# Interesting Investment Information



## Belguy (May 24, 2010)

According to today's Ottawa Citizen, the Canada Pension Plan's reserve fund was one of the best-performing funds in terms of investment returns during the 2005-2009 boom-and-bust period.

But, Canada's private pensions, like MOST in western countries, STILL HAVEN'T RECOUPED THEIR HUGE LOSSES DURING THE GLOBAL RECESSION, according to figures compiled by the Paris-based Organization for Economic Co-operation and Development.

The CPP, which had one of the highest exposures to equity investments in the OECD, was a top performer in the analysis of after-inflation returns for 13 selected OECD countries over the 2005-2009 period.

The average annual return was 3.8%!!!!!!!!!!!!!!!!!!

Conclusion: Now, I don't feel so bad about my own personal returns if some of the smartest money managers in the country could only achieve an annualized return of just 3.8% over a five year period.

They could have done as well investing in a ladder of GIC's!!!

Also, if you are invested in a balanced fund and it had returned say 3 percent in 10 years, and if you were charged a MER of 2% plus, that MER would have consumed MORE THAN HALF!!!! of your long term return.


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## the-royal-mail (Dec 11, 2009)

Interesting post, belguy. I'm not sure about GIC ladders these days though a few years ago they were certainly paying more than the 1-2% offered today, even for large sums. Nevertheless, my returns are comparable to this. My issue would seem to be that time hasn't been on my side due to the difficulty of saving for RRSP/investments. But in time as I have more money, 5% of say $100K ($5000 growth) will result in far greater monetary growth than 5% of $1K ($50 growth). So at least the CPP fund had a huge amount of money to receive growth from, even if the % was low.

2008 and 09 are interesting years. In my funds anyway, the 2009 gains actually seem to outstrip slightly the 2008 losses. 2010 has been far flatter thus far.


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## MoneyGal (Apr 24, 2009)

Belguy said:


> They could have done as well investing in a ladder of GIC's!!!


Not likely. The real geometric annualized gain on 3-month T-bills over the period January 2005 - end December 2009 is less than 2%. One year T-bills bumps it up to just under 3%. Total inflation over the period is 9%. Even adjusting upwards for GIC returns (versus T-bills) you are not exceeding 3.8% annualized during that period.


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## andrewf (Mar 1, 2010)

Not to mention that that 3.8% is on the lower end of the continuum of expected 5 year investment returns on the CPP.


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## Belguy (May 24, 2010)

According to the U.S. Federal Reserve Board, this recovery is going to be a 
s-l-o-w, protracted one with it likely to take 5 to 6 YEARS for the U.S. economy to return to normal.

Among other things, this means that interest rates are likely to stay relatively low for the next several years.

As to what it will mean for stock market returns, nobody knows for sure but it is not likely to be a period of robust gains.

http://www.cnbc.com/id/38246571

While we are in this rut, we all aren't getting any younger!!

U.S. unemployment rates are likely to remain high in the immediate years ahead.

How should one invest in an economic climate like this?


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## OhGreatGuru (May 24, 2009)

Come back in 5 or 10 years and tell us how GIC returns compare to the CPP ROI.


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## andrewf (Mar 1, 2010)

Belguy said:


> According to the U.S. Federal Reserve Board, this recovery is going to be a
> s-l-o-w, protracted one with it likely to take 5 to 6 YEARS for the U.S. economy to return to normal.
> 
> Among other things, this means that interest rates are likely to stay relatively low for the next several years.
> ...


On the other hand, as corporations roll over debt at lower coupon rates, this should help profitability.


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## james_57 (Jul 5, 2010)

Belguy said:


> How should one invest in an economic climate like this?


The young want to grow a pile of wealth, we older cats need income, and above all, security, because we don't want to lose the wealth, whatever it may be. I'm thinking asia is looking pretty good right now as a dual solution. Good returns, possibility of growth. South Korea possibly, India. Is anyone employing this strategy?


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## Belguy (May 24, 2010)

Emerging markets investments are often more volatile and that too can be harder on older investors than on those who will not be dependent on their investments for the longer term. 

That said, I feel that there is nothing wrong with having a small portion of one's portfolio in emerging markets equities--say five or ten percent.

The same goes for precious metals investments.

But then, that leaves one with the decision of how to divy up the rest of one's portfolio.

Dividend paying stocks seems to be the most popular choice judging from my research.


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## osc (Oct 17, 2009)

I think individual investors should learn to invest in any kind of market, not only in one going straight up. Learn about derivatives and how to hedge.


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## james_57 (Jul 5, 2010)

osc said:


> I think individual investors should learn to invest in any kind of market, not only in one going straight up. Learn about derivatives and how to hedge.


You're probably right. Are you suggesting open an options account on the Montreal exchange? I've never done any options trading whatsoever. Although, i read some books. How would a novice best get on that learning curve?


