# Portfolio for my Father, Please Help



## Dopplegangerr (Sep 3, 2011)

I am trying to help my father pick out a diverse portfolio that he can put a portion of his money into. He is unhappy with his mutual funds and would like to transfer over 30k now with the potential for investing an additional 50k that will come from other sources later in the year.
My idea is to select companies that my Dad knows and can understand, I am not interested in putting in tech stocks or complicated bio-med companies. Brands he knows and loves and have been that way for a very long time is the idea, like having lunch at MCD with a large KO, then go for a walk around CTC with a THI in his hand looking at DE, I think that is a perfect day for him 

Some additional information:
He is mid 50s with a solid chunk of his investment into his primary residence.
This money is already in RRSP and will stay registered. 
He has no consumer debt. 
He will have a pension with 35 years in in the next 10 years from the post office. 

I would like to hear peoples opinion about this portfolio as well as what they believe are good buying points. We have the time to do this wright so can wait for certain securities. 
Please let me know if there are any dogs in the bunch you would stay away from. 

Oil & Gas: SU
Banks: RY
Rail Road: CNR
Gold: G
Health Care: JNJ
Agriculture: DE, POT
Consumer Goods: KO
Services: CTC
Food: THI, MCD
Telecommunication: RCI.B


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## HaroldCrump (Jun 10, 2009)

How does he feel about monitoring/managing his investments?

I am thinking divide into two ETFs - XIU and XSP.
Between them, they cover a vast amount of exposure to multiple sectors, regions, economies, currencies, etc.
All the tickers you listed above are part of either XIU or XSP.

Most importantly - it eliminates the individual company risk that a concentrated portfolio carries.
For someone like your dad, diversification is perhaps best since individual company risk will be high in a portfolio comprising ~ 10 stocks.


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## VJ99 (Apr 24, 2012)

Given your investment objective and the amount, I'd suggest buying a couple ETFs. 
You get the quality companies you want, easy diversification and lower trading costs. 
Plus, with the right ETF, you can hedge your USD currency risk. 

Here are a couple ETFs to consider:

BMO DJIA ETF Hedged to C$ ETF (ZDJ/TSX)
read more here: http://www.archeretf.com/dow-jones-hi-or-lo/

iShares Cdn Dividend ETF (CDZ/TSX)
read more here: http://www.archeretf.com/miserly-bonds-yield-to-generous-dividends/


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## Four Pillars (Apr 5, 2009)

Why do you want 100% equities? Can he handle the volatility?


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## HaroldCrump (Jun 10, 2009)

Four Pillars said:


> Why do you want 100% equities?


His dad has a DBP pension. That is the fixed income component of his "portfolio".
100% equities is the way to go for him, IMHO.
Other than some % cash of course, to take advantage of buying low every now and then.


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## MoneyGal (Apr 24, 2009)

There are two ways I've seen this argued (and FWIW I've always pretty much sided with Harold): he has DB pension income to provide the "bond-like" component of his retirement income stream - so might as well load up on equities with the rest of his investable wealth. 

However, there is another line of thought which goes like, "don't take risk you don't need to take." 

NOTE: his pension income might be small, at risk, or inadequate to his overall needs. But from the very basic details provided it sounds like he has an OK risk capacity (risk tolerance aside).


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## Dopplegangerr (Sep 3, 2011)

I liked the way others had talked before about taking the best from a group of companies and leaving the rest. I know Humble has talked about it a number of times. 
Also with some of the ETF's mentioned there is no dividend, and dividend investing makes the most sense out of anything to me.

I agree with Harold and MoneyGal about the pension being bond like, and going 100% equities. He will of course have cash on hand.

Does everyone think ETF's are that great?


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## Toronto.gal (Jan 8, 2010)

I agree with Harold and M.gal [as usual].

I just want to add that it's great to have father/son cooperating this way!


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## Dopplegangerr (Sep 3, 2011)

Sorry, when looking up these codes on Google finance it shows no dividend. Adding them it to a new watch-list shows the dividend now.. I apologize


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## MoneyGal (Apr 24, 2009)

Meh. For $30K, ETFs make more sense (in my opinion) than trading 10 stocks -- but there are a bunch of other variables to consider, mainly his overall trading plan, and his level of comfort with managing a portfolio with 10 moving parts.


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## Four Pillars (Apr 5, 2009)

Let me repeat the question:



Four Pillars said:


> Can he handle the volatility?


I agree about the pension being a bond and all that, but does he understand that the equities might go down a lot at times? Can he reconcile the entire portfolio (including the pension component) and not worry about any single part of it?

If you pick a bunch of stocks, it's guaranteed that at least one will crater eventually - will that bother him (even if the others do well?).


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## Dopplegangerr (Sep 3, 2011)

Even when it bumps up to 80k in a few months?
He is not financially inclined, but I am and would be watching these stocks anyways. As half of them I own anyways.


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## Dopplegangerr (Sep 3, 2011)

Four Pillars said:


> Let me repeat the question:
> 
> 
> 
> ...


Very good question, that I will have to ask him.


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## HaroldCrump (Jun 10, 2009)

Dopplegangerr said:


> Also with some of the ETF's mentioned there is no dividend


XIU pays dividends/distributions.
I believe the yield is around 3% if not more.
Since the securities will be held inside a registered account, the specific _types_ of distribution (dividends, interest, ROC) won't matter in your case.

XSP pays distributions too, but the yield is lower.



> and dividend investing makes the most sense out of anything to me.


