environment. But they need a healthy sense of skepticism in order to succeed. Many stock promotions have an environmental angle. A number of penny stocks have dropped their old, unsuccessful business plans and become a solar power stock, a wind power stock or some other form of green stock. The stock-promotion business has always worked that way. Promoters take whatever fear or issue concerns people most and use it to generate interest in the stocks they are promoting. Investing in these stocks can pay off temporarily, depending on the promoter’s ability. But most eventually wind up worthless....

Here are two simple retirement investing strategies that can help you maximize your investments in RRSPs. Planning your retirement investing and picking stocks for your RRSPs can be difficult. It can be tempting to pick higher risk (and potentially higher return) stocks for your RRSPs. However, we believe these investments are generally unsuitable for this type of retirement investing, and that higher-risk stocks should be held outside of an RRSP. That’s because if higher-risk stocks lose money in your RRSPs, you have a triple loss:...

Short selling involves selling securities an investor doesn’t already own. A short sale is performed in the belief that the price of the security being sold will go down. The seller can then cover the sale by purchasing the security at a lower price, making a profit based on how far the price has fallen. Short sellers face specific regulations in the markets. Hedge funds buy good stocks and sell bad stocks “short” in hopes of making money regardless of the market’s direction. If the market goes up, the good stocks should rise more than the weak ones, so the gains on the good stocks should exceed losses on the short sales. If the market falls, the bad stocks should fall more than the good, so gains on the short sales should exceed losses. But profitable short selling requires superhuman timing, and the inevitable mistakes can be super expensive. In 1999 and 2000, a number of hedge funds collapsed because they shorted Internet stocks that went on to soar. The fund managers were “early rather than wrong,” as the saying goes, but they still lost huge sums. After all, short selling turns the traditional market odds upside down. When you buy, your profit potential is unlimited and the most you can lose is 100%. When you sell short, the most you can make is 100%, but your potential for loss is unlimited....

Growth stocks are companies that are expected to have earnings growth above the market average. Frequently, growth stocks pay little or no dividends, instead re-investing any extra money to promote further growth. These are not to be confused with momentum stocks. Momentum stocks are stocks that are moving higher in the market. While individual definitions may differ, the overall goal from momentum trading is to profit from shorter-term trades. Momentum investors are particularly keen on the so-called ‘positive earnings surprise’, when a company outdoes brokers’ earnings estimates. They view a ‘negative earnings surprise’ — lower-than-expected earnings — as a sell signal. They use a variety of computerized formulas to make buy and sell decisions, but all come down to “Buy on strength and sell on weakness.” So they tend to pile into the same stocks all at once, and the gains that follow are something of a self-fulfilling prophecy....

SINGAPORE FUND $7.10 (New York symbol SGF; Shares outstanding: 9.5 million; Market cap: $67.3 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. When these markets recover, Singapore’s prospects should improve. Singapore Fund’s top holdings are: Singapore Telecom, 14.7%; United Overseas Bank, 13.2%; Overseas-Chinese Banking, 8.9%; Singapore Airlines, 5.3%; Singapore Technologies Engineering (aircraft support services), 4.7%; Jardine Matheson (various industries), 4.7%; Keppel (various industries), 4.2%; Singapore Press Holdings (newspapers), 3.7%; Wilmar International (agribusiness), 3.5%; and SMRT (Singapore public transit), 3.3%....

INDIA FUND $17.40 (New York symbol IFN; Shares outstanding: 38.6 million; Market cap: $672.3 million; 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 will hurt the country’s growth, but it could still expand by as much as 7% this year. The $671.1-million India Fund’s top holdings are: Reliance Industries (conglomerate), 12.3%; Infosys Technologies (software), 9.6%; Bharti AirTel (telecom), 7.4%; Hindustan Unilever (consumer products), 5.5%; ITC, Ltd. (various industries), 4.5%; Housing Development Finance, 4.0%; Oil & Natural Gas Corporation, 3.7%; Bharat Heavy Electricals (engineering and manufacturing), 3.6%; State Bank of India, 3.3%; HDFC Bank, 3.2%; and Power Finance Corp., 2%....

