The publicist for the author Sandra Sexton kindly sent me a copy of the book for review. Subtitled Learn what every Canadian should know about RSPs, stocks, mutual funds & more!, the author says that the book fills “a need for simple, concise, unbiased information for the novice investor.”
The book starts off on a correct note talking about asset allocation and model portfolios for various life-stages and covers most of the investing basics including bank accounts, GICs, bonds, mutual funds, stocks, RRSPs, RESPs etc.
However, there are a few inaccuracies and poor advice that, in my opinion, detract from the utility of the book for an investing newbie. For instance, the author recommends a dividend mutual fund for the income portion of a portfolio and a balanced fund for the growth portion of a portfolio, which has two problems: dividend funds are really equity and it becomes harder to tell how much of a portfolio is in bonds. Also, for the growth portion, the author recommends six funds (an S&P 500 index fund, a NASDAQ 100 index fund, a balanced fund, a technology fund, an utility fund and a financial fund). If you notice, four of the six are sector funds and two belong to the same sector: technology.
When talking about the basics of bonds the author notes that the value of a bond will vary based on the Bank of Canada’s overnight rate, which isn’t accurate and offers this recommendation:
If the overnight rate is expected to go up, opt for terms that are less than two years. If the overnight rate is expected to go down, opt for terms that are more than two years. Many people rely on the term recommended by the banker or advisor from whom they purchase the bonds. However, you may want to consider getting a second opinion from another investment professional.
There is only one problem with such advice: the recommendation of both the advisor and the professional is not worth the paper it is written on as predicting future bond yields accurately is impossible.
The self-published book is available from Amazon.ca (non-affiliate link) and The Clever Canuck website. It is hard to recommend this book when much better information is available elsewhere for free.
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1 response so far ↓
1 Phil S // Jan 22, 2007 at 7:24 pm
I’m usually automatically not a fan of any book by an author that recommends mutual funds. I usually only buy stocks of companies that have a high dividend yield, low P/E ratio and a history of increasing earnings. The history of increasing earnings isn’t as important as the other two since I’ve gambled on some turnaround stories and some IPOs in the past. Almost every stock I’ve picked that meets those criteria has made me good money. So, it’s been a no-brainer, but these days there aren’t many companies that meet those criteria. Does that mean I should consider shorting? No, I’m way too chicken for that. Anyways, if there was a mutual fund with exactly the same criteria that I use for stock picking, then I’m all for that, but to the best of my knowledge, no such fund exists.
As for bonds and interest rates, hindsight is always 20/20. The only thing I suggest is that if you are happy with that yield and don’t mind “locking in” to it, then go ahead and buy the long bond. If the yield isn’t enough to live on, then buy a T-Bill or some other short term security. For disclosure, the only long bonds I hold in my RSP are Real Return Bonds, otherwise the remainder of my fixed income portfolio is in T-Bills or 30-day cashable GICs with 1-yr terms.
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