Then you could do XDV instead of XIU.
XIU is better diversified (IMO) because of the materials and energy sector, which are not big dividend payers.
XDV is more concentrated in financials and insurance, which are big dividend payers.



> Does everyone think ETF's are that great?


There is no absolute ETFs vs. stock picking answer.
It depends on the investor profile, suitability, portfolio management/monitoring ability/interest, etc.
XIU and XSP are as low cost and diversified as you can get.


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## Dopplegangerr (Sep 3, 2011)

HaroldCrump said:


> XIU and XSP are as low cost and diversified as you can get.


And are a better option then Mutual funds yes?


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## HaroldCrump (Jun 10, 2009)

Dopplegangerr said:


> And are a better option then Mutual funds yes?


Most certainly better than an equivalent managed mutual fund (2% + MER) that are based on large cap, broad market equities.
Can't compare with niche or special purpose mutual funds (such as small cap, country specific, etc.).
XDV is also a far better option than comparable dividend mutual funds. Dividend yields being what they are, the fees (usually between 1.5% - 2%) will eat up over half of your yield off the top.


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## fatcat (Nov 11, 2009)

i would invest in canadas standout areas: i would would buy 1-3 banks, power financial, su or imo and husky, a REIT (or real estate equity like killiam) and then i would buy DIA or the canadian equivalent ZDJ ... good luck


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## humble_pie (Jun 7, 2009)

usually when they come here & say i'm-building-an-investment-portf-for-my-wife/fiancee/mother/grandfather, i find myself wishing that the UBO (ultimate beneficial owner) would visit & speak to us in his or her own words.

DG it might even turn out that Dad is more content with his mutual fund advisor than you might suspect !

the 1st thing to think about as MG suggests is whether this gentleman could be content with any risk whatsoever, notwithstanding his bond-like pension. Here we might want to know why he is unhappy with his mutual funds. Is it perhaps because they went down recently ? this might not bode well for a DIY stock portfolio in the future.

DG perhaps you could invite your father to cmf forum. I'm not convinced that he is "not financially inclined." After all, he sired a talented son, so the DNA for financial savvy has to be there. It's possible that starting to manage his own investments would be an invigorating new growth experience.


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## MoneyGal (Apr 24, 2009)

Four Pillars said:


> Let me repeat the question:
> 
> I agree about the pension being a bond and all that, but does he understand that the equities might go down a lot at times? Can he reconcile the entire portfolio (including the pension component) and not worry about any single part of it?
> 
> If you pick a bunch of stocks, it's guaranteed that at least one will crater eventually - will that bother him (even if the others do well?).


IMO this is the essence of "risk capacity" vs. "risk tolerance." An outsider (me) could look at his situation and say, "rationally he can handle volatility because he has a government-backed, inflation-indexed DB pension which is going to provide [let's say] 70% of his current income -- he's in a great spot to take advantage of the higher expected return of equities [i.e., he has a high risk capacity]." However, if his emotional tolerance for variation is low, if his investing comfort is low, or if for any reason he would be "upset" at seeing normal (or even abnormal) fluctuations, then why bother taking investment risk (i.e., he has a low risk tolerance)?


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## Dopplegangerr (Sep 3, 2011)

I have sent my father interesting articles I have found on milliondollarjurney, especially those by Ed Rumple, there is one that talks about getting up to zero. When my father read that, he said he wish some one have had told him 30 years ago. I think he could just do a better job managing his money and save him self a lot of stress and be able to more of the things he wants to do if he took more of an active role. 

I know he has had his mutual funds threw manual life for 12 years, and has not been impressed with the results over that time. 

I will encourage him to post on cfm himself.

Btw humble, I tried to PM you a couple times in the last week and it says your inbox is full and can not receive msgs.


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## MoneyGal (Apr 24, 2009)

Hokay. But if he has a DB pension paying (let's say) $60K from (let's say) age 65, that's an asset worth nigh-on a million dollars right there. So...you could say he's "wealthy" already.


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## Sampson (Apr 3, 2009)

@ M_Gal,

In your experience, what do people usually end-up doing?

If one has high risk capacity, do most take it despite having low tolerance? and vice versa..
If one has low risk capacity, do most end up taking high risk?


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## Spidey (May 11, 2009)

I would also lean towards the ETFs for a portfolio for a parent of this amount. One thing you will run into are currency exchange fees when buying the US stocks unless you use Norbert's Gambit. However, that is a lot of trouble for this size portfolio. I would probably go with selections from Vanguard Canada and add in a little ZRE for some REIT income.


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## HaroldCrump (Jun 10, 2009)

Hm, I didn't think this was a retirement planning question for your dad.
Perhaps wrongly, I believed that the $30K (or, $80K?) in the RRSP is kinda discretionary investment money.
i.e. being down 40% on it would not impact his retirement date, lifestyle, etc.

If, however, this is part of core retirement planning then there are a variety of other questions involved.
Whether to put $30K in a mutual fund or an ETF is only a small consideration.


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## MoneyGal (Apr 24, 2009)

Think about it another way: who has "high risk capacity?" It is people that can tolerate investment fluctuations. And who is that? Well, there are many routes to being in that situation:

- you have bond-like human capital, so your holistic balance sheet already includes a lot of low-risk assets. 
- you have guaranteed lifetime income (you have a strong DB pension).
- you have wealth far in excess of your income needs (you have a high "wealth to needs" ratio). 

So: you could have or develop a high risk capacity because you've been frugal and saved a lot over time (more than you expect to spend once you convert your savings to a stream of income), because you have unmonetized human capital which is more bond-like than stock-like, or because you work(ed) in a job that produces a bond-like income in retirement. 