NEW IRELAND FUND $4.26 (New York symbol IRL; Shares outstanding: 5.1 million; Market cap: $21.8 million; CWA Rating: Aggressive) invests in Irish companies. The Bank of Ireland manages the $50.9-million New Ireland Fund. The bank dates back to 1783. 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), 25.0%; Ryanair Holdings (airline), 15.0%; DCC plc (business services), 7.3%; Kerry Group (food products), 5.0%; Elan Corp. (health-care services), 5.0%, Aryzta AG (agriculture and food), 4.3%; United Drug plc (health-care services), 3.3%; Allied Irish Banks, 3.2%; and FBD Holdings (financial services), 2.4%....

BCE INC. $26.01 (Toronto symbol BCE; Shares outstanding: 791.6 million; Market cap: $20.6 billion; SI Rating: Above Average) has over 7.5 million telephone and Internet customers in Ontario and Quebec. It also has 6.5 million wireless subscribers across Canada. In the three months ended December 31, 2008, BCE’s revenue fell 0.7%, to $4.49 billion from $4.52 billion. However, earnings per share before one-time items rose 19.6%, to $0.55 from $0.46. BCE’s cellphone revenue rose 7.6% in 2008, and subscribers grew by 4.5%. Wireless accounts for 25% of BCE’s revenue and 43% of its profit. Since mid-2008, BCE has laid off over 7% of its staff. It has also cut spending on consulting, eliminated 7,000 corporate credit cards and lowered the number of ad agencies it uses to 11 from 47. These moves should lower the company’s annual expenses by $400 million. BCE earned $1.8 billion in 2008....

BMO EQUITY FUND $20.70 (BMO Mutual Funds, 77 King Street West, Suite 4200, Royal Trust Tower, Toronto, Ontario, M5K 1J5, 1-800-665-7700; Web site: www.bmo.com. No load — deal directly with the bank) (CWA Rating: Conservative) mostly invests in blue chip Canadian companies. The fund’s managers aim to identify stocks based on their analysis of the outlook for the industry the firms operate in, as well as their earnings records, management strength and growth potential. The $1.4-billion BMO Equity Fund’s 10 largest holdings are Bank of Nova Scotia, Royal Bank of Canada, Toronto-Dominion Bank, Canadian Natural Resources, Suncor Energy, EnCana Corporation, Barrick Gold, Manulife Financial, CIBC and Goldcorp. The fund currently holds 35.9% of its portfolio in the resource sector. Its next-largest segment is financial services, at 21.6%....

SWISS HELVETIA FUND $8.96 (New York symbol SWZ; Shares outstanding: 33.3 million; Market cap: $297.8 million; CWA Rating: Conservative) invests mainly in large-capitalization Swiss stocks. Hottinger Group, which dates back to 1786, manages the fund. The Swiss government has moved quickly to restore confidence in the country’s banking system. It’s also lowering interest rates to ease credit and devalue the Swiss franc. The Swiss economy is heavily reliant on exports. A rise in world trade would greatly benefit the country’s industries. The $469.1-million Swiss Helvetia Fund’s top holdings are: Nestle SA (food and beverages), 19.9%; Roche Holdings (pharmaceuticals), 12.9%; Novartis AG (health care and pharmaceuticals), 9.3%; Addex Pharmaceuticals, 3.8%; Alpiq Holding (electric power), 3.4%; Acino Holding (pharmaceuticals and chemicals), 3.4%; Basilea Pharmaceutica (biopharmaceuticals), 3.2%; Actelion Limited (pharmaceuticals), 1.9%; and Galencia AG (pharmaceuticals), 1.4%....

RBC CANADIAN EQUITY FUND $18.03 (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 $3.1-billion fund’s largest holdings are Royal Bank, Manulife, EnCana, TD Bank, Potash Corp., Bank of Nova Scotia, Canadian Natural Resources, Suncor Energy, Research in Motion and BCE. The fund is heavily weighted (47.2%) toward the resource sector; 27% of its investments are in finance. Over the last 10 years, RBC Canadian Equity posted a 4.9% annual rate of return. That’s just over the S&P/TSX’s 4.6% gain. The fund lost 38.3% over the last year, compared to a loss of 38.2% for the S&P/TSX. The fund’s MER is 1.96%....

CIBC CANADIAN EQUITY FUND $16.61 (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 it sees as having above-average growth potential. The $317.2-million fund’s top holdings are: TransCanada Corp., EnCana, Research in Motion, Bank of Nova Scotia, CN Railway, Potash Corp., BCE Inc., Canadian Natural Resources and Royal Bank of Canada. CIBC Canadian Equity holds 39.4% of its portfolio in resource stocks and 27.1% in finance stocks....