Moneysense best mutual funds for 2007 (annual ranking)

Although a lot of people including myself promote using index funds instead of mutual because of their annual fees (MER : Management Expense Ratio). Many Canadian mutual funds will charge you in excess of 2% per year of MER. Other funds though give good performance for fees lower than 2%. I hold CHOU RRSP myself and it has done very well for me over the year. I am still moving to an index fund based RRSP to minimize the effect of fees over the long term. I might decide though to keep a mix of both. Why? Because some mutual funds like CHOU RRSP have a better bear market performance than indexes like the S&P TSX 60 for example. And I like having investments that are more resilient to downturns in the stock market.

So here are the top Moneysense mutual funds for this year (from their latest printed magazine issue). I've added my own twist of only including the top fund in each category that has an MER lower than 2% and a bear market performance of A or B.

Category	Fund	Rank	5 years annual return %	Bear Market Perf.	MER %	Min. Invest. $
Canadian Equity	Chou RRSP Fund	2	15.92	A	1.74	10000
US Equity	RBC O’Shaughnessy US Value Fund	1	11.32	A	1.57	1000
Canadian Balanced	CIBC Monthly Income Fund	2	12.36	A	1.42	500
Global Equity	Saxon World Growth	6	9.21	B	1.87	5000
Small Caps	Mawer New Canada Fund	1	24.15	A	1.5	5000
Canadian Bonds	TD Real Return Bond Fund-I	1	8.53	A	1.48	100

The Global Equity category does not fare well under my criteria, but Small Caps is amazing and Canadian Equity is very decent!

What does this mean? One possible conclusion is that mutual funds with fees under 2% can be a good alternative in some cases. It might be hard to know in advance which ones to pick though. I'll have to back test my strategy to see if there are any trends ...

If you are more comfortable with mutual funds than with index funds/ETFs then definitely go with low fee funds that have proven long term records like CHOU RRSP.

Real estate question: should GST be paid when buying land in Canada?

A reader was asking me to find out if GST should be paid when buying land in Canada. I've done some research and found a very good document on the Government's web site.

There are a lot of points and exceptions, but from what I've understood, you always have to pay taxes if the land was used as a business (except if it was a farm). Any private sale by an individual is exempt of taxes. There are also cases where a non-taxable land can switched to taxable by the owner ... but that's where my interest in taxes wizardry fades :-)

Market vs Fundamental Weighted ETFs

Larry McDonald promotes the idea of fundamental ETFs vs market weighted ones. I agree with him! (thanks to Canadian Capitalist for the link)

How to track blog comments (taking a small break from personal finance:-)

I spend enough time reading blogs and wasting time with annoying details that having found this trick, I had to share it with you guys! I've always found it was cumbersome to go back to visit blogs where I'd left comments to see if others have left comments. Some sites (like Million Dollar Journey) offer that feature directly on their site but most don't. I've finally found the holy grail of comments tracking: CO.MMENTS.COM . You can add it as a button on your browser toolbar and when you're viewing a post, you simply click the button and all new comments will be sent to you via email. I've also added an option to track comments in my Feedburner feed ...

Canadian Personal Finance Bloggers interviews

don't miss those awesome interviews from Canadian Dream 45

save time with RSS feeds from Feed43 (and don't forget: time is money :-)

Chris (a.k.a. "Mr Resourceful") pointed me to this excellent site: FEED43.COM . That sites allows you to create an RSS XML feed from pretty much any web site. On some sites, the initial setup to define tags might take some more effort, but it's worth it. In the end you can have all your daily web sites you visit displayed as a feed in your RSS reader. I've started using that and it's really incredible how much browsing time you save.

Here's one of the feeds from Chris for those who want to monitor the Rideau Canal for skating:
http://www.feed43.com/ottawa_canal_conditions.xml

Here's one also for the Ottawa Citizen:
http://www.feed43.com/ottawacitizen_city.xml

A good post on the value of index funds from Get Rich Slowly

The Get Rich Slowly blog tells us that index funds are recommended but that alternatives approaches (with stocks) could be better for some people. That's exactly what I'm trying outside my RRSP (I'll tell you how in a future post ...)

Career advice!

Since your career is about money, I will start to talk about career advice from time to time.

