Foreign Investments for Canadians

December 18, 2004


Our dollar has strengthened considerably over the past two years, hitting 0.85USD recently. Even though the C$ might strengthen further (Scotiabank recently forecast the dollar rising to as much as 0.925USD in 2005), I am considering increasing my foreign investments in the new year, mainly using the iUnits and iShares index funds. I am also considering initiating new positions in US Small Cap Equities and Emerging Market equities.

Choices include:

  1. US LargeCap: iUnits S&P 500 RSP Index (TSX: XSP), iShares Dow Jones Select Dividend Index (DVY)
  2. US MidCap: iShares S&P MidCap 400 Index (IJH), iShares Russell MidCap Index (IWR)
  3. US SmallCap: iShares S&P SmallCap 600 Index (IJR), iShares Russel 2000 Index (IWM)
  4. EAFE: iUnits MSCI EAFE RSP Index (TSX: XIN)
  5. Emerging Markets: iShares MSCI Emerging Markets Index (EEM)

TD Bank’s 2005 Investment Outlook

December 17, 2004


TD Bank has released a detailed outlook for the next year. Their outlook for returns for various asset classes are:
Cash: 2.5-3.25%
Bonds (SCM Bond Index): 2.0-4.5%
TSX: 3-6%
S&P500: 3-6%
EAFE: 4-7%
Given that bonds and REITs have done extremely well over the last 5 years, perhaps it is time for them to underperform equities over the next few years. Since I don’t know for sure which assets will perform well in the future, I am planning to stick to my asset allocation and rebalance every year.

New Canadian Bond Index Fund

December 16, 2004

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We now have a new option for our bond investments. It is called the iUnits Canadian Bond Broad Market Index fund (TSX: XBB) and will track the performace of the Scotia Capital Universe Bond Index. The MER is only 0.30%, interest income will be distributed quarterly and the index currently yields about 4.04%.
I am going to seriously consider the new iBond index fund for the bond portion of our portfolio. Currently, the bond portion of our portfolio is in cash because I am expecting bond yields to rise (and prices to fall). I’ve been wrong so far this year as the SC Universe Index has increased 7.38%. It is a good illustration that market timing rarely works.