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moneysense.ca, 29/12/06
This and That
- Jonathan Chevreau explains in his column that while it is important to save a little for tomorrow, it is also important to live a little today.
- Some stock market pundits are forecasting that the TSX will return about 8% in 2007, closing above the 14,000 level. To see just how silly such forecasting is, hardly anyone expected double digit gains this year. The most optimistic forecast was that the index might reach 12,000 points. It closed above 12,900 today.
- I never understood the allure of single country ETFs that Rob Carrick discusses in a recent column. I am very happy with the EFA index fund and will be looking to initiate a position in emerging markets with either the EEM or the VWO.
- If you are looking for financial resolutions for the New Year, you might want to check out some of the suggestions at MarketWatch.com. Our main resolutions are to get our wills done and continue to move towards a mostly indexed portfolio.
moneysense.ca, 29/12/06
Remember in 2000, the Dow was going to keep rising too! I guess we shall see how good a forecast is, next December 31st!
Happy and Prosperous New Year to you and Your Readers –C8j
Those “pundits” are only forecasting 8% because that is the “average” annual return of the TSX. However, if you look through the course of history, the TSX index has rarely nailed the “average” return perfectly. So, when the “pundits” guess the average, that says to me that they have no clue.
In my opinion, the TSX 300 composite index is impossible to forecast. Recall in year 2000, the one stock called Nortel at its height represented well over 30% of the entire index because it is weighted by market cap. In 2005 and 2006, the rally was propelled by one “class” of stock (Oil & Gas). Income trusts weren’t incorporated into the “index” until late in the game, so the runup can’t really be pegged on the income trust phenomenon.
So, “pundits” will go out on a limb (sarcasm) and guess 8% if they have no idea. They are like weathermen – they have nothing to lose! They don’t get sued if they’re wrong. Some hot new sector might emerge out of nowhere, like say, agriculture, due to some global drought condition brought on by climate change. Then pow! TSX goes up 15% led by agricultural stocks. Or, nothing emerges and the TSX drops by 8%. Who the heck knows?
Happy New Year Everyone!
about single country ETFs: I would agree that it’s not worth it for a lot of countries, but going forward, I would think that having specific exposure to China might be a good way to ride on their success without being exposed to other BRIC countries for example. (I’m not recommending this specifically just looking at it from a different angle).
Even an economy as hot as China’s may not be the best market for your investment. Yes, the Chinese market has been hot for the past few years but horrendous over the past ten. An ETF exposed to many emerging markets is the best option IMO.