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## osc (Oct 17, 2009)

james_57 said:


> You're probably right. Are you suggesting open an options account on the Montreal exchange? I've never done any options trading whatsoever. Although, i read some books. How would a novice best get on that learning curve?


You can trade options with any online brokerage. I learned about options from books and free online information. I did read a lot before starting to understand how they work. 
For a beginner conservative investor, the best way to use options is for hedging long stock positions (buy protective long-term puts and/or write short-term covered calls). This reduces the volatility of the portfolio and potentially increases the returns. Also, you can sell puts to generate income before buying a stock (if you want to buy it, but currently it's too expensive).


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## houska (Feb 6, 2010)

osc said:


> You can trade options with any online brokerage. I learned about options from books and free online information. I did read a lot before starting to understand how they work.
> For a beginner conservative investor, the best way to use options is for hedging long stock positions (buy protective long-term puts and/or write short-term covered calls). This reduces the volatility of the portfolio and potentially increases the returns. Also, you can sell puts to generate income before buying a stock (if you want to buy it, but currently it's too expensive).


Options can indeed be a part of an intriguing individual investment strategy, but be very careful. There is no free lunch. A derivatives strategy that protects you - even partially - on the downside always either also reduces your upside or has you paying a risk transfer premium that will decrease your returns overall. A derivatives strategy that increases the expected returns always includes some additional downside risk - even though it may be different in flavour than before.

I have wondered about what is the risk return tradeoff between e.g. a 60/40 stocks bonds portfolio and a 80/20 one with the extra stock market risk hedged out by derivatives. However, I haven't seen anyone analyze it from an individual investor perspective. The handful of people I have talked to (not referring to you, osc - others I've had real discussions with) who were employing this or intending to employ this had done a lot of reading on the mechanics of derivatives, but were being pretty naive on the risk-return tradeoffs and implicit bets on "being smarter than the market" they were making.


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## MoneyMaker (Jun 1, 2009)

Belguy said:


> The average annual return was 3.8%!!!!!!!!!!!!!!!!!!
> 
> Conclusion: Now, I don't feel so bad about my own personal returns if some of the smartest money managers in the country could only achieve an annualized return of just 3.8% over a five year period.


You also have to realize that managing too much money is a burdensome task as it is harder to compound that much money and your investment options are rather limited...


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## Belguy (May 24, 2010)

It is true that managing a lot of money is definitely not one of my problems!!


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## Belguy (May 24, 2010)

Here is a link to information on the Vanguard Short-term Corporate Bond ETF:

http://quote.morningstar.com/etf/f.aspx?t=BSV

There might be worse places to invest at times like this when CNBC, among others, are reporting that "fear is returning to Wall Street" with the U.S. economy "ripe with uncertainty". One prediction today called for the Dow to reach 5000 in about 2 1/2 years. It is currently just over 10,000!!

The current bear market rally should peak in a month with market volatility rising in the second half of the year.

All of that said, nobody knows for certain.


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## peterboro31 (May 11, 2010)

http://www.ritholtz.com/blog/2010/07/corporate-cash-top-20-firms-635-billion/


How is the cash in your portfolio?


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## Belguy (May 24, 2010)

One reason that companies are sitting on wads of cash and are not spending is that they fear that the future is going to be worse than the present.

Today, the Consumer Confidence Index took it's largest hit since October 8, 2008 and we all remember what happened after that!!!

http://money.cnn.com/2010/06/29/news/economy/consumer_confidence/index.htm

Company CEO's know that we are facing a long slog ahead.

Today, the Dow dropped 2.52% in a single day. Heck, my GIC doesn't make much more than that in an entire year!!!


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## peterboro31 (May 11, 2010)

Quick Poll
Will The U.S. Economy Fall Into Another Recession?

Yes, there are just too many ominous economic signs out there lately.

58.51% 

No, the economy will start to pick up steam in the second half of 2010.

13.8% 

The technical definition of a recession doesn't matter, but our economy still needs big help.

27.69%

Source: Huffington Post


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## Belguy (May 24, 2010)

OK, so when do the boom times return? Will most of us still be alive when that day comes???


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## kcowan (Jul 1, 2010)

Belguy said:


> OK, so when do the boom times return? Will most of us still be alive when that day comes???


Yes assuming that most of us are age 55 then we have 25 years to recover.

Does anyone know what the age profile is here?


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## Belguy (May 24, 2010)

Some bad investment years shouldn't be a worry for someone in their 30's or 40's with a long time horizon but what about those who are 65 and older and who are already retired?

Projections of "several years" of zero to negative growth doesn't exactly fill one with much optimism when it comes to potential equity returns within our time horizons.