Alternately, who has a low risk capacity? People who are at the other end of the spectrum: low savings relative to desired income, stock-like human capital, no DB pension (those last two are strongly correlated). People often think, "oh, but because person X is young, they - by default - have a high risk capacity" or, conversely, "because person X is older, they by default have a low risk capacity [for their investable wealth]" -- but I don't think the young/old dimension makes much sense, because it's so easily affected by other factors (like the ones I listed). 

Risk tolerance, on the other hand, in my view is pretty much entirely emotional. 

People do and will disagree with me on all of these points, but this is pretty straightforward financial economics stuff.


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## MoneyGal (Apr 24, 2009)

p.s. If you like calculus, and want to learn more about lifecycle economics, here is a new resource for you: 

http://www.amazon.ca/Strategic-Financial-Planning-over-Lifecycle/dp/0521148030


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## humble_pie (Jun 7, 2009)

at the startup phase, there are so many questions to be asked & answered.

for instance, that 50k arriving soon in DG's pater familia's account. Does it have to go into an rrsp ? I inquire, because a possible role for the rrsp might be to accumulate savings to form an estate that your dad could eventually bequeath to his heirs.

but at that point the ugly question of income taxes on rrsp in the event of death pops up. All of an rrsp will become taxable as straight income in the year of death, i believe. The only exception will be a spousal rollover.

so if some of that 50k could be corralled instead into a tfsa now, this could save on eventual taxes far down the line. Not to speak of immediately sheltering all tfsa gains & incomes from taxes as the years tick by.


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## Dopplegangerr (Sep 3, 2011)

Well my fathers father passed away last year and we are in the middle of fixing up their farm to sell. He will be sharing the money from the sale with his two brothers. I believe he will have at least an additional 50k for investing in the next 1-2 months on top of the 30k he already has in his rrsp.

I really think I need him on here to answer some of these questions. He is back tomorrow


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## humble_pie (Jun 7, 2009)

wonderful ! i submit that your father's existing tfsa should be completely maxed out, or one should be set up & promptly funded to the maximum ($20k to date), as soon as distributions from the grandfather's estate commence.

i'm getting way ahead of things here, but since you have made clear the extra $$ will be coming from an inheritance, next i believe some thought should be given as to whether any of this inheritance ought to be contributed to an rrsp. Eventually, in your dad's rrif, all will be taxed at his highest bracket. 

you have mentioned that your dad has 30k in rrsp now, plus an ample pension to look forward to. In such circumstances, some could argue that it makes more financial sense to create a non-registered investment account & to keep income other than tax-favoured capital gains as low as possible. 

yet another approach with a non-registered account would be to keep taxable income mostly as eligible canadian dividends, in order to claim canadian dividend tax credits.

btw there are experts who would argue that i am quite wrong here. They would argue that every dollar is best saved in rrsp regardless of the circumstances.

one good thing about you situation is that you have prepared a long lead time, so these basic kinds of questions can be considered & answered without pressure.


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## MoneyGal (Apr 24, 2009)

Humble's advice is excellent. TFSA all the way.


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## HaroldCrump (Jun 10, 2009)

humble_pie said:


> yet another approach with a non-registered account would be to keep taxable income mostly as eligible canadian dividends, in order to claim canadian dividend tax credits.
> btw there are experts who would argue that i am quite wrong here. They would argue that every dollar is best saved in rrsp regardless of the circumstances.


An additional consideration for those retired (or soon to be so), is the dividend gross ups count against eligibility of OAS.
OTOH, RRSP has implications too, esp. after 71 but DG's dad doesn't seem to be anywhere near that age.
TFSA, of course, beats both those options hands down.

Now if only the feds. would hurry up and double the contribution limits.


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## OhGreatGuru (May 24, 2009)

humble_pie said:


> usually when they come here & say i'm-building-an-investment-portf-for-my-wife/fiancee/mother/grandfather, i find myself wishing that the UBO (ultimate beneficial owner) would visit & speak to us in his or her own words.
> 
> ...


You took the words right out of my mouth. We have no idea what UBO's investor profile is, or why he is "unhappy with" his mutual fund returns (aren't we all lately?). And yet people are dishing out advice on what ETFs the son should recommend to his Dad? 

To OP: if you don't feel competent to give your Dad advice without our help, then I suggest you don't do it.


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## Dopplegangerr (Sep 3, 2011)

OhGreatGuru said:


> To OP: if you don't feel competent to give your Dad advice without our help, then I suggest you don't do it.


Ouch


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## Young&Ambitious (Aug 11, 2010)

I don't think anyone feels confident in their decisions 100% of the time. There's nothing wrong with second opinions and collaboration. 

Personally I also like SI and SJR.B.TO.


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## OhGreatGuru (May 24, 2009)

I realize my last comment to OP sounds harsh. But OP is going out on a limb by trying to advise their parent, based on advice gathered from an Internet discussion forum. More to the point the OP is asking us to provide advice that OP will in turn use to decide what to advise parent, without tellling us nearly enough information about the parent. If OP can't decide, when (presumably) OP is fully conversant with the father's investor profile, how are we supposed to advise OP based on the skimpy info provided?


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## Belguy (May 24, 2010)

His first step should be to consult with a fee-only financial advisor (one that isn't a financial services or mutual fund salesperson) and for which you pay only for advice. He or she will help you with your asset allocation and perhaps suggest some investments and then he can take it from there.

