The fact that mutual fund managers have not been able to beat their underlying indexes is not new news. However, there is recent news stating these managers are still having difficulty beating the indexes. In an article from GlobeInvestor.com, the evidence has suggested that, "...Fewer than 20 per cent of large-capitalization Canadian institutional fund managers beat the index in the first quarter, according to a survey by Russell Investments Canada. That's down from 41 per cent in the fourth …
Margin Can Make you Rich…or Really Really Poor
What if you could double your returns on a 5% increase in stock price with no extra work? Sounds good right? That is the sales pitch you often hear from some stock brokers when they try to convince the average investor to buy stocks using margin - or borrowed money to purchase investments. When things go well, margin has the wonderful impact of multiplying your gains sometimes to the tune of doubling your returns. However, what brokerage houses don't tell you is that when things go bad they …
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Risk Capacity and Risk Tolerance Are Different Beasts
Just because you have a high level of tolerance for risk does not mean that you have the same level of capacity for risk. These are quite different concepts and I am suggesting that as investors we should understand the difference. In this post I will explain my interpretation of the two types of risk. Risk Tolerance Risk tolerance is the what most investors are used to thinking and reading about. It is that "can I sleep at night" principle that we often read about. If you buy a …
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Which Sectors Do Dividend ETFs Invest In?
If you are building a portfolio of individual securities, then the sectors you invest in should be part of your overall asset allocation plan. Recently I ran a post which energy companies are most predominant in a few dividend ETFs. I took this analysis one step further and tried to dissect what sectors dividend ETFs had represented. I do this to assist my own portfolio building process and asset allocation decisions - I want to make sure I have managed the risk appropriately in my portfolio …
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What Music Band Nine Inch Nails Taught Me About Investing
Trent Reznor of Nine Inch Nails (NIN) fame kicked some music label butt in this past couple of weeks by releasing a 36 track album on his own using only the web as a means of distribution. He racked up sales of a cool $1.6 million. I think this is a strong message for the record companies that things are changing and the middle-man is not required anymore. As usual, I looked at this from an individual investor perspective and came away with this learning: The more people involved with …
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