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## Belguy (May 24, 2010)

Investors rightly concerned about paying high fees for managed mutual funds don't have to shun these funds completely. There are many low fee, high performing managed funds as the linked article from the Globe and Mail illustrates. These funds have consistently beat the indexes over the long term even though their fees are among the lowest:

http://www.theglobeandmail.com/glob...ance-these-funds-deliver-both/article1643163/


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## Belguy (May 24, 2010)

Here are some stock picks from this week's MoneyTalk on BNN:

CP or CN
Brookfield Properties
Power Corporation
Encana
Cenovus Energy
Trans Canada Pipeline
Thompson Media

Any thoughts on any of these?


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## james_57 (Jul 5, 2010)

Belguy said:


> Here are some stock picks from this week's MoneyTalk on BNN:
> 
> Power Corporation


Historical side note: just looking at the history of Power Corp to refresh my sagging memory, and notice that it was formed by Nesbitt & Thomson*. In the mergers and acquisitions chain of events unfolding since 1912, this organization traces forward to the present day BMO Capital Markets. 

It was the BMO quant desk which issued the urgent warning and widely noticed GO TO CASH memo a few weeks ago.

*_Nesbitt Thomson and Company is a former Canadian stock brokerage firm founded in 1912 by Arthur J. Nesbitt and Peter A. T. Thomson. The company was headquartered on St. James Street in Montreal, Quebec and its success helped make the area the financial centre of Canada.

In 1987, Nesbitt Thomson was acquired by the Bank of Montreal with Brian J. Steck appointed its President and CEO. In 1994, the firm was merged with Burns Fry Ltd. to create the Nesbitt Burns Inc. entity now operating as BMO Capital Markets and BMO Nesbitt Burns, wholly-owned subsidiaries of the Bank of Montreal Financial Group._


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## Belguy (May 24, 2010)

Beware of too much taxable dividend income:

http://www.thestar.com/business/mon...oo-much-dividend-income-can-hurt-after-age-65


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## Belguy (May 24, 2010)

Beware of high management fees!!

From the Canadian Couch Potato website: "Investors are unaware of the real cost of their investments. If an investor with $100,000 received a bill in the mail EVERY MONTH for $208, he'd be more likely to question the value of a 2.5% MER!!!

If you are a fund investor, know what you are paying and how it will impact your long term results.


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## kcowan (Jul 1, 2010)

Belguy said:


> If you are a fund investor, know what you are paying and how it will impact your long term results.


It is sometimes very difficult to determine the true cost of a fund, including ETFs. Trading fees are usually buried in operating expenses. Front end loads and trailer fees are often not disclosed. Past performance shown is often before taking into account all their fees.


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## Belguy (May 24, 2010)

Watched Larry Berman on BNN today. His opinion is that there is 10 percent more downside risk before he starts to get excited about investing again. He sees more weakness for the next 3 months and possibly stretching into early 2011 before sentiment starts to turn. He suggests selling on any short-term rallies. Watch for the next leg down in August/September.

Larry Kantor, Head of Research at Barclay's Capital sees things a bit differently. He notes that the current selloff started in April but that the recovery is still intact. He sees a rebound over the next couple of months "but no raging bull". He sees the chance of a double dip to be "very remote". His target for the S&P 500 for the year is 1210 where it now stands around 1065. This will be a company led, rather than a consumer led, recovery with Industrials, Materials, and Technology leading the way, according to Kantor.

Two points of view for what they're worth.

You pays your money and you takes your chances.

Maybe Lotto Max is the better way to go!!


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## Belguy (May 24, 2010)

Received semi-annual report from the Morgan Stanley Emerging Markets Domestic Debt Fund, Inc. (EDD).

For the six months ended April 30, 2010, the Fund had total returns of 12.25%

It states that "emerging markets debt strongly outperformed developed market debt and that this trend is expected to continue given the more pronounced recovery and robust fundamentals in emerging economies. Flows to EM bonds has reached record levels in a search for higher-yielding assets."

"Meeting this record demand has been a record issuance which, since the start of this year, has reached $81 billion (USD) and was divided almost evenly between sovereign debt and corporate debt.

If interested in this fund, do your own due diligence.


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## Dr_V (Oct 27, 2009)

Belguy said:


> Some bad investment years shouldn't be a worry for someone in their 30's or 40's with a long time horizon but what about those who are 65 and older and who are already retired?


People who don't want to have to deal with the consequences of "bad investment years", should find a more suitable asset allocation. My portfolio is extremely heavily-weighted in stocks; I'm comfortable with this, but I'm probably also 30+ years younger than you. 30 years from now, I should hope that my portfolio will reflect my risk tolerance at that time, and not my risk tolerance from 2010.

Put differently: If sleeping well at night means that you need to hold fewer stocks, then for goodness sake, hold fewer stocks. 


