diversification

Growth stocks are companies whose earnings growth has been above the market average, and is likely to remain above average. These firms often pay little or no dividends. Instead, they invest their free cash flow in furthering their growth.

These stocks can be highly volatile, but they often make good long-term investments....

You can enhance your long-term investment results by following these 3 key tips for investing in the stock market. They’ve long been part of the advice we give in our investment services and newsletters, including Canadian Wealth Advisor, our advisory for conservative investing. 1. Treat all predictions with a healthy degree of skepticism: Thanks to the Internet, it’s possible to get hold of far more information than ever before. From there, it’s easy to fashion a theory or accept a conclusion that is missing just enough key material to be completely at odds with reality. This can happen to anybody. That includes teams of award-winning journalists and editors at major newspapers, top-paid investment analysts at the world’s biggest financial institutions — and you. That’s why you need to treat all predictions — yours and everybody else’s — with a healthy degree of skepticism. You can take them into account, let them influence your investment decisions, even skew your portfolio so you can profit if they hit the mark. But keep it within limits. Never let a prediction take the place of diversification....

The improving U.S. economy is helping more consumers repay their loans on time. That’s pushing down loan losses at a number of U.S. banks, and improving their profits. However, the outlook for the U.S. banking sector remains uncertain. High unemployment continues to hurt demand for new loans, and the industry faces greater regulations under the Obama administration’s new financial reforms. ...

When building your stock portfolio, it’s crucial to follow our advice on downplaying stocks that seem to be near-universally recommended by brokers and are getting a lot of favourable media coverage. That’s because, in investing, familiarity can breed excessive feelings of comfort, security and performance.

(Downplaying stocks in the broker/public relations limelight is part of our three-part investing program....

Regardless of whether you follow an aggressive or conservative investing approach, we continue to recommend that you own shares of at least two of Canada’s big-five banks — Bank of Montreal, Royal Bank, CIBC, TD Bank and Bank of Nova Scotia. However, banks shouldn’t be the extent of your Canadian financial holdings. To increase your profits and cut your risk, it is also essential to diversify your holdings within each economic sector — including Canadian finance. Other types of financial investments, such as non-bank financial companies, should also play a role in your portfolio. ...

The investment industry has created all sorts of exchange-traded funds (ETFs) in recent years. However, quality varies. All too many exist to tap into popular, but risky, themes and fads, so you need to be highly selective with your ETF holdings. ETFs offer very low management fees. In addition to low fees, the best ETFs offer well-diversified, tax-efficient portfolios of high-quality stocks. Here are five foreign ETFs we like:...

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on the fundamentals of successful investing. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away. Today’s tip: “Investment success depends more on the quality of your investments than on the price you paid for them.” When you start investing, you may think the secret to investment profit is “buy low, sell high.” But that’s hard to do. You’ll often buy just before prices fall, or sell just before they rise. If you stick to high-quality value stock picks, however, your short-term gains and losses can average out and you’ll still profit greatly in the long run. Here are nine factors to look for when judging a value stock pick’s investment quality....

Rona Inc., $15.43, symbol RON on Toronto (Shares outstanding: 132.2 million; Market cap: $2.0 billion), is the largest Canadian distributor and retailer of hardware, home-renovation and gardening products. Rona operates a network of about 700 stores of various sizes and formats. Franchisees own some of these outlets. The company also operates 40 stores that are geared to commercial customers, particularly contractors. Rona supplies all of its stores through its own network, which consists of nine distribution centres across Canada. Rona first sold shares to the public for $6.90, and began trading on Toronto in October 2002. The company’s revenue more than doubled, from $2.3 billion in 2002 to $4.8 billion in 2009. Earnings grew 114.3% over the same period, to $1.20 a share in 2009 from $0.56 in 2002 (adjusted for a 2-for-1 split in 2005)....

AGF Elements Yield Portfolio Fund uses a number of different managers. The fund aims to give investors “diversification” by combining different investment-management styles. We think this approach is inferior to management by an experienced and proven individual. As well, the fund is a balanced fund, and holds 70.5% of its portfolio in bonds. We don’t generally recommend balanced funds. That’s because bonds are unlikely to perform as well in the next few years as they have in the last few, if only because interest rates are likely to rise. That means the fund would only earn interest income on its bonds; instead of capital gains, its bond holdings could produce capital losses. We don’t recommend the AGF Elements Yield Portfolio....

Investing outside of Canada and the U.S. can expose you to more volatility and risk. The sharp downturn in many foreign markets during the global recession proves this. But there are still countries and regions that offer lots of growth potential and opportunities for diversification. One of the best ways to invest in foreign markets is through exchange-traded funds (ETFs). That’s because directly investing in those markets can be complicated and risky, and high-quality ETFs let you make international investments with greater safety. As well, the best ETFs offer a great combination of low fees and top-quality stocks. Here are four foreign ETFs we like:...