Also, has anyone suggested that you have a look at the model portfolios at www.canadiancouchpotato.com?


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## Dopplegangerr (Sep 3, 2011)

OhGreatGuru said:


> I realize my last comment to OP sounds harsh. But OP is going out on a limb by trying to advise their parent, based on advice gathered from an Internet discussion forum. More to the point the OP is asking us to provide advice that OP will in turn use to decide what to advise parent, without tellling us nearly enough information about the parent. If OP can't decide, when (presumably) OP is fully conversant with the father's investor profile, how are we supposed to advise OP based on the skimpy info provided?


Your right I did think your comment previous was harsh and this one did little to soften it. Please instead of criticizing me for not providing enough information ask me some additional questions. I promise flaming me is not the best way to get threw to me.
I have not tried to help some one before with there finances, I do not know the information I should be providing. 

I really respect the opinion of some of the posters here on this forum. And I also want the best for my family. I encourage my family to self educate and do there own DD but I believe there is nothing wrong with cross checking my ideas with others in similar situations. Is that not what this forum was set up for?

My father has joined the forum himself and will be going threw this thread.

PS. Please if you would like to shorten my name I think a more appropriate one would be DG, not OP


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## Dopplegangerr (Sep 3, 2011)

Belguy said:


> Also, has anyone suggested that you have a look at the model portfolios at www.canadiancouchpotato.com?


Hey Belguy, I remember looking at this a while ago, is this the one you were getting upset about in another post that had given you poor results over the last ten years or was that something else.

The basis for the portfolio I had originally planned was based on the Derek Foster books. Building the dividend machine, I know that a couple of the stocks dont have huge dividends now but they look like such strong companies, and were able to further diversify things.


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## humble_pie (Jun 7, 2009)

hey DG are you really getting your father to join. Is that great or what. It's a landmark. You will be, i think, the very first cmf forum two-generation pair.

moderators, shall we have champagne on the house to toast the duo, if they appear.

(aside to DG) guru's concerns are most appropriate imho. The issue is not seeking a 2nd opinion on a proposed portfolio. The issue is uneasiness about participating in any kind of portfolio structuring based on hearsay alone about a mystery 3rd party.

i'm here to mention to you that guru's forum insights & suggestions are always wise. He & your dad will probably turn out to be good friends, so let's all be happy, hold no grudges & get ready to down the cold bubbly at the end of a long hot friday afternoon.


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## londoncalling (Sep 17, 2011)

Dopplegangerr said:


> PS. Please if you would like to shorten my name I think a more appropriate one would be DG, not OP


OP = original poster


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## Belguy (May 24, 2010)

Despite all that I have said, and through it all, I have remained fully invested in my 'Couch Potato' portfolio and am in it for the full roller coaster ride through all market conditions but you have to be able to sleep at night whichever plan you follow.

If I were younger, and had it to do all over again, I might instead have decided to invest in a portfolio of dividend paying stocks from solid companies who you feel will remain in business for the long term and who have a history of increasing those dividends over time.

The trick is to determine which dividend paying stocks to buy but a properly diversified portfolio should consist of somewhere between a dozen and twenty such stocks. 

In either case, after setting up your portfolio, trade mainly only for rebalancing purposes in order to minimize your trading fees.


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## Dopplegangerr (Sep 3, 2011)

londoncalling said:


> OP = original poster


Hahaha really? That's a new one for me


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## Dopplegangerr (Sep 3, 2011)

Belguy said:


> If I were younger, and had it to do all over again, I might instead have decided to invest in a portfolio of dividend paying stocks from solid companies who you feel will remain in business for the long term and who have a history of increasing those dividends over time.


How young would you have to be to do this?


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## Belguy (May 24, 2010)

There really is no age limitations on any methods of investing. I just feel that I don't want to change my approach at this moment in time because I am now out to find out if the 'Couch Potato' is a valid long term investment strategy or not. Also, keep in mind that you do receive dividends from your low-fee, broad-based ETF's as well and so it is not like you are foregoing dividends altogether with your 'Couch Potato' porfolio.

Consider, for example, the iShares Aristocrats Dividend Index ETF:

http://ca.ishares.com/product_info/fund/overview/CDZ.A.htm


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## Sampson (Apr 3, 2009)

Keep in mind there is no evidence that the 'dividend investing' approach will outperform a passive index investing strategy over long periods of time.

It is a very popular approach, and probably a very viable retirement strategy to generate income, but if you are young, then you want the greatest total return and the year to year dividends/cash is not as important.


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## humble_pie (Jun 7, 2009)

Belguy said:


> There really is no age limitations on any methods of investing.



Dormouse ! cried Alice. How lovable you are when you do finally make some sense !

oh my paws & whiskers, said the White Rabbit, looking at his pocket watch. It's well past noon. Is there still time for me to benefit from dividend investing.

be careful, said the Grin. Everybody looked up. There-are-some-who-say-that-dividend-rates-will-have-to-fall-towards-bond-interest-levels-instead-of-the-other-way-around-which-is-that-interest-rates-should-rise, continued the familiar teeth.

this is what i've been saying all along, said the Dormouse. We get a great big fat global depression & dividends are going to drop faster than pie can let the hot air out of the pumpz.


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## Sampson (Apr 3, 2009)

Faster? Sure your shoes can be deflated in an instant.

The day I bought some pump ups, they would go to the gutter.


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## OhGreatGuru (May 24, 2009)

Doppelganger:

OK, here's me trying to be more constructive. Your original post should have said something like (correct or amend as necessary):

_My Dad is mid-50's.