K.


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## Belguy (May 24, 2010)

I sleep very well at night with no nightmares about the stock market.

But, that doesn't mean that I have been a happy investor over the past few years or all that optimistic about the foreseeable future.

Maybe some of you young whipper snappers out there will have better timing.

We grow too soon olde and too late schmart!!!


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## peterboro31 (May 11, 2010)

http://www.canadianbusiness.com/man...3B8PRWg4I&utm_content=mwnl41&utm_medium=email


Something more to ponder.


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## james_57 (Jul 5, 2010)

peterboro31 said:


> http://www.canadianbusiness.com/man...3B8PRWg4I&utm_content=mwnl41&utm_medium=email
> 
> 
> Something more to ponder.


_"Roughly 67% of Canadians in June believe the outlook for the economy is good, compared with 54% in the previous quarter, according to a survey conducted on behalf of RBC."_

lol.. translation: Roughly 67% of Canadians do not understand the Canadian economy.


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## peterboro31 (May 11, 2010)

“At the moment, we're just going through a bout of pessimism.”


Oh really????


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## Belguy (May 24, 2010)

Buy during periods of maximum pessimism and sell during periods of maximum euphoria.

Poor investors always get it exactly backwards.


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## andrewf (Mar 1, 2010)

^Easier said than done. I find a more systematic timing system helpful.


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## kcowan (Jul 1, 2010)

Yea one such technique is called regular rebalancing. It avoids trying to second-guess the market.


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## Belguy (May 24, 2010)

New lithium ETF:

http://www.indexuniverse.com/sections/news/7832-global-x-debuts-first-lithium-etf.html

Also, uranium and aluminum ETF's!

http://ca.news.finance.yahoo.com/s/...re-new-lithium-etf-powers-green-movement.html

Any takers?


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## andrewf (Mar 1, 2010)

Way too specific for my taste.


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## Belguy (May 24, 2010)

Fees, fees and more fees!!

How the financial services industry gets rich off of their clients' life savings and how those clients get robbed of their own money:

http://www.theglobeandmail.com/glob...returns-let-us-count-the-ways/article1646632/

I have often related this story. Some years back, after a particularly volatile period on the markets, I met with my advisor for my annual visit to go over my portfolio losses. He had set me up in a portfolio of high fee managed mutual funds with deferred sales charges. I was very uninformed back then and he took advantage of that fact. Anyway, after our meeting, in which he suggested making some switches to other high fee funds within related fund families, we went out into the parking lot. Then, he asked me how I liked his new Lexus!! How insensitive can you get. As soon after that as possible, I dumped him and opened a discount brokerage account, started reading and doing my own research, and never used an advisor again.

My first objective was to lower my fees as much as possible by gradually converting my managed mutual funds to index products, including ETF's, as soon as the deferred sales charges expired.

The only thing that I might have done differently if I were to start all over again is to set up a portfolio of about 20 good dividend paying stocks with a history of increasing those dividends over time.

In conclusion, you have to minimize your fees by keeping your trading activity to a minimum and by opening a discount brokerage account with a company who will charge you the lowest fee.

I pay $4.95 per trade and then only trade for portfolio rebalancing purposes for the most part.

Fees matter. Pay good attention to them. Know exactly what you are paying and the impact on the long term performance of your portfolio.

Most advisors spend precious little time explaining this to their clients.

Insist that they do!!


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## Belguy (May 24, 2010)

Summary of all Vanguard ETF returns:

https://personal.vanguard.com/us/funds/etf/all?reset=true&sort=name&sortorder=asc

Fees matter!! These are the lowest fee ETF's out there.


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## Belguy (May 24, 2010)

Summary from iShares.com:

http://us.ishares.com/product_info/fund/index.htm

If you want the chance for superior returns, you might have to look to emerging markets instead of developed country ETF's:

For example, here are some one year iShares, country specific, ETF returns:

Malaysia: 33.16%
Mexico: 32.87%
Singapore: 29.38%
South Korea: 31.29%
Sweden: 29.58%
Thailand: 42.18%
Turkey: 44.89% http://us.ishares.com/product_info/fund/overview/TUR.htm


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## osc (Oct 17, 2009)

Belguy said:


> Malaysia: 33.16%
> Mexico: 32.87%
> Singapore: 29.38%
> South Korea: 31.29%
> ...


Some of those countries are not emerging, but developed (South Korea, Sweden, Singapore).
S&P500 return over the last year is 15%. Emerging market returns may be better in some years but have a higher volatility. Similar results can probably be achieved with IWM (Russell 2000) in US. IWM return over the last year is 20%.
Surprisingly XIU.TO (TSX60) is the under-performer over the last year with only a 5% gain.


