INDEX

A

advisors. See financial advisors

age

at retirement, 5

age-equals-percentage formula170–74

AGF Canadian Large Cap Dividend Fund Classic, 94

Agnew, David,107

AIM funds, 90

Alimentation Couche-Tard, 99

Amvescap PLC, 90

anchored expectations, 41

annuity, 69,171–72

Assante,116

asset allocation, 40,164

Asset-Backed Commercial Paper (ABCP), 3, 17

B

Baldwin, Warren,173

Banerjee, Preet,119–21

Bank of Montreal, 95

banks

Canadian chartered, 24

as investments, 97, 98

Barclays iShares CDN LargeCap 60 Index ETF, 94

bear markets, 7, 86

benefits of, 17

historical,173

risk reduction,161–63 2008–2009, 12

Beauchamps, Ray and Sheila,101–2

Berkshire Hathaway Inc., 41–42

Berkshire Investments, 10

Bernstein, William, 96

Betty, Keith R., 60

Blackmont Capital Inc., 62

Blow, David, 10

blue-chip companies,174,178

BMO Nesbitt Burns,116

bonds

backing of, 72

basics of, 69–72

benefits of, 64

broker, 79

buying, 79

callable, 78–79

corporate, 77–79

coupons, 70

defaults, 70

discounted, 71

and equities, 72

ETF, 80

and ETFs, 73–76

funds, 79–80

government, 14, 19, 74, 76

guaranteed, 65, 67–68, 69

high yield,160

and inflation, 76

and interest rates, 71–72

bonds (continued )