He has a secure job with Canada Post, *(is anyone’s job secure these days? - OGG) *and could retire in 10 years with 35 years service (ie. a DB pension worth 70% of best 5 years of salary)

Other than his pension his major investment is his primary residence. *(Any mortgage, or will it all be paid off before retirement? - OGG)* He has no consumer debt.

He has a small RRSP ~$30K, and could potentially add another $50K in the near future from an expected inheritance. *(Or did I misread your post, and $30K is only a portion of his RRSP - OGG?)*

Up until now his RRSP has been invested in the following mutul funds: .... ( or classes of funds if you don’t want to name names) He is unhappy with his funds *(Why? overall return, volatility; risk, MER, service ? - OGG)
*
His investment horizon for the RRSP is ~15 years before withdrawals. Even then, he will not be dependent on the income stream for his essential living costs. Consequently he can tolerate volatility in return for better long term returns. 

I have discussed various options with my Dad, and their relative risks. He believes he would be comfortable investing *(100%? - OGG) *in equities *(CDN, US, Int.? - OGG)*

I think my Dad should invest directly in a selection of common stocks representing brands or products that he knows and understands. *(We don’t care that it is your idea to do this - we need to know if Dad wants to do it, is he aware of the risks, and will he be comfortable with it. - OGG) *

“I am not interested in putting in tech stocks or complicated bio-med companies”. *Please explain further why not, as this contradicts your statement that he wants a diversified portfolio. Is it because of the “products he knows & understands” criterion, or because of risk issues? -OGG.*

May I have your opinions on the following portolio of stocks; or on the overall stategy: etc._


PS: Get your Dad to read and sign off on all the above assumptions if he can’t communicate with us directly. (Otherwise we can't tell if it is his investor profile or yours we are responding to)


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## kcowan (Jul 1, 2010)

He needs to invest in stuff he understands. Otherwise he is taking too much risk for him.

(If he buys the TSX ETF, does he understand that?)


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## Dopplegangerr (Sep 3, 2011)

Guru, thank you for explaining it this way to me. It much easier for me to understand. I have had my father sign up for this forum I and have sent him the link. He is very excited to come on and learn and see what others think so he can make an informed decision about managing his own finances, and when he has some free time I assume he will make a response him self on this thread.

When I originally posted this (with his full consent) I did not equate all the additional information that would be needed. At this point I feel more comfortable with him answering many of these questions him self. I underestimated the amount of information that would be needed, I think I got so caught up in stock picking that I did not consider a great many other things. 
I appreciate forum members taking the time to respond and I have taken your advice on board. 

Cheers


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## lonewolf (Jun 12, 2012)

When dividend & P E ratio (based on old accounting standards for calculating P E ratio) are @ or near the same level I have herd the market historians say is the time to buy. The 09 bottom was no where near that apparently. I remember seeing a long term chart of the dow showing P E ratio & dividend yield. I remember The dividend yield was very high @ the bottom in 1932 after the 89% decline in the dow. @ market lows the dividends were higher then they were @ the highs


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## Belguy (May 24, 2010)

Will this likely be the case when the Dow drops 89% this time when Europe starts to implode?:very_drunk::very_drunk::very_drunk::very_drunk:


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## boipinoi604 (Feb 13, 2012)

To OP, if you have the ability to pick out company stocks through security analysis, then by all means go for it. But if you, like the rest of us, have not a single clue about being a security analysis, then you should do your dad a favour by seeking professional help because 30k + an additional 50k is a lot of money to be goofing around with.

IMHO, if your father understands risks associated with equties and has long investment horizon, I suggest XWD etf.


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## Tucker (Jun 28, 2012)

Hey .. this is Tucker .. have been trying to get back to this site for a while ,but you know how things come up ,anyways my son ,doppleganger has given a quik
synopsis of whats going on and what I need help with , I will recap. 
I am a 55 yr old male,recently married, 22 years with the post office ,plan on working to get 30 yrs in but with a reduced pension ( some people have talked about bridgeing 
my CCP not to sure what thats all about either ) I have a 400 K house which I still owe about 125 K this is on a line of credit at 4% . I also have approx 26 K in mutual funds with manual life (orig 20,000 invested in 2001 ,is this a good return ?) not sure if I should move this ? And I do have approx 60 K coming in the 
next 4-5 months ,from an inheritance , should I put it against my loc ,invest ,not sure ...... thank you...Tucker


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## Brian Weatherdon CFP (Jan 18, 2011)

I offer a quick word of surprise that one would put so much personal detail into a public forum for anyone in the world to see. 

You might find it easy to chat with a certified financial planner near where you live -- an opening meeting at no-cost or a modest fee. 

Some privacy and professional support could be worth something for you.

Cheers!
BW


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## Dopplegangerr (Sep 3, 2011)

See I told you I would get my father to post 

I was a little off with the numbers, but dont hold it against me guys, my heart is in the right place.


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## Dopplegangerr (Sep 3, 2011)

Brian Weatherdon CFP said:


> I offer a quick word of surprise that one would put so much personal detail into a public forum for anyone in the world to see.
> 
> You might find it easy to chat with a certified financial planner near where you live -- an opening meeting at no-cost or a modest fee.
> 
> ...


Wow I find this comment amazing. Have you ever read threw the money diary's? the information those people put up is so far beyond what we have wrote is unbelievable. Why is there not comments on them like this?


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## HaroldCrump (Jun 10, 2009)

Tucker said:


> I also have approx 26 K in mutual funds with manual life (orig 20,000 invested in 2001 ,is this a good return ?