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## Belguy (May 24, 2010)

I have noticed that iShares in Canada has started selling Canadian versions of some of their U.S. ETF's. The differences are that many of these are hedged for which they charge a higher fee.

Anyway, I am confused about how the HST works in this regard. 

If I purchase the Canadian version, I know that I will pay the HST on the management fee.

However, what if I purchase the U.S. version on the NYSE? Do I avoid the HST or do iShares somehow charge it to me anyway?

How then does the HST work with U.S. purchased ETF's, including those from Vanguard?

Can I avoid paying the HST on the ETF management fees by purchasing the U.S. version?

I assume that I will pay it if I purchase the Canadian hedged version.


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## kcowan (Jul 1, 2010)

Belguy said:


> ...Can I avoid paying the HST on the ETF management fees by purchasing the U.S. version?
> 
> I assume that I will pay it if I purchase the Canadian hedged version.


I believe the answer is yes. You avoid paying HST on a US fund or ETF purchased directly in the US. And you pay the HST on the Canadian hedged version of a US fund. So your perceived benefit from hedging has to outweigh the extra MER with its tax.


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## CanadianCapitalist (Mar 31, 2009)

Belguy said:


> I have noticed that iShares in Canada has started selling Canadian versions of some of their U.S. ETF's. The differences are that many of these are hedged for which they charge a higher fee.
> 
> Anyway, I am confused about how the HST works in this regard.
> 
> ...


The short answer is yes. You pay HST on funds domiciled in Canada. There is no HST on US-listed Vanguard or iShares ETFs.

Also note that if you hold a Canadian ETF that in turn holds an US ETF, you will indirectly pay a 15% withholding tax on dividends. If you had held the US ETF instead, there won't be any withholding tax within a RRSP.


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## HaroldCrump (Jun 10, 2009)

CanadianCapitalist said:


> Also note that if you hold a Canadian ETF that in turn holds an US ETF, you will pay a 15% withholding tax on dividends. If you had held the US ETF instead, there won't be any withholding tax within a RRSP.


I could be wrong here CC, but isn't that true only if you are holding the stock directly rather than through an ETF/MF?
I believed (maybe wrongly) that a US based ETF or MF will always withold the taxes, regardless of the type of account it is held in Canada.
However, US stock owned directly inside an RRSP will not incur witholding taxes.


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## CanadianCapitalist (Mar 31, 2009)

HaroldCrump said:


> I could be wrong here CC, but isn't that true only if you are holding the stock directly rather than through an ETF/MF?
> I believed (maybe wrongly) that a US based ETF or MF will always withold the taxes, regardless of the type of account it is held in Canada.
> However, US stock owned directly inside an RRSP will not incur witholding taxes.


I clarified my post to say that the withholding tax is indirectly charged. i.e. the MF/ETF that holds US assets pays the withholding tax. This withholding tax is not recoverable when the MF/ETF is held within a RRSP.


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## HaroldCrump (Jun 10, 2009)

CanadianCapitalist said:


> I clarified my post to say that the withholding tax is indirectly charged. i.e. the MF/ETF that holds US assets pays the withholding tax. This withholding tax is not recoverable when the MF/ETF is held within a RRSP.


So, is the following correct:
Direct US stock in non reg = witholding tax but recoverable (potentially) via tax filing
US ETF in non reg = witholding tax but recoverable (potentially) via tax filing
Direct US stock in reg = no witholding
US ETF in reg = witholding tax but non recoverable (worst of both worlds)


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## CanadianCapitalist (Mar 31, 2009)

HaroldCrump said:


> So, is the following correct:
> Direct US stock in non reg = witholding tax but recoverable (potentially) via tax filing
> US ETF in non reg = witholding tax but recoverable (potentially) via tax filing
> Direct US stock in reg = no witholding
> US ETF in reg = witholding tax but non recoverable (worst of both worlds)


That's not entirely correct. Here is the corrected version:

Direct US stock in non reg = witholding tax but recoverable (potentially) via tax filing
US-listed ETF in non reg = witholding tax but recoverable (potentially) via tax filing
Canadian-listed ETF that holds US ETF (or US stocks) in non reg = withholding tax but recoverable (potentially) via tax filing.
Direct US stock in RSP = no witholding
US-listed ETF in RSP = no witholding
Canadian-listed ETF that holds US ETF (or US stocks) in RSP = withholding tax but not recoverable.
Direct US stock in TFSA = witholding tax not recoverable
US-listed ETF in TFSA = withholding tax not recoverable
Canadian-listed ETF that holds US ETF (or US stocks) in RSP = withholding tax not recoverable


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## Belguy (May 24, 2010)

With this in mind, and all things considered, which ETF's would one choose for a registered account--the Canadian hedged version holding the related U.S. ETF, or the U.S. version of that ETF?