junk, 77

liquidity of, 80

management expense ratio,80

maturity, 69

purpose, 72–73

real return, 78

returns, 14, 19, 72

risk, 70, 77

in RRIF, 75

in RRSP, 69, 75

and stock market, 72

strip, 73–76, 80, 169,170

in tax-free savings account, 75

taxation on, 75–76

brain response

and investment decisions,104

Bre-X, 10

broker

buying bonds, 79

Buffett, Warren, 13, 14, 41

bull markets, 86

historical,173 of 2003–2006, 8

Burns, Gregory,104

buy and hold theory, 13–14, 41

C

calls,162

Canada Deposit Insurance

Corporation (CIDC), 12,154,164

Canada/Quebec Pension Plan (C/QPP) and retirement, 28

Canadian Securities Institute,103,114

Canadian Utilities, 98

capital

preservation, 60–61, 68–69

capital gains, 59

China, 20

Chrysler,158

churning,123–28

CIBC Wood Gundy,116,154

Citibank, 18

commissions and fees

abuses of system,128

avoiding, 62

back end,85 –86

at brokerages,121–23

discharge penalty,154

effects of changing system,129–30

front end, 85–86

for high-volume producers,121–23

in investment industry, 50

management,152

mutual funds, 87–88

and mutual funds, 85–87

paid to advisors, 6, 7–8, 9

principal protected notes,152

structure of,129

tax implications,129

trailer, 86

trailer fees,103,124,126,152

compound interest,131

Constant Proportion Portfolio Insurance,154–55

corrections

stock market, 12

Costello, Brian,136

Cottier, Christopher, 62–65, 75

coupons, bonds, 70

crash of 2008–2009

aftermath, 36

and Canada, 23–26

effects of, 11–13, 26, 41–42

impact, 20–21, 38

inflation and,153, 167

and investment industry, 7

prediction of, 18

currency devaluation, 167

D

Damji, Salim, 10–11

day trading, 56–57

debt

in Canada, 24

in United States, 21, 22, 24

deferred sales charge

on mutual funds, 44, 45

defined-benefit pension plans, 2–5

defined-contribution pension plans

switch to, 3–4

deregulation, 38

derivatives, 55,161–63

devaluation, 167

discipline, 57–59

diversification, 40, 59, 96

dividends, 97,178

advantages, 59

and preferred shares, 61

Dominion Securities,125

Domtar, 3

E

economy

government role in, 32

equities. See also stocks

advantages,173–74

and bonds, 72

purpose, 72–73

ETFs. See exchange-traded funds

exchange-traded funds

actively managed, 94–96

advantages of,174–76

Bank of Montreal and, 95

bond funds, 80

cost, 94

as investments,177–78

liquidity, 95–96

management expense ratio, 94, 95

in portfolio, 97–100

and self-directed investing, 93–94

and strip bonds, 73–76

TD and, 95–96

types, 94

export levels, 33

F

Fama-French Three-Factor Model, 52, 57

fee-based services, 62

fees. See commissions and fees financial advisors. See also investment brokers

choosing,117–18

and commissions, 6, 7–8, 9

compared to do-it-yourself, 46–47

complaints about, 15–16, 43–45, 81–82,101–2,105–8,125–26,128–29,146–47,156–58

earnings, 45

fee structure,129

qualifications,131–32

role, 8

as salespeople,131

Financial Architects Inc.,106–8

“first retirement,” 27–29

foreign currency exchange, fraud,140

fraud

affinity,142–45

double dipping,141–42

foreign currency exchange,140

investment, 9–11,135–45

loans,141

methods,133

oil and gas producers,140

Ponzi schemes,139–40

precious metals,139

prevention,144–45

pump and dump,142

signals of,143–44

tax shelters,140–41

types,139–42

vulnerable targets,138–39

G

gains

crystallizing, 97

Garda Security,133–34

gems, fraud, 139

General Motors, 2,158,193

George Weston Ltd., 77

Godden, Allison, 81–82,174

gold, 99–100

governments

role in economy, 32

role in recession, 38

Great Depression, 26, 32, 41

Greenspan, Alan, 16, 17–18, 55

growth

and preservation of capital, 68–69

and risk, 39

and security, 25

guaranteed investment certificates (GICs)

laddered, 96,170

H

Hallett, Dan, 88

hedge funds, 54–56

Herjavec, Sarah, 30–31

Holoday, Michael,114,115

housing market, 23

I

Iceland, 20–21

index funds

and mutual funds, 89–90

India, 20

Inflation

and bonds, 76, 167

economic crisis (2008–2009),153, 167

effect on cash, 167

future, 25, 76

and investments, 78

in 1980s, 33

and price of gold, 99–100

and stock market, 168

interest rates

and bonds, 71–72

and inflation, 167

and stagflation, 168

and unemployment, 168

Intraligi, Peter,125

Invesco, 90, 91,124–25

investment brokers

commissions,121–23

complaints against, 43–45

Investment Dealers Association of Canada (IDA), 44,155

investment decisions

and brain response,104

investment expenses, 6. See also commissions and fees

investment firms

ombudsman in,105,106

investment industry

commissions and fees, 50 role of,148

Investment Industry Regulatory

Organization of Canada

(IIROC), 44–46,155

investment seminars,136–38

investments

asset allocation, 40

avoiding errors,163–65

cost of low-paying,163

diversification, 40

domestic, 25–26

in ETFs,177–78

and inflation, 78

leveraged,153,178

monthly statements,178

mutual funds, number of,177

protecting, 25

setting goals,177

strategies,177–78

investor behaviour,82–84

investors

expectations,114–15

responsibilities,108–9

J

Jean Coutu, 99

Jones, Earl, 11,115

K

Know-Your-Client form,107,109,110,146

Krembil, Robert, 90,124,125

L

Labatt, Arthur, 90,124

lending rates. See also interest rates

and bonds, 71–72

in recessions, 33

leveraging, 55

loans,159–60

lifecycle funds,160–61

Limited Trading Authorizations (LTAs),127

liquidity, 80

of exchange-traded funds, 95–96

loans

leveraged, 159–60

risk-free and fraud,141

Loblaw, 99

Logan, Gary,133–34

Long-Term Capital Management (LTCM), 55

longevity

Canadian population, 32

and retirement, 27

losses. See also fraud

causes, 9

offsetting, 34–37

protection from, 7

recovering, 67–68

M

Madoff, Bernie,114,115,134–35

management expense ratio (MER)

