CIBC Global Asset Management
After 10 years of outperforming stocks, bonds aren’t a sleepy and boring asset class. You only need to look at what happened to bonds during the credit crisis. Patrick O’Toole, portfolio manager for CIBC Global Asset Management, writes.more…
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Investors and analysts are always trying to predict the direction of the stock markets. And there seems to be as many ways to try to predict market movements as there are analysts and pundits. Models can range from the very scientific and highly calculated to the completely speculative and opinion-driven.
Each year the Canadian Investment Funds Standards Committee (CIFSC) reviews its category list. The purpose of the review is to ensure the categories accurately reflect the Canadian investment fund landscape and in turn help investors make informed investment decisions. In 2008, for example, the emergence of a number of funds investing primarily in equities within China led to a new category – Greater China Equity. This allowed for direct comparison of funds with this mandate.
In the advertising business it’s almost axiomatic that hyperbole sells. Look closely at the barrage of ads you see every day, and you can’t help but notice the immense number of ads with strong appeals to a particular emotional response or reaction. Everything from sex to fear is used to sell products and services. It’s all about fantasy and wish-fulfillment related to the product.
When it comes to investing, equities tend to be riskier than bonds. Equity investments are generally used for capital growth, while fixed income investments preserve capital. Young investors with a long investment time horizon are encouraged to tilt their portfolios heavily towards equities, because over the long term, this will produce the highest returns. Regardless of whether or not all this is true, it is generally what we are led to believe.
As a financial advisor (and investor), I am always searching for methods of saving my clients income tax through every legal means possible. There are three basic methods of taxation, and how you get taxed depends on the investment vehicle you use.
Last month, I wrote about the importance of diversification and how it’s used to control risk. I gave an example of diversifying geographically using a Canadian Equity fund and a Japanese Equity fund to take advantage of the low correlation between the two countries.
Jane and Joe head in to see their financial advisor to invest some money. They hope that the advisor has the edge to find the best investments so they can get to financial freedom that much quicker. They sit down with their investment advisor and the advisor says that something like this: “Hi Jane and Joe. I believe investing is personal. Every investor is unique, so before I can recommend a portfolio, I need to learn a little more about you. I need to understand your risk tolerance, your financial knowledge, your time horizons. The more I understand, the easier it will be for me to recommend a portfolio that is customized for your needs.”
As a lead-in to today’s topic, let me start off with two conclusions. First, most investors spend way too much time doing certain things, and way too little time doing others. Second, most investors make only very average returns on their portfolios. Perhaps the two are related?
Q – I have noticed the advertisements by Ally, the new online bank, which apparently is part of ResMor Trust, and have just checked out their website. Given their higher interest rates, would you care to provide your comments on the merits of this source of higher rates. – Kenneth S.
Q – I have benefited from being a long-time subscriber to your newsletters, and my list of holdings has grown large. Is there a consensus as to the optimum number of stocks, funds, etc. held either in absolute number or based on the dollar value of the holdings? – Don W.
Would you like to know of an investment fund that has low risk, pays a decent dividend, and generates long-term returns that tend to beat its relevant index?
Q – I have a GIC coming due. I am 61 and have quite a lot of equity holdings. My question is whether I should invest more in fixed-income. If so, where is the better choice: short-term bonds; ETFs; corporate bonds; or another GIC? – Yvette, New Brunswick
Portfolio diversification is almost always mentioned by advisors and money managers when discussing your portfolio. But what is it really? And how can you use it to control risk?
In times like these, when interest rates are low, one of the biggest challenges facing investors is how to keep money safe and still earn a decent rate of return.
Are you a conservative investor? What does it mean to be conservative?
The past 10 years in the stock market have been anything but stellar. With two significant downturns in the market, investors are feeling the pains from the past decade. As a result, it’s been trendy to be “conservative.” As our population ages and baby boomers head closer to retirement, one would expect Canadians naturally to become averse to risk. Why then are so many conservative investors feeling the sting of the market?
Last month, we looked at the Canadian Investment Funds Standards Committee (CIFSC) and its role within the Canadian mutual fund industry. With the creation of a classification scheme and constant review of fund holdings, the Committee has helped provide investors with a consistent set of mutual fund categories. This can help you manage risk if you understand the risk factors that can affect each category.
Q – We have just sold our snowbird home in Florida and will realize a small capital gain ($10,000). Home value is under $300,000. Can we claim expenses on the house we incurred over the 10 years of ownership, such as repainting, general repairs and improvements, lawn maintenance fees, community association fees, etc. to reduce this gain? We are Canadian citizens and have been spending about four months a year down South (January to mid-April). – Deborah D.
Canadian home prices continue to soar. The median price hit $340,920 in March 2010, up dramatically from $289,881 a year ago. Naturally, that has prospective first-time owners once again wondering how they are ever going to come up with a 25%, or even a 10%, down payment, let alone afford the whole house.
Investing can be complicated. But if we distill the academics of investing to the basics, without leaving anything important out, the passive investment approach is one very desirable way to go.
Mutual fund fees continue to be scrutinized by the media. Many feel that the management expense ratios (MERs) on mutual funds are too high, especially given the fact that the past 10 years have been far from rewarding.