My first advice comes from what my brother does nowadays: black-belt lean Six-Sigma product development. (Yes Six-Sigma can help your company do better and if you are the one promoting it, it can be good for your career :-). I think the key concept here is not that he uses Six-Sigma, but that he became an expert at it. In only a few years out of University (as a mechanical engineer) he went from a low-level consultant to a in demand expert who's currently working at the San Jose plant of a Danish company. And at the same time traveling 3 months in Mexico and then another 3 months in Australia. How did he do that? Yes he worked hard, but in my opinion these are the key things he did:

• Use every work opportunity as a learning one. Keep educating yourself.
  
• Build a personal knowledge base (papers, books, Word documents, web sites, etc.) that you can build on to move in your career.
  
• Read as many relevant business books as possible BUT especially synthetize it creatively to add new value that he can apply in your job.
• Know what you want and have the will and confidence to pursue your dreams. If you want a break and your company does not want to, be ready to leave it. If you want to work in California, for example :-), quit your job, work all day long to find a new job and you will find one.
• Become an expert in your domain (ideally developing a unique expertise). Experts are much more useful and hard to layoff than middle management or just being "one of the 1000s of engineers in a company".
  

This advice is not for obviously not for everybody but it can help inspire you if you dream of something better.

Need a boost in your career? Look on Monster for good advice and even a job :-)

Watch out for those fake 20$ bills

There are still a lot of fake 20$ bills out there ... be careful. Here's how to identify them ...

Business 2.0's 101 Dumbest Moments in Business

I just got my latest issue of Business 2.0 with their annual 101 Dumbest Moments in Business. There are a few pearls in those but here's one related to the stock market:

• #32 : TradingMarkets wants to publicize its money management services and invites 10 Playboy model to participate in an investing contest (to show what clueless investments result in). At the end of last year, 40% of the "bunnies" delivered better returns than the S&P 500 compared to only 29% of actively managed mutual funds!

flash post: Mortgage wake-up call from Canadian Capitalist

Make sure you visit our friend Canadian Capitalist who has a mortgage wake-up call for those about to renew it!

flash post: ROBTV recommends WisdomTree ETF

If you are looking for an international ETF that focuses on dividend paying companies ( like the Canadian Claymore Dividends Achievers, CDZ), ROBTV (look at the Jan 17th archive) mentioned the WisdomTree ETF International Dividends Top 100 (DOO) [thanks to Chris for the info] .

I already hold some myself. That said, I think it might be somewhat early to know if this ETF will perform over the long term. On the other hand, I like the fact that it's diversified globally. The focus on dividends will hopefully help target good companies.

Here's the Morningstar summary:

Analyst Report SummaryThis exchange-traded fund offers exposure to the highest-yielding companies from Europe, Far East Asia, and Australia. While the ETF focuses on similar geographical regions as MSCI-EAFE trackers, it offers much-different sector and country exposure

WEEKEND EDITION: GPS showdown: time is money! (warning: this post will NOT save you money :-)

I've always wanted to have a GPS (yes I'm a gadget lover on top of being a savvy investor) :-) . I travel a lot and hate having to look at maps and waste time (time is money after all!)

So I went to my favorite store, Costco, and looked at what they had: the Cobra and the Magellan Roadmate 800. The electronic guy on site said the Magellan was much better. So I bought it. I also looked online at Costco.ca and found many models but the one that stuck out was the Garmin Nuvi 350 (I had read about it on CNET already). So I ordered it. Here I am with two GPS models (click the link for their full CNET Reviews):

• Garmin Nuvi 350 8.3/10 ; 600$ (Costco will have the 360 on sale in March)
• Magellan Roadmate 800 7/10 ; 460$

After some tests, here's why I found the Garmin is much better:

• it's much smaller
• it tells you the street names (which the 800 does not)
• it's much more responsive and quick when you go in different menus
• the antenna system finds its current position much faster

A few bad things I've noticed with all models:

• they can make you turn on a "no-left turn" corner (but not on one-ways though)
• they get confused with the exact location of an address close to a very large area ( building, park, etc.)
• it's a lot of money!

On the plus side, all models recalculate the route if you miss a turn. They can tell you which restaurants, hospitals, banks, etc. are close to your current location. They will bring you anywhere in North America with the out of the box maps.

Overall though, I found that a GPS is very useful and I will keep the Garmin Nuvi 350.

And as always, I buy electronics at Costco because they have a very generous added warranty and you don't have to buy an extended warranty.

Business Week: going global with ETFs

an older link I had forgot to post: Business week has a very good article on Global ETFs.