$20K invested at the start of 2001, current value of $26K yields an annual return of 2.3%
It does not _sound_ like a good return on face value, however, it depends on _what_ the mutual funds are invested in.
If it's all money market funds, then yeah, it's probably about right.
If it is equities or even bonds, then I'd say the returns are much lower for the duration of investment (10+ years) and the risks taken (3 serious market crashes, multiple negative economic events, etc.).

Can you specify what the mutual funds are invested in?
Names or symbols of mutual funds would be ideal.

And please ignore our friend Brian Weatherdon CFP - there is no compromise of privacy that I see here.
We have no idea who you are and who your son DG is.
There must be thousands of 55 yr. old guys called "Tucker".
But I am sure there is one and only one Dopplegangerr


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## Dopplegangerr (Sep 3, 2011)

Thank you Harold. 
Btw Tucker is a hockey player my Dad likes (Tucker is not my fathers name), so o my goodness there is another vital piece of information, my dad is Canadian and he likes hockey. That should narrow it down


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## humble_pie (Jun 7, 2009)

i think the 1st order of business would be to focus on whether the coming inheritance should be used to pay down the LOC. It will be difficult for our new member to guarantee himself an after-tax return from investment that will exceed 4%, year after year, even with the help of his son.

ottomh i am thinking of our experts on this issue, moneyGal & Frugal trader. Perhaps they would have opinions to share ?

if the entire inheritance were to be used to pay down the debt, the situation would be left with 2 smaller challenges:

1) could the capital presently invested in mutual funds be better deployed (i take it these are in an rrsp, but please confirm.)

2) can tucker arrange to save any funds out of his salary that could be utilized to start up a tax-free savings account.

there are messages upthread on why a tfsa could make sense for this gentleman. Please keep in mind that payments on the LOC would be substantially reduced if the inheritance is used to pay it down, therefore some income would be freed up.


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## humble_pie (Jun 7, 2009)

the bubbly we've been keeping on the ice to welcome père et fils ...
.











.


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## MoneyGal (Apr 24, 2009)

It's an absolute no-brainer to me that dad should pay down/off his LOC when his rate is 4%, his experience with investing (of some kind) has been poor (as in: given Harold's caveats, he's either achieved very poor returns on equity funds, or he hasn't been in equities and received OK returns -- but he's paying a higher rate on his debt than he's receiving on his investments, this does not make sense as a strategy), and his comfort level with creating a portfolio sounds low. 

He has a government-backed, inflation-indexed DB pension on the way. He doesn't "need" to take any investment risk and he has a relatively high interest rate on the debt he has now. He should probably retain some liquid funds in case of emergency (in a TFSA, likely in a HISA) but those should not be "invested" in any case -- but my vote is for the simplest plan: pay down the LOC. If there's excess income in the future, he can start to invest once his debt is cleared. 

Slightly OT: I'm never sure what people mean when they say they want to invest in companies they know and understand. Does that mean they know and understand the products? The balance sheet? The company financials? If I like McDonald's (or Caterpillar, or Lululemon), does that mean I "know and understand" the company? What does knowing and understanding mean - surely people aren't analyzing company balance sheets? (Forum company excluded)


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## Dopplegangerr (Sep 3, 2011)

Humble, Thank you for the Champagne, I needed a drink :boxing:

Money gal, thank you for weighing in. So that makes sence with the additional 60k coming in later in the year. What about the 26k he has in mutual funds in his RRSP?



MoneyGal said:


> Slightly OT: I'm never sure what people mean when they say they want to invest in companies they know and understand. Does that mean they know and understand the products? The balance sheet? The company financials? If I like McDonald's (or Caterpillar, or Lululemon), does that mean I "know and understand" the company? What does knowing and understanding mean - surely people aren't analyzing company balance sheets? (Forum company excluded)


When I say this I mean products. I get this from reading the Derek Foster books.


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## MoneyGal (Apr 24, 2009)

Leave the RRSP in place, because he's going to pay a high rate of tax if he collapses it now. I meant the new money coming in. $125K mortgage is still relatively high - he needs to get that down to a low level before he retires. 

This is probably the best of both worlds - pay down debt with the money he's going to get, and then restructure the RRSP investments he has now. 

Back to my OT: what's the rationale for putting stock of "products you like" in your portfolio? This doesn't make any sense to me.


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## lonewolf (Jun 12, 2012)

Money gal

Often when a person says to invest in what you understand. There is no understanding of that which they are talking about it is just a memorize & repeat catchy phrase.

It is often said that emotions are your enemy when investing I totally disagree & I will do a post @ some point on emotions & investing. To explain how to make emotions your friend even for investing. For mind & emotions to be in harmony. 

Money Gal, You were one of the only person to treat me with any respect when I was posting as Jet powder. I would have to look over the figures but in 08 I did @ least 10 trades that were well over 10 folders & most likely around 25 folders. ( bought differnt times but sold all @ once) If your interested I could send you infoe to take advantage of the next possible crash but the infoe can be shared with noone because I worked hard in the research.


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## kcowan (Jul 1, 2010)

MoneyGal said:


> Back to my OT: what's the rationale for putting stock of "products you like" in your portfolio? This doesn't make any sense to me.


I said he should put his money into things he understands. For him that sounds like paying off his LOC. But what the heck is his RRSP invested in? If he does not know, then I think that is bad. To say it is with Manulife is not an answer. I am not picking on tucker. But too many people plunk their money in funds and have no idea what they are investing in.

