A Comment -- General Comments From an Expert (A Commentary)

Markets. Investors need courage and patience right now. A problem that investors always face is that when an investment is going in their favour, they want to leap out because they are frightened it is going to go back down again. If things continue to unfold as they have been in the last several months, this is the time when you actually make money despite whatever pullbacks, which inevitably will happen.

Bonds. It always concerns him when people ask about bond ETFs, mutual funds, etc is that they always want to believe what the current market yield is but that is not what you are going to end up with. If you have a market yield on a bond ETF or fund at 4%, you really have to look at the yield to maturity. The problem is that outside of the RRSPs you are paying tax on the 4% yield but that yield is based on the bond that the portfolio manager has paid a premium price for. When it matures, you’re not getting a premium price for it but paying a tax. Summary: cheque out the yield to maturity!

Better to buy options with a strike price above or below the current price of the stock? Really depends on how much leverage you want. If you buy an “in the money” option where the option price is below the price of the stock, it is much less risky but you are not getting the leverage. If you want an “out of the money” option and the option price is higher than the stock price, you can get a lot more leverage. (Money is really in the Selling rather than the Buying.)|

Mutual funds or ETFs? A lot of this has to do with fees. If you are buying a Canadian broad-based equity fund, funds are roughly 2.3% to 2.6%. If you are buying a similar ETF, fees are somewhere between .07% and 1.5%. There is a huge difference in costs which has a very, very direct influence on your returns. Also, if you want to get out of a mutual fund, they have deferred sales charges which can go up to 5%.

Best REIT ETFs in US and Canada? The big one in Canada is iShares Cdn REIT (XRE-T) and another is BMO Equal Weight REITs Index (ZRE-T), of which 25% is RioCan. There is also Vanguard REIT (VNQ-N).

Markets. A little bit ahead of itself. Had a nice start for the year, however there are still a lot of issues in the world to work out, so he thinks there are going to be bumps along the way. Good news is that economies are expanding, although at a snails pace in some cases. Hopefully by the latter half of 2013 we should be in a situation where that picks up a little.

Markets. We are in a positive market and his feeling is that this is going to continue. There is a feel-good feeling in the market. What brings it to an end is higher interest rates and he doesn’t see this in the short term. It’s a stock pickers market. Buy on the dips and the market goes higher.

Markets. Most investors seem to have an optimistic bent and “Buy On the Dips” mentality right now. Marks have been very strong. Up 5% in January so volatility might be expected at some point. Thinks we are seeing all the signs of complacency setting in. On the NYSE, 83% of the companies are trading at least 8% above their 200 day moving average. Those are real warning signs of some kind of a correction. This can persist for a while and it confirms a very strong upward trend in equity prices, but investors should make sure to remember that we are in a very volatile world. 1) Markets are discounting a lot of good news out of Europe, 2) the fiscal Cliff is over, 3) Asia is bouncing back and 4) the debt resolution in the US is not going to be a big deal. So people are taking a very positive spin. His Balanced Portfolio is running about 20% cash right now.

Markets. Feels it is safe to get into the market now but the caveat is, corrections can happen any time. The value of the market is there. Earnings are at an all-time high.

Markets. On Friday a German Finance minister said the Euro crisis is not over. The markets are responding a little to that. Many markets, other than Canada, are a bit overbought. Maybe the markets are due for a little bit of correction. The world is probably not going to grumble but there could be some anxiety during the summer months. If someone is worried about a 5% correction over the next month or two, maybe they should take some money off the table. The amount varies by investor.

Educational Segment. Managing your own money better. Most people are interested in how to manage an income portfolio, e.g.:

Avg. Yield: 4.20%, Std.Dev. 7.25%.

Above would be equally weighted with dividend portfolio, e.g.:

Avg. Yield: 4.20%, Std.Dev. 7.25%.

The different bond ETFs have different volatilities. The reward people can get is defined by the risk they can take.

You can shift between bonds and equities without making a significant change in the yield. You have to re-balance your portfolio from time to time.

Markets. The sell off from the comments in the Euro-zone is a buying opportunity. It is interesting that we have had some of the same concerns over the last 18 months coming back into the market. There is good macroeconomic data out there. Would not be surprised to see the rest of the year do well. When you look at how much money is in fixed income out there, and with S&P trading at 15 times earnings it is not a concern long term as money will shift into equities when interest rates rise. Industrial sector looks very good, specifically in the US. Manufacturers have a lot of cost of labour as employment is not increasing.

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Markets. Thinks there will be pretty good growth this year, but outside of Canada. Things move in big cycles and Canada had a big cycle in the 1^st part of this century. There has already been a shift in the foreign markets. Last year his global funds were up 17% but the Canadian market was only up 3%. Commodity cycle is key for Canada and he doesn’t think we are going to repeat what was done in the last 10 years. Now the shift is to some real growth markets, probably driven by consumption, capital spending, technology innovations which he feels is outside of Canada.