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RRSP suggestion

need4greed

Member
Jan 15, 2004
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with the deadline just around the corner, any suggestion for what to buy? Personally I'm not a big fan of mutual funds as I don't believe the return justifies the high management fee. Last year I put all my money into the TSX index fund. Any idea for this year?
 

drlove

Ph.D. in Pussyology
Oct 14, 2001
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The doctor is in
Personally, I think index funds are too volatile, since their performance hinges on the index itself - they do whatever it does. Even though you may not like mutuals, they are not a bad investment in my opinion. I invested in aggresive resource funds. Even though you may experience some loss, a couple of good years will more than offset it. You should come out ahead that way.
 

need4greed

Member
Jan 15, 2004
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I like index fund because of the low fee.... it should not be as volatile as other mutual funds because it is even more diversified. Realistically, only X% of all mutual funds beat the market (as defined by the index), and so far I havn't had much luck picking the winners.
 

keybitz

New member
Feb 14, 2004
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i like common stock with positions in large companies in diversified fields....imo it is much easier to monitor a company than a mutual fund....there are more mutual funds to choose from than there are common stocks
 

VERYBADBOY

Active member
Dec 22, 2003
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Back in the 6ix
The bottom line is diversification.

You have to see what you have now and what you will need in your future. Mainly you are looking for growth.

An index such as the TSX is well diversified and therefore has a beta of near zero meaning that risk is more or less at a minimum in comparison to the market.

Given that a portion of your RRSP may be invested outside Canadian borders, go south to the US for your choice. A market index on one of the US exchanges may be a good option.

You may want to diversify into international markets as a choice, but beware of the restictions and laws in doing so. The best option is a mutual fund for this so you want want to shy away.

There is a lot of research that you are going to have to do in the next few weeks, but remember as long as you get the cash in there you can make your choice afterwards.

It is always best to invest earlier rather than later. Optimally you should invest now for the 2005 year instead of being one year behind, remember the power of compounding.

VBB ;)
 

james t kirk

Well-known member
Aug 17, 2001
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VERYBADBOY said:
The bottom line is diversification.


Given that a portion of your RRSP may be invested outside Canadian borders, go south to the US for your choice. A market index on one of the US exchanges may be a good option.

VBB ;)
I disagree with this.

The American dollar is nose diving, and shows no signs of turning around any time soon. Massive deficits, massive debt, massive trade deficits.

Bank of Nova Scotia is predicting a 90 cent dollar, some are even predicting par.

You don't want to lose money in a currency exchange.

You could make money on the investment, but lose more in the exchange.

For now, Canada, Europe and Asia are better investments.
 

kooldogg

Member
Aug 24, 2001
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The way companies report results these days I reccomend lotto 6?49. I don't find encore to be much of a deal thou.
 

short

Member
Oct 23, 2002
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all this talk about paying more fees than getting a decent return, why not ING Direct?? no fees whatsoever
 

Dancerfan

Oldtimer
Dec 22, 2001
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short said:
all this talk about paying more fees than getting a decent return, why not ING Direct?? no fees whatsoever
Yes I agree,ING is a conservative investment,but you pay no fees or service charges and your money is always safe!
 

VERYBADBOY

Active member
Dec 22, 2003
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Back in the 6ix
james t kirk said:
I disagree with this.

The American dollar is nose diving, and shows no signs of turning around any time soon. Massive deficits, massive debt, massive trade deficits.

Bank of Nova Scotia is predicting a 90 cent dollar, some are even predicting par.

You don't want to lose money in a currency exchange.

You could make money on the investment, but lose more in the exchange.

For now, Canada, Europe and Asia are better investments.
Your last line, for NOW but you also have to look long term.

I don't doubt what you say above, but remember the greenback is trading in a good range now which makes an investment in the US a good deal. Remember that RRSP investments are long term, do you really think that the C$ will be trading this high in relation to the U$? The ceiling is going to be close to Par, but the range on the floor is greater at the present time which brings up the potential for gains.

If the exchange rate moves $0.05, if it moves up the loss is less than the gain if if moves down.

VBB ;)
 

backflush

Immense member
Sep 18, 2004
172
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I don't like mutual funds either. For my self directed RRSP I purchase exchange traded funds. I assume you already know what they are. There are a few that are traded on the TSE. For your foreign content you can also buy ETF in the US as well.
 

Sargon

'Senior' member
Aug 30, 2004
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short said:
all this talk about paying more fees than getting a decent return, why not ING Direct?? no fees whatsoever
Even though ING pays more interest and charges no fee, you can earn more with your money if you buy dividend paying common shares or income trusts. It is not difficult to find diversified, stable income trusts yielding between 6% and 9%

Also, bank and term deposit leave you vulnerable to capital erosion due to inflation.
 

need4greed

Member
Jan 15, 2004
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Happy said:
Total agreed! That said, there are some large U.S. companies that generate their revenues from outside the U.S. and they actually benefit from the falling greenback. Examples: Citigroup and GE, both current favourites amongst most analyst.

Answer to the original post: I suppose you mean ETFs when you say index funds. I agree, most mutual funds underperform the markets and still charge 2.5% MER. ETFs are the way to go.

If you believe that energy will do well, buy iUnits Energy ETF, symbol XEG, on TSX. I've been advocating Scotia Capital Income Trusts Index, symbol SIN.UN, yields about 9%. Income trusts will continue to do well this year. With new money pouring into RRSP and given that most Canadians are yield hungry, income trust is the way to go.
Why do you like SIN.UN, what is it about this income trust that attracts you?
 

james t kirk

Well-known member
Aug 17, 2001
23,932
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I was watching ROB TV the other night and they had a chick on from Calgary who manages an income trust who raked in 20% over the last 4 years.