He would be better to buy KO or something he feels comfortable with. As a postal worker, maybe Fedex or DHL might be good choices for him? And NO I do not mean products that he likes. It is possible to like a product and not invest in it and vice versa. I like LULU but I don't buy the product. I like AAPL but only have an iPad along with several PCs and an Android phone. But I have neither MS nor Google stocks. So I think it is having an appreciation of the business that the company is in.

(And I think balance sheets are misleading. Even auditors have all kinds of footnotes and asterisks! As a CEO, I relied on my CFO to do them right.)


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## OhGreatGuru (May 24, 2009)

Tucker said:


> Hey .. this is Tucker .. ..
> I am a 55 yr old male,. ...... thank you...Tucker


Thanks for coming in with more complete information.

I agree with all the suggestions to use your inheritance to pay down debt, (short of any you need to add to an emergency fund, or some small indulgence to remind you of the dear departed.) This will be your best guaranteed rate of return by a long shot - don't forget you are paying that LOC with after-tax dollars. You are contributing to a good DB pension, so adding to your RRSP is not an urgent concern IMHO. And dabbling in the stock market is not a good idea when you get a guaranteed return by paying off loans.

A key to most successful retirement plans is to retire debt free. With no mortgage to pay; no CPP/pension contributions to make; no Union dues or EI to pay, you can afford to live on less.

_"I also have approx 26 K in mutual funds with manual life (orig 20,000 invested in 2001 ,is this a good return ?) not sure if I should move this ?"_ It should remain in an RRSP. Can't comment on return without knowing more about the particular funds, and when you invested. It may be worthwhile transferring to lower-cost index funds. Read up on the Couch Potato portfolios.

_"some people have talked about bridgeing my CCP not to sure what thats all about either"_. I'm not sure how much change has been made to CPC's pension plan since it became a Crown Corp. I would guess it is still pretty similar to the Public Service Superannuation Plan, but I could be wrong. First of all, find out if your employer offers a 3-day pre-retirement seminar similar to the one offered to Public Servants. It will explain your pension plan, how it is integrated with CPP, what happens if you take CPP early, and offer general planning advice for retirement.


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## MoneyGal (Apr 24, 2009)

kcowan said:


> I said he should put his money into things he understands.


K - it was Doppelganger (I don't have that spelling the same as the OP) who said dad should invest in "brands he loves." I don't think this is sufficient rationale for investing in a product. I also don't think that balance sheet analysis is the right approach -- I was wondering what the criteria are for these analyses -- i.e. what is it that one "likes" about a stock in order to purchase it -- the products, the balance sheet, what? :biggrin:


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## donald (Apr 18, 2011)

I think it is sector related moneygal.If your an investor and think or come to your own conculsions/research that say agriculture or farming is going to boom going foward you play your theme on the strongest market leaders of your ideas(ie-you would play deere for equipnment,maybe potash for furtilizer ect ect)weather your right or not is a different story.There is a ''greater chance" if your right that the market leaders will be in the best positions.(not to mention the ''protection" of maybe a strong dividend/history ect ect,and if your off on your idea the downside won't be as bad)

If you want exposure to real estate you might just go with riocan(highly visable knowen leader),instead of being a ''layman''(or having the skills to go through sheets) and trying to sort through all riets(small cap stocks are more for the advanced investor imo)If you think housing has bottomed in the states you hedge your bets on maybe tol brother's(if you think the high end sector is best positioned,if low priced homes you would maybe go with beazer homes)

Some say ko(coke) or pg(proctor and gamble) for example are forever stocks(you might be wrong with your entry,but as time goes on there is a high chance you will be ok @ the very least)Thats my understand of pick-what you know.


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## MoneyGal (Apr 24, 2009)

D. A sector-related approach makes more sense than saying "I am going to invest in the stocks of companies I know [i.e., producers of domestic household goods] and love [my favourite brands]." I'm not looking for stock-picking tips; I was commenting on this slogan-y thing I sometimes see here. :02.47-tranquillity:


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## donald (Apr 18, 2011)

My bad mg.I think peter lynch started the idea!lol or buffet-Buy a cross section of america.It's a staring point(looking at large popular brands,but not a sound plan)


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## humble_pie (Jun 7, 2009)

*(DG Is Not Going to Like this Message ) (Sorry)*

.

i for one think it's premature to talk about any kind of common stock purchase at this point in time.

first, it would be nice to hear from tucker what kind of mutual funds he has. The idea here is not to critique the funds, but for tucker to take note of what he owns. For example, are they stock funds ? balanced funds ? international funds ?

just recognizing the funds & reading about them is plenty homework for the rest of july. That would be a short-term goal.

a mid-term goal, say over the next few months, would be to work up what kind of equity exposure might be suitable for tucker. For example, will he be looking for safety of capital ? will he feel comfortable with a degree of risk & if so, what degree ? no matter what the answers turn out to be, there will always be economic & cost-saving investment candidates among low-cost index funds & etfs.

i would suggest that the progression be from mutual funds to low-cost index funds or etfs, with a possible additional leg onward into common stocks in 2013, but probably not before. Frankly, there is a great deal of homework to do first. Going from full stop to managing a quality common stock portfolio would take roughly a year, i do believe. I'm imagining that the subject would be willing to study and/or read a couple of hours a week.


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## HaroldCrump (Jun 10, 2009)

Regarding the "buy stocks in companies whose products you like" argument, it is fraught with survivor bias.
Examples are often given of Coca Cola, McDonalds, etc.