Norbourg mutual funds fraud: some investors compensated

Here's a proof that sometimes investors can be compensated if they've been victims of a fraud. People who were scammed by Vincent Lacroix from Norbourg could get up to 200000$ (paid by the Quebec Financial Authority). Only 10% are eligible apparently.

Here's a quick summary from Reuters:

"Vincent Lacroix, president of Norbourg, faces 51 securities fraud charges stemming from the company's failure. The Autorite has sued him for C$94 million and police are also investigating the firm's collapse.

Lacroix has denied the allegations, which have not yet been heard in court.

The Autorite said those being compensated were victims of fraud committed during the distribution of financial products and services at Norbourg Capital Inc. and Groupe Futur.

Representatives selling Norbourg funds were paid commissions beyond the norm to direct clients toward placing their investments with the Montreal firm, the Autorite said."

That's a break for some investors in this case, but not everybody is as lucky.

RESP: contribute right away or not?

Question following a post from Million Dollar Journey on RESPs ... Friends who just had their first child were telling me that their financial adviser is suggesting to wait to contribute to a RESP until they have their second child to setup a "family plan RESP" where the money can be used on any one child if one decides not to pursue higher studies for example. Is that how it works? I'll have to find out. But I'm personally thinking that the sooner you save money from Revenue Canada the better (interest compounding on your investments). I wonder if there is a point also where if you wait too long, you lose some government matching funds.

Canadian Personal Finance blogs and sites: Google Custom Search ...

I've created this Google Custom search that indexes a lot of Canadian Personal Finance blogs and sites. Have a try and let me know if you find this useful. If you find your site is not indexed, please let me known and I will add it. I'd also appreciate any suggestion of new sites to add.

Playing the TAG game :-)

I hope you wanted to know 5 things about me that you didn't know because I've been tagged by Canadian Dream 45 :-)

Let's see if I can find 5 entertaining facts ...

1. I learned valuable stock trading lessons early on(and I'm really glad it happened before I had time to do more damage!): I had bought 3 Nortel stocks at 120$ and finally sold them at 12$. That was when NOT to buy. I've then bought 100 stocks at 1$ and sold them at 10$ ...that was when to buy :-)
2. Despite all my good advice, I keep trading too much outside my RRSP (because I like stock picking). I'm not a day trader though!
3. I had setup an Adwords campaign to see if it would boost traffic to this site ... not working that well :-) (links from popular blogs seem to be the most traffic generating event)
4. Yes you know I practice martial arts now, but did you know it's Wing Chun Kung Fu (and we should really say Gung Fu)?
5. I got lost in translation in Japan! Imagine my wife and I having to go to our hotel in Tokyo, 11:30pm and no cab (of a specific type we learned later) would take us and we couldn't understand (literally!) why so we walked with our luggage in the middle of downtown Tokyo and finally found a cab that took us after when he looked at our paper (but he still didn't speak English!). The rest of the trip was fun though :-) Basically, fact #5 is that I like to travel a lot!

Let's see if I can tag other bloggers who haven't been already :

• Investorial
• Canadian Money Advisor
• The Zen of Investing
  

Alternative to Income Trusts: Dividend stocks are good but some are better!

In the G&M, Rob Carrick talks about alternatives to income trusts. The alternative that interests me the most is buying dividend paying stocks. My instinct would have been to grab those with the highest yield. But Rob makes a good point when he says that what we should look for first are companies that have consistently risen their payout year after year. This is a sign of a solid company that will reward investors for year to come. There are also more chances that this is a growing company and that it will give you capital gains as well (the stock price will go up!).

Here are three stocks mentioned that go in that category:

1. Astral Media: "largest stable of English and French specialty, pay and pay per view television services", "has increased its dividends 15 per cent annually over the past five years"
2. Manulife Financial:"world-class financial services company. It is global in scope, with operations in Canada, the United States and Asia", "Tremendous free cash flow generation with double-digit dividend growth (a five-year compound annual growth rate of 25 per cent) and only a 30-per-cent payout ratio, which speaks to the financial strength of the company and why we expect the double-digit dividend increases to continue"
3. Power Financial:"A holding company that directly owns 70.6 per cent of Great-West Life, 55.9 per cent of Investors Group and 27.1 per cent of Pargesa Holding SA, a European company that derives 95 per cent of its net asset value from four holdings: Total SA, Suez, Imerys and Lafarge.", "Over the past 10 years, Power Financial's dividend growth rate has been 18 per cent annually"

Two other stocks that might have been good but seen as too pricey:

1. Enbridge
2. TransCanada

Other alternatives are mentioned:

• preferred shares: doesn't look much better than bonds to me
• corporate bonds: only those from big banks are recommended
• government bonds: you won't get rich on those, but they are safe!

