Tuesday 1 January 2013

Happy New Year!





The New Year often causes individuals and investors alike to take stock of their lives and   portfolios.   


We are not keen on New Year’s Resolutions, preferring a year- round approach to improving your portfolio and your life. But if you are the Resolution type, then we have some for you. Here goes:

(1) Maximize your tax-deferred accounts. In addition to your RRSP, don’t neglect your contributions to your tax-free savings account. The government has just increased the annual contribution limit for the TFSA, to $5,500 annually. Use it!

(2) Take a look at your investments. If you have a stock that is way down from where you bought it, and you are ‘hoping’ it will recover, then sell it. Investing is different than hoping. If you have a stock that you are not willing to buy more of— right now—then it is time to get rid of it. Even if you think it will at least stop declining this year, the lost opportunity elsewhere can be costly.

(3) Take a look at your mutual fund statements. If you own a mutual fund that has more than 100 different securities in it, then—guess what—you own an index fund, or at least one that will perform in line with the index. Too many positions dilutes active management, so you might as well sell that fund and buy an ETF instead. The difference in fees over the long term will be a huge boost to your investment returns.

(4) Stop trading your investments so much. Buy good companies, and keep them. Don’t try and ‘trade around’ positions. The costs of trading and the bid-ask spread as well as taxes (if applicable) just aren’t worth it. Besides, if you own a good company, why would you ever sell it?

We think it will be an OK year for investors. Maybe not great, but there will be still be lots of opportunities to make money. There are lots of bad headlines, of course, but that is nothing new. Dividends continue to rise, and the economy is slowly getting back together. 

Enjoy the Year!
Peter Hodson, editor

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