Also, if I am not mistaken, I understand that a change is either coming, or already in place in the U.S. to either tax dividends at a higher tax rate or to do away with the preferential taxing of dividends altogether.

Has anyone heard of this?

Would this have any effect on Canadians investing in U.S. ETF's for their registered accounts and might this be a consideration for purchasing the Canadian versions holding the related U.S. ETF?

And then there is all of the speculation that the Canadian dollar is going to continue to rise in value against the U.S. dollar for some time to come.

All in all, I don't know whether to invest in U.S. ETF's, including the Vanguard offerings, or stick to buying the hedged Canadian iShares that hold the related U.S. iShares.

What would you be inclined to do?


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## HaroldCrump (Jun 10, 2009)

It's a particularly complex issue inside an RRSP, regardless of witholding tax or not.
Even with wash trades and Norbett's Gambit or Charles Roulette cool you still incur the currency conversion fees for USD distributions inside CAD RRSP accounts.
Only Questrade offers a true USD RRSP account.

In general, I do not like currency hedging.
In my mind, an unhedged investment reflects the true value of that security in terms of its country of origin.
Hedging essentially cancels any currency effects by taking up a short sell position in the currency pair.
At least that's my understand of how hedging is implemented.

You could simply buy the US stock or ETF directly and ride the USD up or down.
When you need to liquidate the investment for whatever reason, simply sell and convert to the then current conversion rate.

If you stop [mentally] converting the value of your foreign investment into CAD every time you look at your statement, you won't see the currency volatality.
Just think of it in terms of the host currency.

To answer your other question, from CC's explanation, it sounds like the best case scenario for holding US stocks/ETF is inside an RRSP.
Worst case is holding inside TFSA.

And if you choose to go with a CDN based ETF (hedged or not), non registered is your best bet.


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## CanadianCapitalist (Mar 31, 2009)

HaroldCrump said:


> It's a particularly complex issue inside an RRSP, regardless of witholding tax or not.
> Even with wash trades and Norbett's Gambit or Charles Roulette cool you still incur the currency conversion fees for USD distributions inside CAD RRSP accounts.
> Only Questrade offers a true USD RRSP account.
> 
> ...


I agree this is a complex issue. And yes, I'm not very happy with foreign exchange conversions within a RRSP account either. However, for index ETF investments, I'm not too fussed about this. The reason is that dividend yields run about 2 to 3 percent per year. If a 2 percent forex fee is charged, that implies an additional expense of 4 to 6 percent. Would I like to avoid this expense? You bet. But I'm not losing sleep over it. Pretty soon, all brokerages will have USD RRSP in one form or the other. 

I don't like currency hedging either. The short history of currency-hedged funds suggests that the tracking errors of these funds are horrendous. 

http://www.canadiancapitalist.com/category/investing/currency-hedging/


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## andrewf (Mar 1, 2010)

The only decent suggestions I've seen is from Larry Berman from his BNN show, that you switch between the US version and the CAD hedged version of ETFs to layer on a long or short (respectively) USD:CAD position. I'm not sure it makes sense with all the currency conversion fees. Perhaps if they had a CAD-denominated unhedged ETF to convert to. Otherwise, I doubt hedging is worth it. If the currency risk is too big for you, you probably shouldn't be investing so much in equities anyway.


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## HaroldCrump (Jun 10, 2009)

andrewf said:


> The only decent suggestions I've seen is from Larry Berman from his BNN show, that you switch between the US version and the CAD hedged version of ETFs to layer on a long or short (respectively) USD:CAD position.


So, then, is it possible to create your own hedge by using an opposite forex trade in the currency pair?
Let's say, we buy a US based ETF (holding US stocks) worth $100 USD.
Then, using a simple forex trading account, take a sell position in CADUSD for the same amount.
Keep that position open for as long as you hold the ETF/stock.
Essentially, we are balancing an asset with a corresponding liability in the same currency.
I'd assume simple forex trading accounts are free so there is no "cost" to this hedge.


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## peterboro31 (May 11, 2010)

http://www.buydonthold.com/2010/dashboard-composite-falls-to-1-last-night/


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## andrewf (Mar 1, 2010)

I think you have to change the size of the hedge to adjust for changes in the asset price in the home currency. The hedge only adjusts for currency fluctuations. I'd think the added 1% MER/tracking error for hedged ETFs is probably cheaper than the transactions to maintain the hedge manually for all but the largest accounts.


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## Sampson (Apr 3, 2009)

HaroldCrump said:


> Only Questrade offers a true USD RRSP account.


Are there untrue USD RRSP accounts?

RBC is now offering a USD RRSP account - I've got all my holdings switched over


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## Belguy (May 24, 2010)

U.S. indexes are up approximately 7 percent in July.

However, don't get too excited as the indexes have essentially gained nothing, zero, na-na for the first seven months of the year.