Interesting point made about bonds:

For investors who want to keep things safe and simple, Mr. Dong recommends the trusty old bond ladder, where you split your GIC or bond money evenly into one- through five-year terms

In Investing or Exercise, There are No Quick Fixes

I thought I'd point you to this excellent warning about "magical thinking" in investing from Tom Bradley at Steadyhand.

Which financial magazines do you read? Here are my choices...

For those who need magazines/newspapers/newsletters ideas, here are the ones I read the most (post comments to tell me which one YOU read!):

in print
Moneysense : The best personal finance magazine for Canadians in my opinion. From their mutual fund reviews to their 200 annual best stocks to general tips.
Canadian Business: The reference for Canadian finance related information. That's where you learn where the economy is going and how it's affecting companies. Their online edition has great stuff too like Larry McDonald's blog...
(these previous two I get at a very cheap price thanks to Rogers)

(thanks to Larry McDonald for the mention!
(quick note: I am moving towardss a Couch Potatoe portfolio for my RRSP ... in my regular account, I'm still trying to buy stocks ... a combination of the MoneySense 200, Investment Reporter suggestions, my own research (now improved with Rule #1 advice)

Business 2.0 : US magazine for entrepreneurs, but it's very entertaining and it gives you a glimpse of the next big ideas which often are good investments ideas as well.

Investor Digest: Excellent financial roundup that talk about many specific companies in details. Interviews with mutual fund managers. Mexico Mike and his junior mining picks!

online
Globe and Mail Insider edition (more access to good articles from Rob Carrick :-)
Business Week: The ultimate US magazine in my opinion. They cover a very wide array of topics from macro-economy to very detailed reports abouts specific topics.
Investment Reporter (in print too, but I read in PDF): One of the best Canadian investment newsletter that has been there for a long time. In my opinion, they give very good advice for long-term investors. here's a quote from their site:
Rob Carrick sums up The Investment Reporter in a nutshell: “Published since 1941, this weekly is one of the best all-around sources of investing ideas for those with an eye to the long term.”)

flash post: 10 easy steps to the simple (financial) life

Some simple but effective financial tips from Consumer Reports ...

Thanks to Simple Dollar for the link

Cool finance blog I found: The Zen of Investing

If found this new blog (the Zen of Investing) that seems very interesting from the two articles I've read so far (thanks to Investorial for the link):

1-Ten reasons why US dollar denominated bonds are not as safe as you think.

It gives a good idea of why the US economy will be under pressure.

Some interesting quotes:

At some point and time, the U.S. Federal Reserve will try to block global flight from the U.S. dollar by propping up interest rates, not cutting them. Here you suffer twice. Once from a loss of purchasing power and twice, from a devaluation of the face value

with U.S. President Bush poised to send more U.S. troops to Iraq in 2007, the war will have an even heavier toll on the U.S. economy in 2007.

2-How Understanding the Success of the Mixed Martial Arts Champions will Make You a Much Better Investor.

Being a martial arts practitioner myself, I enjoyed the parallel being made between mastering martial art styles and investment techniques.

Here's an awesome quote (I hope it's not too long of a quote!):

It is just not possible to master 10 completely different techniques brilliantly in even a span as long as ten years. In fact, many martial artists of legendary folklore status spent decades mastering just ONE technique which they would use to defeat opponents of all different styles. Miyamoto Musashi, widely heralded as the greatest swordsman ever, stated that he didn’t see the point of learning the many different sword techniques that existed, because after all, there are only a limited number of ways to deliver a fatal blow with a sword.

This very concept of keeping your strategies simple is one that large investment firms have mastered. For the last half of a century, investment houses all over the world have convinced tens of millions of people that diversification through Modern Portfolio Theory is the best, safest and only way to invest your money. This is rubbish.

Go visit this site as it is worth your time ...

"Don't try to beat the market!" , Motley Fool

For any of you who thinks about investing in stocks out there and hope to be beating the market (including me) I found a great text from Motley Fool. It says:

"Don't try to beat the market!"

First of all, you might already be ready to tell me: "you're a fool to try to beat the market!". And you might be right :-) . That's what the paper addresses: if you don't have the time to do a lot of research, etc. to beat the market, don't do it! Buy index funds and you will nicely follow the market average returns which most mutual funds company (and individual stock pickers I assume) fail to beat.
They say you need to be ready for the commitment and occasional disappointment if you are going to buy stocks instead of low costs index funds (or ETFs).