But there are other examples too.
You use GE bulbes in all your light fixtures, so should you have bought GE stock?
You have been banking with Bank of America for years, should you have bought BAC stock?
You drive a GM truck, should you have bought GM stock?


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## MoneyGal (Apr 24, 2009)

It's also potentially a source of concentration risk. "I work for P&G, I love P&G products, I have P&G options-I'm going to load up in my investment accounts with P&G stock!" (HELLO NORTEL)

Also: does this maxim mean that you should or do NOT invest in sectors/products/ventures you don't "love" or "understand" (however defined?) Goodness.


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## donald (Apr 18, 2011)

Ya but(if your buying individual stocks)your going to be reading the news everyday and then going to read the news on your specific company or companies(Your going to be aware of all the headwinds it's facing(under normal circumstances ie: not snc lavlin happenings like recently*can't see those things* but generally you know)

example-*cat* you know china is slowing/usa is still having a slow recovery-so your not surprised(near term)The gm or bac(09 great recession-bailouts are black swanish)anybody hold stocks now know's that earning season is going to be hard.Ya don't blindly buy/set/forget-otherwise how would you end up with individual stocks in the first place?(not including owning employer shares)


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## Tucker (Jun 28, 2012)

Thanks so much to everyone who responded , so much info to take in , alot of it making sense , alot confusing , being new to most of it .
Actually paying down my LOC , makes sense to me , try to get rid of all debt before I retire . ( my LOC is my only debt ) . I guess since I have 
a pension , I had a false sense of security ,( didnt feel an urgency to by rrsps ) but as retirement gets closer I am realizing this might not be enough , I dont really want to work 
till age 68 to get my 35 yrs in for full retirement . But I think if I pay down all my debt it would be ok .Also like the tfsa , All pretty much risk free , but I guess that's where my comfort zone is . Its like my mutual funds , came into some money 12 yrs ago , then gave it a friend of the family , and hoped I did the right thing ,just left it there ,
didnt have to think about it . Some were asking which funds they were ....
CI Harbor growth & income
Manualife monthly high income
Manualife dividend
Growth opporortunities
Canadian value
Fidelity Canadian Disciplined Equity
Fidelity True North
( all GIF encore series 2 )
Dont know if this helps , thanks again to all for all the info , much appreciated


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## kcowan (Jul 1, 2010)

Tucker, my initial reaction is that you have too many funds. You need to investigate what they are costing you. This will not be obvious but the information is available. Then look at consolidating some of them into ETFs that have the same objectives. That plus paying down the LOC ought to keep you busy for some time...


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## humble_pie (Jun 7, 2009)

maximum 2-3 e-funds would be a reasonable end goal.

size of this account suggests that etfs will likely be too expensive commission-wise.

also, for tucker, who has not looked at his mutual funds in 12 years, it's important to set out a reasonable learning time frame. It will take many months to learn why these funds are expensive & redundant; after that a plan has to be created & optimized that would replace them with a spartan 2-3 e-funds.

at this point in time i do not think tucker has yet addressed the notion of whether he wants any equity risk at all. That point will probably not come for several more weeks or months.


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## Spudd (Oct 11, 2011)

CI Harbor growth & income - This is a balanced fund, 2.43% MER
Manualife monthly high income - Another balanced fund, 2.18% MER
Manualife dividend - Canadian equity fund, 2.36% MER
Manulife Growth opporortunities - Canadian small/mid cap equity, 2.74% MER
Canadian value - I'm going to guess that this one is TD Canadian Value, if so then it is Canadian equity, 2.18% MER
Fidelity Canadian Disciplined Equity - Canadian equity, 2.49% MER
Fidelity True North - Canadian equity, 2.49% MER

So basically all your money is in either Canadian balanced or Canadian equity funds. The first thing you should do is figure out what you feel comfortable investing in. If you want to keep the mix as it is, then you will want a little bit of bonds and a lot of stocks. Easiest way to do this is to invest in the TD e-series bond index fund and TD e-series Canadian equity index fund. These have very low fees (less than 1%) and it will massively simplify your holdings. 

If you don't know, MER is the fee that the fund charges you for being invested with them. So if (for example) you made $100 in a year on a fund that has a 2% MER, you would get $98 added to your account instead of $100. Over the years because of compounding, this really adds up. Hopefully someone else can post the useful graph that exists somewhere on the internet to illustrate this.


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## Dopplegangerr (Sep 3, 2011)

The main reason I started this is because I was so very sure there were better options then having 7 different mutual funds for 26k. I like Humbles's advice about you learning about these funds and as much as can about other funds with lower fees or other options over the next couple months and making an informed decision about your own future.


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## humble_pie (Jun 7, 2009)

tucker seems to be a person who has worked hard & succeeded well. He has certainly raised one great kid, that we know. He deserves nothing less than an impeccable retirement. It really does take time & effort to plan for this, especially on the DIY model.

so far, so good. MoneyGal has alerted him to the wisdom of paying down the LOC. This was a lucky connection. Especially lucky that it happened so quickly & seamlessly. Tucker could not find better advice anywhere in canada, from st. john's to victoria bc.

& spudd has given tucker plenty to chew on for next few weeks.


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## Belguy (May 24, 2010)

While the G&M is still free, here is an interesting article about dividend investing:

http://www.theglobeandmail.com/glob...earned-as-a-dividend-investor/article4404570/

Also, growth--and index investing--are dead!!!

http://www.theglobeandmail.com/glob...owth-is-dead-long-live-stocks/article4404618/


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