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Monthly Archives: September 2009

Anthony Sabti

Mutual Fund Research: Manager Performance

When researching funds, an important factor to consider is the track record of the manager currently in charge.  Most fund summaries will include the fund’s return since the current manager started.  Looking at this return can be more telling than the fund’s long-term return.

Many funds change portfolio managers over the years.  We usually have to be a bit more cautious if a fund has a great long-term track record, but has recently changed managers.  Conversely, if a fund has had a poor record, but a manager with great long-term performance comes aboard, it may be more attractive. 

No fund manager delivers the best results each year, but there are some who constantly deliver above average results year after year.  There is a lot more peace of mind to be had knowing your money is in the hands of an experienced, successful mutual fund manager than one with a limited track record. 

Anthony Sabti

Mutual Fund Research: Sector Allocation

Did you know that in Canada alone, there are approximately 8000 mutual funds to choose from?  No firm or individual can work efficiently with that number of funds, and at You First / FundEX Invesments we ideally only utilize one percent of them.  Our job is to research, analyze and hand pick the funds that best meet the investment needs of our clients.  Going over all the research criteria would make for a fairly long article so we will focus on only one today:  sector allocation.

Sector allocation states which industries are most represented in the fund.  Fund summaries will include a breakdown of its sectors weightings as well as how this measures up against the benchmark index. A benchmark index could be the S&P/TSX Composite Index or the S & P 500 Index. One fund might have its largest concentration in health care stocks; another may have it in industrial goods stocks.  The Canadian economy is heavily reliant on banks and energy and certain Canadian equity funds will have more or less weightings in these industries.  Funds that had the largest concentrations in the financial sector last year dropped the most, but are doing much better this year.  Certain industries perform better in certain market cycles and therefore the fund allocation gives us an idea on how that fund will perform.  The technology sector is one that does well in high growth cycles, while consumer staples do better in recovery markets. 

In summary, it is important to understand which sectors are likely to out-perform and which are likely to under-perform and to choose funds accordingly. 

Odette Morin

What is with February 11, 2010? Pre-Olympic RRSP season

From February 12 to 28, 2010 Vancouver will be buzzing with people and excitement as our city welcomes the World for the 2010 Winter Olympics.  We are proud and enthusiastic about this event.  It sure will be a fun time to share our beautiful city and celebrate with athletes and visitors from around the Globe.

February is also traditionally, RRSP season.  This year, we will have no choice but to prepare ahead of time as it may be difficult for you to get to our office.  Though the streets around our office are indeed open part of the downtown area will be closed to vehicles and traffic is expected to be heavy.  Our office will remain open throughout the Olympics.

To make it easier for you, we ask, exceptionally this year, that you make early arrangements for your RRSP contribution.  We will be starting our pre-Olympic campaign soon and our staff will be inviting you to book an early time for a meeting this fall or in January.  You will also have the option of making your contribution by mail of course; though we would appreciate it by our pre-Olympic deadline of February 11, 2010 to make sure it gets processed on time no matter what happens to downtown office accessibility.

Be a Winner !  Mark your calendar now!  February 11 will be our own internal Pre-Olympic RRSP contribution deadline!!

Here is a link to a map outlining the downtown Vancouver Street restrictions during the Olympics.

Click here for map

Odette Morin

Another ponzi scheme

Earl Jones, Bernard Madoff and now, two Alberta-based investment advisors, Milowe Brost and Gary Sorenson, also up to no good. The two men allegedly perpetrated a Ponzi scheme in excess of $100 million which could very well be the largest scheme in Canadian history.

According to the RCMP, Brost and Sorenson created a business, Syndicated Gold Depository S.A. and then formed a agreement to loan money to Merendon Mining Corporation Ltd. for the promise of a high rate of return. And I mean, really high return.  They promised clients 35% to 40% annual returns along with tax advantages by placing their money in offshore shell companies such as: Asset Trax Inc., Quatro Communications Corp., Rapid Express Corporation, Strategic Metals Corp., and Merendon Mining (Nevada) Inc.

The RCMP estimates about 3,000 investors had their money tied up in the scheme, with little likelihood of getting their principal investment returned to them.

The RCMP arrested Brost, 55, in Chestermere, Alberta, a community close to Calgary. Sorenson, 66, is believed to be in Honduras, which does not have an extradition treaty with Canada.

They reportedly referred to themselves as “structurists” and condemned traditional investment vehicles. According to the Globe and Mail, members paid an initiation fee of about $1,700, and were then introduced to the investment scheme, where they would place money in an offshore investments”.

A Ponzi scheme works by convincing investors to invest in something that is of little to no value. The principal investment from new investors is used to pay out the promised returns to earlier investors. They usually get in trouble in market downturns when clients want their money back.

In an interview with the CBC, a couple who invested more than $300,000 with Borst and Sorensen commented that they seem so good and real.  Well, Earl Jones and Madoff too were nice guys. 

Your first line of defence against crooks like these is your common sense. When the promise is way too generous and the scheme complex and unusual, there is a good chance that it is simply too good to be true and you should stay away.

Maybe time to reread our previous blog post, How to protect yourself from the earl jones and bernie maddoff of the world.

How to protect yourself from the Earl Jones and Bernie Madoff of the world

Anthony Sabti

Latest U.S. Economic News:

Despite economic recovery seeming bleaker in the United States than many other parts of the world, there is still reason for optimism. 

U.S. federal reserve chairman Ben Bernanke announced today that the recession is very likely to be over.  Last week, U.S. stock prices had a great week as they rallied for 5 straight days.  The rise was fueled by reports of declining jobless claims and upbeat forecasts from large U.S. companies. The S&P index (which tracks the prices of the 500 largest U.S. companies) reached its highest level since October 6th, 2008.  Bernanke added that although the economy will feel weak for some time, most forecasters expect moderate growth for 2010.

The numbers below shows the Year to Date (as of Sept 15th) figures of the major North American indices (The first three are the major U.S. indices; the last is the major Canadian index):

Index YTD

Dow Jones +9.69%

S&P 500 +16.17%

NASDAQ +32.64%

TSX Composite +26.08%

Even though the U.S. still had the “recession” label attached to it, this does not mean that stock prices were still falling.  Remember that stock prices are forward-looking.  That is they are not an indication of a company’s present growth potential; they are an indication of what investors believe to be the company’s future growth potential.  This makes stock prices a “leading economic indicator” because they change before the economy does. 

Although there is not one accepted definition of recession, it is usually linked to GDP (Gross Domestic Product: basic measure of a country’s economic performance).  The GDP is updated every quarter and therefore reflects the past three months of economic data.  This makes the GDP a “lagging economic indicator” because it changes after the economy does. 

Some positive news is coming out of the U.S., just like the rest of the world. 

Anthony Sabti

Intro Blog

Hello to all investors,

My name is Anthony Sabti and I recently started as investment analyst for the amazing You First team.  This is the first of what will be a weekly blog contribution for the You First website.  The issues covered will include market commentary, industry news, and fund advice. If ever you would like any additional information on what was posted, please feel free to contact me.  I would also welcome any feedback you can provide on the posts.