It then goes on to say that if you are still willing to buy stocks after that warning, you should not focus on large caps (which I do a lot), but on small caps where the real rewards are. There are more "pricing inefficiencies" (value stocks I assume) in small caps . They manage to mention that it's something Warren Buffett has proved "over and over again". Finally they talk about the "Motley fools hidden gems" ... I guess they had to pay the writers of the article :-)

you can read the full article here
(disclaimer: they do try to sell you the Motley Fool stock screener at the end!)

---
update: I agree with Motley Fool that small caps can bring better returns, but I think having a mix of large and small caps might still be safer. And even buying large caps is more fun than buying index funds :-) (Although I'm using a lot of index ETFs myself).

A useful topic: saving money on groceries (in Ottawa)

The Ottawa Food Security Council has an interesting web site that links to the flyers of the week from different grocery stores. That should make it easier to figure out where to buy your top sirloin steaks this week :-)

(thanks to Chris for the link!)

---
update :I've just sent them an email since some of their links don't seem to work

UPDATED - Canadian Business 2006 Best Selling Business Books (including 15 min/week investing!)

The top 5 business best-sellers from the latest issue of Canadian Business (2006):

1. Why we want you to be rich : Two Men, One Message, by Donald J. Trump and Robert Kiyosaki
2. Let my People Go Surfing: The Education of a Reluctant Businessman, by Yvon Chouinard
   
3. The Next Great Bubble Boom: How to Profit from the Greatest Boom in History: 2006-2010, by Harry S. Dent Jr.
   
4. Banker to the Poor: Micro-Lending and the Battle Against World Poverty, by Muhammad Yunus
   
5. Rule #1: The Simple Strategy for Successful Investing in Only 15 minutes a Week!, by Phil Town
   

So apparently, Donald still sells. "Let my people go surfing" looks entertaining, but I'll have to pass. Book number three is another crystal ball book that promises wonders:

Dent gives us all something to look forward to, including:

• The Dow hitting 40,000 by the end of the decade
• The Nasdaq advancing at least ten times from its October 2001 lows to around 13,500, and potentially as high as 20,000 by 2009

As much as Book number 4 looks like a solid read, Book #5 is very intriguing ... can I really only spend 15 minutes a week to be a successful investor? (I spend much more than that nowadays and I'm not retired yet :-) I think I'll have to read it ... I'll let you know.

---UPDATE (Jan 3rd 2007) -------- I've started reading rule #1 and it's looking very promising. I'm not sure that 15 minutes will be enough, but we'll see :-)

Here's a real review of the book...

Skype not worth it finally?

After playing some more with Skype over the holidays, I came to the conclusion that it might not be worth it as much as I thought at first. The quality seems to have dropped again. The free North American calls are over. You need a computer to use it or a special phone. Compare that to Yak which uses your regular phone line and has very similar prices to Skype! For example calling from Ottawa to the Dominican Republic cost pretty much 11c/min with both. Skype seems about to introduce a connection fee on top of it.

RRSP cleanup for the new year & using Globe and Mail Portfolio

I am slowly moving to an index ETFs only RRSP (like Canadian Capitalist and others) .

My starting point will be the Couch Potato portfolio concept from Moneysense. I've implemented that type of portfolio for my brother this year in his RRSP and it got close to the 14.7% return wich Canadian Capitalist talks about today. I'll blog about my brother's portfolio later this week...

I am also about to do a big 2007 cleanup and sell all my odd RRSP positions I've accumulated over the years. That will make it much easier to track my assets and feel less cluttered :-)

Inspired by many of the Canadian blogs I read, I've implemented a better portfolio tracking strategy. I am using the Gold version of GlobeInvestor with their great portfolio tracking and analysis. I've entered all my transactions and it gives me annualized returns with charts, etc. All the dividends and distributions are automatically added. I'll talk more about it at some point this month. I've learned that my RRSP had a 10.3% return this year and my smaller non-rrsp close to 16%. My RRSP was boosted by CBQ (BRIC ETF from claymore) but was dragged down by some income trusts (especially the XTR ETF).

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My non-rrsp portfolio is a stocks only portfolio for now with mostly "safe" stocks (with some quick gambling plays I've done here and there). I'll blog about that portfolio later this week too.