bond funds, 80

defined, 6

exchange-traded funds,94 , 95

of mutual funds, 45, 84–85, 89,163

real return bonds, 169

segregated mutual funds,159

Manulife,154

Manulife Mutual Funds, 95

Manulife Simplicity wrap accounts,95

Mark, Howard and Penny,146–47

Market Regulation Services Inc., 44

market timing,164

maturity date,162

minimum annual payout, 65–67

Morningstar Inc., 85

mortgages

sub-prime, 3, 23

mutual fund companies

complaints about,125–26,128–29

conflict of interest, 89

criticisms of,120–21

investing in, 89

management expense ratios, 89

managers’ investments in, 88

salespeople’s experience,103

statement of portfolio transactions, 88

Mutual Fund Dealers Association,108

mutual funds

bond, 79–80

costs, 84–85

criticism of, 64

deferred sales charge (DSC), 44, 45

expenses,87 –88

fees, 85–87

hedge funds and, 54–56

holdings of, 91–93

and index funds, 89–90

management expense ratios, 45, 84–85, 99,163

management of, 89–90

money market, 61

number of in portfolio,177

performance, 84, 87–88

segregated,159

selling or holding, 92–93

N

New York Stock Exchange, 33

Nortel, 30–31, 47, 48, 49,

103–14

Northern Telecom, 30–31

O

O’Brien, Leo Alexander, 126–27

oil and gas producers, fraud, 140

Ombudsman for Banking Services and Investment (OBSI), 102, 106, 107, 108, 147

Ontario Hydro, 72–73

Ontario Securities Commission, 10, 123–24

P

Pape, Gordon, 56

pension plans

defined benefit, 2–4

defined contribution, 3–4

losses in, 3

Nortel, 30

total value, 31–32

Ponzi, Charles, 140

Ponzi schemes, 139–40

portfolio. See also RRSP

diversification in, 96

exchange-traded funds in, 97–100

makeup of, 96, 97–100

protecting, 170

stock choices, 96–97

precious metals, fraud, 139

principal protected notes (PPNs), 149–55

cashing in, 153–54

and CIDC, 154

discharge penalty fee, 154

fees, 152

Pro-Financial Asset Management, 120

puts, 162

R

RBC Dominion Securities, 116

real return bonds, 78, 168–70

management expense ratio, 169

maturity dates, 169

Real Return Bonds Index Fund (Barclays), 169

recession

benefits of, 17

effects of, 36

export levels, 33

lending rates, 33

mid-2007, 32

past, 33

of 2008 (See crash of 2008–2009)

unemployment in, 33

Registered Retirement Income Fund. See RRIF

Registered Retirement Savings Plan. See RRSP

Research in Motion (RIM), 100

retirement

average age, 5

and Canada/Quebec Pension Plan, 28

first, 27–29

and longevity, 27

reassessing concept, 38–39

second, 28

stages, 27–29

target dates, 37

risk

assessment, 110–12

aversion to, 83

bonds, 77

and bonds, 70

controlling, 60

and growth, 39

reducing, 56, 57–61, 161–63

and returns, 160

and reward, 51–54, 56

tolerance for, 110–12

treatment by financial industry, 176–77

Risk Questionnaire, 109. See also Know-Your-Client form

Roache, Jim, 156–58

Roth, John, 31

Roubini, Nouriel, 18

RRIF

conversion from RRSP, 28, 62–64, 65

withdrawals, 65–67

withholding tax, 66–67

RRSP

bonds in, 69

contributions to, 39, 177

converting to RRIF, 28, 62–64, 65

importance of, 177

during individual’s 60s, 67

mix of assets in, 170– 76

number of accounts, 164

total value, 31–32

Russia, 21

S

savings accounts. See also tax-free savings accounts (TFSA)

high interest, 60

ScotiaMcLeod, 116

“Second Retirement,” 28

security

and growth, 25

segregated mutual funds, 159

shares. See also stocks

preferred, 61

shortselling, 55, 56

Smoot-Hawley Tariff Act, 32, 33

social safety net, 32

Soucie, Suzanne, 15–16

stagflation, 168

Stanhiser, Gary, 142, 145

Statman, Meir, 109

stock market

and bonds, 72

corrections, 12, 47

cycles, 40–41

historical returns, 172–73

and inflation, 168

timing, 103

stocks. See also exchange-traded funds; shares

banks, 97, 98

choosing, 96–97

defensive, 100

diversification, 96

dividends, 97

energy, 98

exchange-traded funds, 97–100

pipelines, 98

technology, 97, 113–14

telecommunication, 100

strike price, 162

Sun Life Assurance, 31

Suncor, 77

Swenson, David, 89

T

tax

on bonds, 75–76

shelters and fraud, 140–41

tax-free savings accounts (TFSA), 28, 39, 75

TD Waterhouse, 116

technology stocks, 97, 113–14

Thow, Ian, 10

3-D approach, 57–61

timing the market, 113, 164

Tindale, Jack, 43–45

Toronto Stock Exchange, 49

trailer fees, 86, 103, 124, 126, 152

treasury bills, 60

Trimark Investment Management Inc., 90–91, 124–26

Turner, Garth, 17, 136

U

unemployment

in 1929–1939 recession, 33

in 1990s recession, 33

unemployment (continued )

in 2009 recession, 33

and interest rates, 168

and stagflation, 168

unions

and defined-benefit pension plans, 3

United States

and 2008 recession, 21–23

bailout practices, 22

and Canadian economy, 23

debt, 21, 22

savings rate, 27

V

volatility, 14, 51

controlling, 57–61

W

Wellington West, 116

White, Jerry, 136

Wolf, Martin, 18

wrap accounts, 95

Y

yields

in recovering economy, 36