IFIC Says Fund of Funds Prove Popular in 2007
All major investment companies in Canada have introduced their own version of a fund of fund product.
A mutual fund is simply a collection of stocks. A fund of fund product is just that, a collection of mutual funds all wrapped up together. Pat Dunwoody, the VP of Member Services & Communications at IFIC, says “Fund-of-funds are seen as part of an overall investment strategy, strengthening the diversification of an investor’s portfolio”. He goes on to say that “They are ideally suited for managing market risk.”
Your Take-Away: There is no time like the present to try and manage market risk, and maybe a fund of fund product is exactly what you need. By investing in a fund of funds product, you have the ability to spread your money around a number of different asset classes and regions while maintaining the original purpose and intent of your original investment based on your personalized risk profile.
Companies such as CI Investments, Mackenzie Financial and Templeton to name a few, all provide well diversified portfolio products that can be matched to your customized risk level.
Until next time, have a Terrific Tuesday.
Chris
Time to Start Investing Again?
Warren Buffet has been quoted saying “if you are a buyer of equities, why would you actually want the market to go up?”
In other words, this may just be a perfect buying opportunity for those of us with cash in our pocket. A recent article at www.financialpost.com written by Peter Hodson says “So if you actually have any excess cash to invest, then you are better off buying in a down market like this.”
Your Take-Away: The markets have been all over the map, but most would agree that we are currently experiencing a down or bear market. If that is the case, that means that the funds or large cap stocks we normally look too are now on sale which provides a majority of seasoned investors with a great opportunity. Taking advantage of “Dollar Cost Averaging” (buying in small increments over an extended period of time) is no question a great strategy and can prove to provide those who make that decision with a very strong position over the course of the next couple of years.
Don’t forget that the largest market plunge post World War II happened on Oct. 19, 1987. This drop in the market that we are all familiar with did not trigger a recession, yet investors recouped most of their losses within a year. Perspective in the end, is everything.
Until next time, have a Magnificent Monday!
Chris
How do Lower BOC Rates Effect Canada
As you know, the Bank of Canada dropped the overnight lending rate by 0.25% on January 22nd.
The drop in the overnight rate by the Bank of Canada presents a mixed picture for the economic outlook. While the Bank acknowledged that “the 2008 outlook for the U.S. economy is now significantly weaker than at the time of the October Monetary Policy Report” and that this “will lead to additional downward pressure on export growth,” policymakers presented an optimistic outlook for Canada’s domestic economy as “domestic demand in Canada is projected to remain strong.” Still, the Bank concluded that “further monetary stimulus is likely to be required in the near term.”
Your Take-Away: The potential for yet another cut in interest rate later in 2008 is a very real possibility. What this means for you is that we also expect to see the chartered banks decreasing their prime rates by similar amounts. This in turn will make mortgage rates, and more specifically, the variable rate products very attractive. This is something to seriously consider if you find your self purchasing a new house or refinancing an existing mortgage.
Until next time, have a Fantasic Friday!
Chris & Elisseos
Stay the Course in our Volatile Market
With all the volatility the TSX experienced since early last week, many investors are moving to a cash heavy portfolio.
It is no surprise at all that many Canadians are moving to cash. After all, the ups and downs in the market can be scary and sometimes even overwhelming. For those nearing their retirement, it can be down right petrifying. The question we must ask is “Are we staying the course and following our original long term plan?”
Your Take-Away: Rob Carrick wrote yet another great article on the importance of going back to basics and reviewing your initial long term plan. After all, if you stick to your plan there is no question that you understood the market would fluctuate. The benefit to choosing the funds and in turn the portfolio you chose was that you believed the long term benefits would out weight the short term volatility. Does that sound familiar, even fair?
There is no question that the volatility we’ve seen in the last week or so has caused many to wonder what the future holds. I also think it is very fair to be frustrated or a bit nervous when your portfolio seems to be shrinking. After all, we are all human and choosing how to invest our money is not only an academic or technical decision, but also a very emotional one.
My encouragement is this. The markets will probably continue to bounce around for the next little while, but rest assured that with the bad comes the good. In fact, if there was no such thing as a bad market, there would be no such thing as a good market because we’d have nothing to compare it too.
Step back, take a look at your long term plan, and realize you made sound financial decisions back then which means you can sleep easy and simply enjoy the ride up!
Until next time, have a Terrific Tuesday.
Chris
Our Thoughts on the Recent Volatility in the Canadian Market
With the very real losses the Canadian market saw on Monday, many investors are looking for answers.
Rob Carrick wrote an amazing article on the volatility of the Canadian market, and I truly believe it is a “must read”. He comments on the response that most investors are taking and how that could severly effect the value of their future portfolio.
Your Take-Away: Although it is impossible to know the outcome and length of this current downward slide, it is possible to look at the history of the market to help us determine what our response should be. In fact, when writing this post alone, the TSX has already bounced back by 351 points over yesterday’s losses.
Below are seven points that will help you further undertand both the market, and our current perspective of what is and has been happening.
1. Corrections are a normal part of a healthy market and they present opportunities for long-term Investors.
2. A lot of Portfolio Managers are using market weakness to add to their portfolio holdings. After all, stocks are clearly on sale.
3. The Global Economy is still in pretty decent shape. This is going to be good for the earnings of Large Cap, Global Multi National Companies.
4. Bear Markets start with excessive equity valuations, with Central Banks increasing Interest Rates and investor sentiment being unrealistically optimistic. We are in the opposite scenario currently. Central Banks are cutting rates, investor sentiment is bearish and valuations are compelling.
