Favourite Takeaways – Guide to What’s Good, Bad and Downright Awful in Canadian Investments Today – Part 2 of 2

Favourite Takeaways – Guide to What’s Good, Bad and Downright Awful in Canadian Investments Today – Part 2 of 2

Last week, I started to share my favourite takeaways from Rob Carrick’s Guide to What’s Good, Bad and Downright Awful in Canadian Investments Today.  I felt I had many things to say (and learn) from Rob’s book so I decided to break down my takeaways into two blogposts.  Without further delay, here is the best of the rest.

Chapter 4 – Bonds, GICs and Other Conservative Stuff

In this chapter, Carrick was quick to acknowledge that bonds haven’t been stellar investments since “oh, mid-2000, which is the last time you could have got a return of 6 per cent from a five-year Government of Canada bond.  Since then, interest rates have fallen and returns from bonds have been just pitiful.”  That doesn’t mean you shouldn’t own them.  Instead, Rob advises you need to hold them even if they are just “a mental-health thing” (and to protect you from stock market declines).  Regarding the returns as well, that isn’t entirely true.  It might be for traditional bonds, such as Canada Savings Bonds, GICs or bond mutual funds from big banks but not bond ETFs.  I’ve held XBB, not since-2000 mind you, but for the last 3 years.  XBB has returned 6.3% for the 3-years ending April 2012.

Chapter 5 – Do-It-Yourself Investing

“You wouldn’t perform surgery on yourself, would you?”  No, I wouldn’t Rob but is investing the same thing?  Actually, it can be made invasive and complicated but Carrick assures us it doesn’t have to be – the impossible can be very possible for many of us.  This chapter is largely about giving us the tools and resources to do just that – go it alone and become comfortable with it.  How do we start our journey?

First, Rob provides five reasons to use a discount broker.  Personally, I liked his fourth reason the best (convenience) but others are equally valid.  Carrick also promotes some discount brokers worthy of consideration.  He provides some great options and lists them in his Guide.  In this chapter, I especially liked his “five investments that go great in discount brokerage accounts” even though I don’t own all five investment products:

• Exchange-Traded Funds (ETFs) – totally agree, I own some like XIU, XBB and VWO.
• Blue-Chip Dividend Stocks – agree again, I own many Canadian companies and want to own more.
• Global Stocks – if you count the U.S. in this bucket, same as above.
• GICs – I don’t own any.
• Corporate Bonds – I don’t own any.

Chapter 6 – Investment Advisers

Rob writes “This chapter is devoted to help you find a true adviser and avoid mutual fund salespeople.”  Good on your Rob, I bet many Canadians need this chapter!   I could have used this chapter more than 10 years ago in my early 20s.  Here, Carrick provides readers with ten traits to look for, big red flags if you will, to know if you have a rotten adviser in your inner financial circle.  Here are a few red flags from Rob’s book:

• You never heard from them during the 2008-2009 market crash.
• You have no written financial plan.
• You’re always being urged to make some changes to your investments.
• You’re always being hyped about new products.

He offers more flags in his Guide.  Instead of painting all advisers with the same brush, Rob is excellent at providing folks with a clear roadmap to take if your adviser has made your poorer over the years.

Chapter 7 – Information, Please

Out of the entire book, this was probably my favourite chapter.  Most of us know, over long investment timelines (10 or 20 years I mean), stocks will generate more returns than bonds and bonds will generate more returns than cash.  You and I don’t need more books saying this stuff.  What you and I need are tools, resources and easy to digest information without letting tons of financial noise get in our way.

Thankfully, Carrick has packaged these resources to help us become more knowledgeable and make informed decisions.

First up, Rob suggests we all check out The Investor Education Fund Website.  After visiting this site a few times over the last couple of years myself, it’s easy to see why.  What to know the best thing about this site?  Rob writes: “not a penny of support comes from the investment industry, which means the information presented on the fund’s voluminous website is free of bias, tilt, spin or anything else designed to move readers towards one product versus another.”

Secondly, Carrick lists a bunch of websites to browse for information:  The Globe & Mail, Google Finance and MarketWatch are listed among others.

As a DIY investor, this book makes you reflect on your investing practices and philosophy.  For the newbie, the Guide to What’s Good, Bad and Downright Awful in Canadian Investments Today offers a great look at the investing space in Canada over the last few years.  Carrick’s work is clear, opinionated and his broad criticisms of Canada’s high-fee mutual fund industry are justified.  Overall, I would rate this book as excellent because there’s always something to learn or brush up on.  This Guide gives you an opportunity to do just that.

Have you read Rob Carrick’s Guide?   I look forward to your feedback.