We're basically grinding sideways with much uncertainty ahead and deflation looking more and more possible.

With this in mind, are you fully invested or mainly sitting on the sidelines in cash?


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## kcowan (Jul 1, 2010)

Belguy said:


> ...With this in mind, are you fully invested or mainly sitting on the sidelines in cash?


Large cash position. Gradually reinvesting as opportunity presents itself. Still waiting for the second leg down. The cost of waiting appears to be zero so far.


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## Toronto.gal (Jan 8, 2010)

Belguy said:


> We're basically grinding sideways with much uncertainty ahead and deflation looking more and more possible.
> 
> With this in mind, are you fully invested or mainly sitting on the sidelines in cash?


Is anyone fully invested these days? Never have been, never will be as how could one take advantage of buying opportunities this way? I would say 70% invested.


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## Belguy (May 24, 2010)

Random thoughts at month end:

July was one of the best months in years for the stock markets.

28 of 30 Dow stocks were up for the month representing broad strength.

Many investors, who have cash on the sidelines, have underestimated the rebounding economy. Thus, the volume of trading has been low.

Many individual investors have been avoiding equities and choosing corporate bonds. This could be taken as a sign of fear in the marketplace. 

It might be a good time to be overweight on tech, energy, and materials.

Going forward, the markets could be range bound until after the fall U.S. elections.

Retail sales are relatively weak with many consumers sticking to their needs and putting off purchasing their wants. 

Next Friday's U.S. unemployment numbers are key. If they are worse than predicted, then this will tend to cancel out any good news that is out there and you can kiss any of your recent gains goodbye and forget about the rest of August says Cramer.


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## Belguy (May 24, 2010)

Does anyone have any opinions on the GreenHaven Continuous Commodity Index ETF (GCC) as mentioned in Bill Carrigan's column in today's Toronto Star?

http://www.greenhavenfunds.com/

According to Carrigan, "an emerging theme in support of introducing a commodity component into your portfolio is that today's managers and investors are having difficulty in seeking out non-correlated assets. In other words, equity exposure to Canada, the U.S., Europe and Asia translates into exposure to multiple assets that all do the same thing at the same time. Equity diversification today is impossible thanks to globalization. Commodities are one of the few asset classes that do not necessarily have a positive correlation to the global stock markets and the placement of commodities into the portfolio could reduce risk as measured by volatility".

Any thoughts?

Also in today's Star is a list of the best and worst five-year fund performers.

Many of the top performers are precious metals funds including the Morningstar 5-star rated RBC Global Precious Metals Fund with 1,003.6 $M assets and a five year return of 24.3% and a ten year return of 27.9%.

Many of the worst performers are international equity funds including the Morningstar 1-star rated TD International Equity Fund with 471.6 $M assets and a five year return of -9.5% and a ten year return of -9.1%. For the 'priviledge' of 'achieving' these returns, the fund charges a MER of 2.42%. Well, at least the manager is getting rich!!


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## peterboro31 (May 11, 2010)

Investing in futures contracts is highly speculative which could result in large fluctuations in the price of the Fund’s Shares; and an investor could lose all or substantially all of his/her investment. To learn more about the specific risks associated with an investment in the fund, please view the disclosure.


Disclaimer on GCC. Too high a risk for those in advanced years.


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## InfiniteSeries (Aug 1, 2010)

July failed on the 15th and ended below the close of that day. A great month for traders, but not for bag holders ('long term investors').

Volume was lowish, the ramp up was sold into, and smart money was only fine tuning positions taken earlier in the year.

Neither earnings nor news move markets. 

Best odds favor testing of the 950 zone on the S&P 500. Failure of that zone (price by time) will mean a true test of recent bottoms. 

Now that the supposed 'reforms' have been enacted, the next leg down should be interesting.


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## Belguy (May 24, 2010)

Which has generally been the superior long term investment approach--selling out of fear and then trying to time the best time to get back in the markets or just buying and holding and not trying to time the markets?

I have heard that one of the best reasons to utilize the services of a professional money manager is that he or she can save you from yourself by often preventing you from buying and selling at precisely the wrong times.

I am on this rollercoaster ride for the long term to experience both the ups and downs of the market. Thus, I will neither sell nor buy at the wrong times.

Picture a bell curve or, if you like, the bottom and top of the rollercoaster.

As we start out near the bottom, many investors say "never" when it comes to putting new money in the markets.

As we go up the curve, at about the half way mark, many investors start to think "maybe" and gain optimism about putting some money to work. However, they think that they will wait a little longer just to see what happens.

At the top of the curve, optimism reaches it's maximum, and many investors decide "I'm in!!".

Just after they decide to jump into the markets, things start to go downhill as they always do in an up and down market cycle.