5. This is not the time to be buying Government Bonds. The Asset Class is likely to under perform over the coming years relative to other Asset Classes. It also offers no inflation protection.
6. Currency has been a major issue. The move in the CDN dollar against the Euro and the US Greenback is unprecedented. That is rear view however and C$ movements are unlikely to have such a big impact going forward.
7. Every single time an index has hit its peak and fallen back, investors who stuck with their knitting experienced a breakthrough beyond that peak down the road.
The long and short, read Carrick’s article and don’t forget about the retirement plan you put in place. After all, that alone is a long term plan and moving your money from equities to cash is probably not what you originally decided on.
Until next time, have a Terrific Tuesday.
Chris
What Happened to the TSX Today?
Wow…today was a bit of a surprise and has definitely grabbed the attention of Canadian investors.
The Canadian market suffered its largest single day drop in the last seven years. After last week’s losses completely wiped out all of 2007’s gains, it’s even harder to accept what happened today. There is no question that the losses we’ve experienced since last week have scared many investors into taking a large cash position in their portfolio.
Your Take-Away: It is nearly impossible to put a positive spin on the markets today, and I wouldn’t want to try. What I do know and believe however is that market swings like this have happened before, and will happen again, yet the markets always bounce back at some point. I don’t want to simplify the current environment we are experiencing, but don’t forget that in 1987 the markets fell a whopping 11% in one day but were back up to par or better within the same year.
My approach has always been to take a balanced, long term stance when it comes to market fluctuations. Our markets may not bounce back tomorrow or even this quarter, but the fact is that they will…one day. Just keep that in the back of your mind the next time you hear the outcome of today’s market or take a look at your current portfolio.
Until next time, have a Magnificent Monday.
Chris
How Do You Think 2008 Will End Up? (We’d love your feedback)
There is no question that 2008 has had anything but a great start.
At the close of the markets yesterday alone, this one week slide we’ve experienced has completely depleted the gains that the Canadian market made through the entire year in 2007. That can be somewhat scary to most investors, especially considering many Financial Institutions have been or are mailing out their annual statements and many are showing a negative return from 2007. Don’t forget however, the market works in cycles and if you don’t need your money today or in the short term future, you can ride this one out because you know the markets will rebound at some point.
Your Take-Away: Education is and always has been key. We would love to hear your comments on whether or not you think the Canadian market will turn around by the end 2008. We obviously have our own opinions, but we can’t help but think that many of you do as well.
So, let us know what you think and post a comment for all to see. We’d love to hear what our readers have to say!
Until next time, enjoy the weekend and enjoy the ride!
Chris
Canadian Banks May Ignore Future Rate Cuts
Bloomberg recently confirmed that many of the major Canadian banks are seriously considering ignoring the upcoming potential rate cut by the Bank of Canada.
TD Chief Economist Don Drummond said that “Toronto-Dominion Bank and other lenders may not match an expected interest-rate cut by the Bank of Canada next week.” If this decision were to hold true, this could seriously undermine the policy makers ability to revive our Canadian economy based on the slowdown in the United States. Drummond goes on to say “The reality is that there’s nothing given by law that we have to match the bank’s rate, and our prime should be related to our costs”. Wow.
Your Take-Away: There is no question that this decision could play a serious role in the overall strength of our economy. After all, if the major Canadian banks are more concerned with protecting their own pockets and not as much concerned with the Canadian economy as a whole, that could leave a deep scar in the mind of both the Canadian Consumer and even the Bank of Canada.
Now more then ever, we as Canadians need to be educating ourselves on what is happening around us so we can be best prepared to handle the issues we are and will be forced to deal with.
Until next time, have a Terrific Thursday!
Chris & Elisseos
Middle Class with Struggle the Most in Retirement
Canadians with a household income of less then the $58,000 median income level will replace approximately 89% of their income during retirement through Government programming. This is not necessarily the case for the middle class Canadian family.
According to Sherry Cooper, a Global Economic Strategist with BMO, “The transition will be relatively painless for low-income earners due to the health care system and the implicit value of social benefits in general, including mandatory retirement.” Further to that, Cooper goes on to say “those earning six-figure salaries can only expect to see about 30% replacement.”
Your Take-Away: It is hard to imagine that those who make less money throughout their lifetime will find it easier to transition from their income earning years to their retirement years. The reality however is that the more we make, the more we tend to spend. At least that’s what we’ve seen with our clients. In my opinion, there is no better reason to start seriously looking and planning for your retirement today, despite your current age.
If you don’t know how much you will earn annually during your retirement years, how will you be sure that your transition will be as smooth as those earning less then $58,000?
Until next time, have a Terrific Tuesday!
Chris
Second Half of 2008 Looks Promising
With the new year comes “rate cuts and uncertainty”.
RBC Economists recently said that the first half of 2008 will be “filled with rate cuts and uncertainty” but that the second half of 2008 looks promising in terms of returning to a normal environment with the exception of the housing market. “The US is definitely in a housing recession” says Paul Farley, a Chief Economist with RBC. But he also later states that “the residential investment is only a small part of the GDP”.
Your Take-Away: Most economists say that now is the time to “buy and hold”. There is so much uncertainty and volatility in the markets that for most Canadians it would almost be crazy to try and time the market. Instead, hold on to what you have and the let the eventual upward swing of the overall market strength propel you to another positive growth year.
Until next time, “Buy. Hold. Prosper.”.
Chris
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