Would someone please explain to me what an income trust is, and the name of the income trust was the "Bisset income Fund" by Franklin Templeton.
 

lickrolaine

Member
Jun 29, 2003
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what is the best way to buy gold bullion in a self directed RRSP?
 

The Doctor

Still Without Humour
Jun 2, 2003
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drlove said:
Personally, I think index funds are too volatile, since their performance hinges on the index itself - they do whatever it does. Even though you may not like mutuals, they are not a bad investment in my opinion. I invested in aggresive resource funds. Even though you may experience some loss, a couple of good years will more than offset it. You should come out ahead that way.
need4greed: Please seek the guidance of a professional investment advisor. Too many do-it-yourself investors throw around terms that they don't really understand and create more confusion. I've quoted drlove as an example but I could have quoted any number of posts thus far in this thread.

Volatility is a very popular term that is thrown around rather carelessly yet it's not a very useful concept for the individual investor. Volatility is a relative term and is usually represented by the statistical measure of standard deviation. In general terms it is the measure of how much the return on your investment differs (deviates) from that of a suitable benchmark, in most cases an index. For volatility to be useful, you need to be comparing apples to apples such as a mid to large cap Canadian equity fund and the TSX or a small cap equity fund and the Nesbitt Burns 400. If you are investing in an index fund then the returns you experience should deviate verry little from those of the index the Fund is attempting to replicate less management fees (usually 0.50%). As a result, the volatility of an index fund is actually quite low as measured by standard deviation, but this doesn't mean you don't have a risky investment.

Risk is a concept that few investors give much thought to, and in particular, risk of loss. From an investment standpoint, risk is primarily a function of your time horizon...do you have enough time to ride out potential downturns in your investment. Your appetite for risk should factor in how much you value a good night's sleep and how long you have before you need the money. Most investments are ranked based on a risk reward scale...the more risk you take, the higher the expected return to compensate for that risk. On the risk/reward scale aggressive resource funds rank up there pretty high on the scale, but if you can handle the potential down years, you may be handsomely rewarded at some point (probably the only statement in drlove's post I agree with).

Volatility can be msileading for most investors because no one really thinks about volatility until returns are negative. However, you can have very volatile investments that are positing positive numbers. Most don't worry about that volatility until the numbers turn negative and there is a risk of loosing some capital.

Please understand the terms properly before throwing them around and when selecting investments, choose them based on your own personal needs, risk tollerance, time horizon and financial situation.
 

The Doctor

Still Without Humour
Jun 2, 2003
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lickrolaine said:
what is the best way to buy gold bullion in a self directed RRSP?
If I'm not mistaken, gold bullion cannot be held directly in an RSP as it's not a qualified investment. You can hold mutual funds that invest in Gold companies as their units and the underlying shares of those companies would qualify. As well, since the returns on gold bulluion are primarily capital gains, you may want to hold it outside the RSP as it would receive the best tax treatment.

You may want to check with the CRA giudleines before adding it to your RSP just to be sure. This link covers off what can be held but it doesn't mention gold bullion specifically... Qualifying Investments.
 

The Doctor

Still Without Humour
Jun 2, 2003
2,319
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1060 West Addision
need4greed said:
I like index fund because of the low fee.... it should not be as volatile as other mutual funds because it is even more diversified. Realistically, only X% of all mutual funds beat the market (as defined by the index), and so far I havn't had much luck picking the winners.
You are correct in saying that not many active managers can beat index returns. In the US it's as little as 20%, but it's slightly better in Canada. Index funds do have low fees however since they basically hold equities of a similar nature i.e. country or original, sector or market capitalization or bonds with similar characteristics i.e. credit ratings or term, they cannot be considered very diverse. Yes they are better than holding the underlying investments themselves, but to be properly diversified your portfolio should have a mix of assets classes and the best way to get this for smaller investors is through a diversified mutual fund or a broad based equity or bond fund.

The managers may not beat the market all the time but they are professionals and are in a better position to monitor the individual investments than you are. In most cases, the phrase "you get what you pay for" comes into play here.

VERYBADBOY said:
The bottom line is diversification.
Very true. You wont get that from individual stocks or holdings.

An index such as the TSX is well diversified and therefore has a beta of near zero meaning that risk is more or less at a minimum in comparison to the market.
Actually, the TSX is the benchmark that most will use when referring to the Canadian Stock Market and therefore the TSX index is the market. Beta is another one of those terms that people throw around without really know how to apply them. Since the TSX is the market and beta is a measure of an investments correlation to the market (somewhere between 0 and 1 with 1 being directly correlated) an index fund designed to replicate the TSX would have a direct correlation to the "market" and would have a beta of 1. However, the TSX is diversified if you define diversification as a broad holding of large cap Canadian stocks.

Optimally you should invest now for the 2005 year instead of being one year behind, remember the power of compounding.
Excellent suggestion.
 

The Doctor

Still Without Humour
Jun 2, 2003
2,319
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1060 West Addision
short said:
all this talk about paying more fees than getting a decent return, why not ING Direct?? no fees whatsoever
It depends on what fees you are talking about. ING does not charge admistration fees for their basic deposit accounts however, their investment funds have management fees comparable to that of any other major mutual fund company. If you just leave cash in their RSP accounts then you will not be subjected to any fees, but you will not get much in the way of returns.

Don't be afraid to pay fees...just understand what you are paying for.
 
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