Part way down the curve, the optimism starts to wain and these investors start to think "I was wrong!"

A little further down the curve, the worried investors start to feel that "I hate my broker".

And then, at or near the bottom, just as pessimism reaches it's maximum, these investors proclaim "I'm outa here!!"

And then, the whole process starts all over again.

This is why most investors underachieve the long term returns of their investments.

They are out at the wrong time and get back in at the wrong time.

Invest during periods of maximum fear and sell during periods of maximum optimism.

Many investors get it entirely backwards and then wonder why their portfolio has performed so poorly.


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## InfiniteSeries (Aug 1, 2010)

Many do get it wrong...and one may lump the so-called professionals in with the neophytes in that catagory.

Conditioned belief as to what a market is, vs. interrogation into what it really is. 

We never hit max fear, nor max optimism...we are only told that it is so via supposed gurus and indicators that we are conditioned to give weight to. Indicators that, owing to the nature of natural law, move up and down as they will. Just like the 'markets' they are purported to be attached to.


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## kcowan (Jul 1, 2010)

If you are a value investor, you only buy when the value triggers are met and you sell when the valuation exceeds your threshholds. This avoids the scenario that you describe. Also looking at things quarterly keeps the effort to a minimum.

Finally setting your asset allocation triggers at fixed percentages will keep the emotion out of your investing philosophy.

And if you DIY, then you avoid the external advice that can adversely impact your decisions.


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## Belguy (May 24, 2010)

Over the past six years, my portfolio of mainly ETF's has grown by 35.76% or 5.96% annualized including dividends.

Throughout this period, I have remained fully invested through all market conditions.

Whether I would have achieved better results by jumping in and out of the markets over this six year period will never be known. 

This has been one investor's experience with a diversified 'buy and hold' portfolio of ETF's.

Any thoughts?


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## Belguy (May 24, 2010)

The iShares Canadian LargeCap 60 ETF (XIU) may be cheap but that is no guarantee that it will outperform over the long term:

http://www.theglobeandmail.com/glob...ce-a-tale-of-two-time-periods/article1659759/


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## andrewf (Mar 1, 2010)

Why would you expect an index fund to outperform? The whole point is that it does not try to outperform.


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## InfiniteSeries (Aug 1, 2010)

Most of my thoughts are currently centered on why an entirely valid post has not made it past the supposed 'moderators' when said was entered hours ago?

But more to your question...are you satisfied with 5.96 annualized? Are your best interests served and are your goals met? If not, its time to revise your strategy.

Since you seem to favor etf's you can take a look here, http://www.robertwcolby.com


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## kcowan (Jul 1, 2010)

andrewf said:


> Why would you expect an index fund to outperform? The whole point is that it does not try to outperform.


Right! An ETF aims for average performance. Chasing performance by using ETFs is not a sane strategy.


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## Belguy (May 24, 2010)

From all of my research I have found that, over a one year period, several managed funds will beat the index. Over a two year period, fewer funds will succeed in that feat. Over three years, fewer still until over the longer terms, fewer and fewer professional managers will manage to beat the indexes.

And then, there is the fact that a manager with a successful track record will, sooner or later, either retire or be enticed to switch companies and suddenly a fund with an historically superior return will have a new manager without the same historical record of success. Then, what is a fund investor to do?

With index products, that is not an issue.

Anytime you find yourself chasing after hot returns, be it in individual investments, sectors, or professionally managed funds, it can, more often than not, end up being a mug's game.

Buy low!!


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## InfiniteSeries (Aug 1, 2010)

kcowan said:


> Right! An ETF aims for average performance. Chasing performance by using ETFs is not a sane strategy.


It is a sane strategy if the index is performing above a valid baseline, and you are long. Just as if the particular index is performing below a valid baseline, and you are short.

A key point: Is the ETF weighted or constructed properly? In other words, does it properly reflect the movement of the underlying? Many proxies do not.

A second point: Is the underlying going to move enough to give you a profit net net (ie after yearly devaluation of the fiat, energy cost, ceasars pence).


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## Belguy (May 24, 2010)

Information concerning ETF and Index options trading:

http://www.theglobeandmail.com/glob...n/etf-options-v-index-options/article1657192/


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## Belguy (May 24, 2010)

Tired of trying to beat the system? It may be time to relax on the couch!!

http://www.thestar.com/business/money911/article/845273--roseman-how-to-invest-like-a-couch-potato


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## Belguy (May 24, 2010)

One investor's use of index funds or ETF's for his core holdings:

http://www.theglobeandmail.com/glob...nds-key-to-investors-strategy/article1665108/


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## Belguy (May 24, 2010)

The top 15 Canadian equity funds over the past decade. Beware of management changes!!!

http://www.theglobeandmail.com/glob...xon-scores-as-a-top-performer/article1664539/


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