- There is much to be said for simplicity in investing. Tom Bradley writes in his Steady Hand blog that investors should stick to the basics and avoid most new-fangled financial products.
- Larry MacDonald reminds us in his Investment Ideas blog that t’is the season for rebalancing your portfolio. While you are at it, don’t forget that your personal life may also need some rebalancing.
- You should pay close attention to the fees you are paying for your investments. While future returns are unpredictable, it is guaranteed that the fees you pay will reduce your returns. Growth in Value recommends that we read an article in MoneySense magazine that reminds us that fees matter.
- Professional money managers are optimistic on equities (Canadian, US and EAFE) and Canadian bonds and pessimistic about Canadian real estate, corporate bonds, oil and currency writes James Daw in The Toronto Star (As an aside, I think the new design looks much nicer than the old one). Just don’t put too much stock in predictions about asset class returns, especially over such a short term.
- Jon Chevreau of The National Post wonders if mutual funds are becoming obsolete as more investors start to question their high fee structure. While I would like to think that champions of low-cost investing are having a big effect, the reality is that the question “Where are the Customers Yachts?” was first asked in the 1930s and is still valid today.
- The Globe and Mail’s Rob Carrick mentions four mutual funds that in his opinion are worth a look. I firmly believe that past performance is no guarantee of future returns and I don’t even consider a mutual fund except in unusual situations.
- It will soon be time for the next budget and tax expert Tim Cestnick assigns odds on what potential tax changes the Finance Minister would make in his second budget. I think that the upcoming budget would be packed with a million small tax cuts given that we might be heading to the polls soon after.
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8 responses so far ↓
1 Canadian Money Blogs Reviewer // Dec 22, 2006 at 12:54 am
hi CC,
I’ve actually quoted Larry McDonald’s portfolio rebalancing by coincidence … In my blog today, I make a comparison of the Manulife Investor Sentiment indicator between now and just before the tech crash in 2001. There is a red flag in my opinion (more in my blog, I can’t rewrite it all here :-). I think switching towards a defensive portfolio (dividend paying stocks, etc.) is wise at this point. But simple portfolio rebalancing can go a long way in avoiding the risk associated to over-exposure to hot securities whether they’re the tech stocks of 2001 or the mining stocks of today for example.
Happy Holidays to you and all your readers!
CBMR
2 MillionDollarJourney.com // Dec 22, 2006 at 2:25 pm
Yea, it’s usually time to sell when everyone and their dog is jumping into the market. I predict that there is going to be a significant correction in the first half of 2007.
FrugalTrader
http://www.MillionDollarJourney.com
3 Canadian Capitalist // Dec 22, 2006 at 3:40 pm
FT: I have no faith in predictions whatever the indicator. If an indicator always works, investors would find it, use it to guide their investing that it won’t work anymore. While I hope a correction happens (like last summer) because I would like to deploy some funds, I am not counting for one to happen. I just don’t have good investing ideas now.
4 Canadian Money Blogs Reviewer // Dec 22, 2006 at 4:40 pm
true, it’s hard to trust any kind of prediction. That said, with the US housing market still seen as about to go down, with the huge US debt, with the uncertainties of the Irak war, with the growth in Canada slowing (http://www.thestar.com/Business/article/164168) , with the inflation above the 2% target,with the etc. some additional caution might be advisable … but yes, with a real slow down, interest rates would be lowered and the economy would probably get back into high gear
5 TZ // Dec 22, 2006 at 5:17 pm
MillionDollarJourney says:
“Yea, it’s usually time to sell when everyone and their dog is jumping into the market. I predict that there is going to be a significant correction in the first half of 2007.”
TZ says: And that’s a great opportunity for buying good stocks, when they’re on sale!
6 Phil S // Dec 22, 2006 at 5:32 pm
But when the US economy slows down, then the Fed will lower their interest rates, then housing will start to take off again. To make a play on that scenario, you would want to buy mortgage lenders now. For me, I’m already loaded up on mortgage lenders on both sides of the border.
In general, I agree that there aren’t any bargains out there right now for large cap stocks and my RRSP is about 40% in cash & short term securities right now. I am obviously hoping for a big correction as well, but I’m not sure if I’m bearish enough to short the index. There’s a mutual fund company called Horizons BetaPro, which has funds that hold nothing but short positions. On the one hand, it isolates you from going broke trying to cover a short position if you’re totally wrong, but on the other hand, there’s a steep 5% front end load on the fund, so you have to be absolutely sure of a massive correction to assume this position. I’m not sure enough about a correction to take on that 5% front end load.
There are still good deals down south of the border, in my opinion. Their Sarbanes-Oxley act is making it too onerous for many small companies to remain public, so there are some really busy private equity firms taking a lot of these businesses private in order for them to avoid SarbOx.
The NYSE also have ADRs of many banks around the globe, some of which have juicy dividend yields! Like Unibanco of Chile (Symbol UBB) offering 5% yield along with exposure to an emerging market! Westpac (Symbol WBK) is an Australian Bank with a 4.9% yield! Compare them to the 3.5% yield on Canadian banks and it becomes a bit of a no-brainer. I just haven’t made up my mind whether these stocks would go up in price correspondingly if the US dollar plummets. Since almost 100% their business is derived from other countries, conventional wisdom would dictate that it should. But markets don’t always follow conventional wisdom.
7 Phil S // Dec 22, 2006 at 5:37 pm
Oops! I meant Brazil, Unibanco is a play on the emerging market of Brazil. Chile isn’t much of an emerging market, is it?! Haha… Sorry!
8 Monty Loree // Dec 24, 2006 at 6:41 am
Best wishes for the holiday season and for 2007.
Looking forward to reading more of your money ideas and articles in the new year!
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