Concepts and Ideas
concerned about the return of my money than with the
return on my money".
The American humorist
Will Rogers (1879 - 1935) had a special way of making a point.
The point of this part
of Mathisen Financial, Inc.'s presentation to you is to provide you
with investment theories, concepts and ideas that will make your investments
grow faster than "the average".
Please use the theories, concepts and ideas here to make your investment
choices and decisions.
And, please, feel free to call, fax or e-mail me at any time with
your questions, suggestions, or ideas.
But, don't forget that we at Mathisen Financial, Inc. are as concerned
about the return of your money as we are about
the return on your money.
on MUTUAL FUNDS
Gordon Pape, the
well known Canadian author, broadcaster, and financial consultant, made
the following comments on MUTUAL FUNDS on CBC Radio on March
"One of the main benefits
of equity mutual funds is that they spread assets over a well-diversified
stock portfolio. But they can also be risky."
ways to look at Equity Fund Risk:
The Simple Rule is: The
broader the base of the fund, the less the risk.
The most broadly-based type
of fund is the international stock fund. Fund Managers can buy
and sell around the world, going where the action is, and avoiding
areas of potential trouble.
Next up the risk
scale are area funds: e.i.: Pacific Rim.
More risky: single
country funds, such as Japan. These funds are higher risk because,
if the stock market in that country falls, the value of the mutual
fund will decline as well.
Still Riskier: Emerging market
funds which invest in third world countries such as Mexico,
Thailand, Turkey, etc. They offer good profit potential, but their
markets are often volatile, so the risk is high.
Top of the Geographical Risk
Scale: Regional funds such as funds which invest only
in Alberta. If the economy of the region is hit - say,
by a fall in the price of oil in Alberta's case - the fund
is going to suffer.
2)TYPE OF FUND:
Funds rank lowest on the risk scale. They invest
mainly in preferred shares and high quality common stocks.
The main goals are a combination of safety and dividends. That
makes Dividend Income Funds especially good for conservative investors
who want to make use of the Dividend Tax Credit.
Next up the scale: Blue Chip
or Large Cap Funds. These funds Invest in shares of large corporations.
If the stock market falls, they'll obviously get hit, but often
not to the same extent as higher risk funds, such as those funds
that invest in small to medium sized companies.
Small Cap Funds invest in small
and medium sized companies. These funds are higher on the risk
scale. Small Cap Funds are very common in the U.S. When they're
in favor, as they are now, these funds can do very well. Several
of them gained 40 % last year. But in bad years, they can lose
almost as much.
Sector Funds are highest on the
risk scale. These invest in one area of the economy: Resource
Funds are most common in Canada. Some of these funds were up more
than 70 % last year, but you may have to endure years of low returns,
or even losses, to get one spectacular year of returns".
LOCATION AND SIZE OF
THE WORLD'S EOUITY MARKETS:
The U. S., Japan &
Hong Kong 75.00%
The Rest of the World,
including Europe 23.00%
REMEMBER: Gordon Pape's Simple Rule:
The broader the base of the Fund, the less the risk.
If you are invested
in the 2% of the World's Equity Markets called Canada, where are you
on Gordon Pape's Risk Scale, and what is the Growth Potential of your
investments (NOTE: on a global scale, if you are invested in
Canadian Mutual Funds, haven't you invested in a Regional, Small
Wouldn't it be preferable
to invest in 75% of the World's Equity Markets, with 75% of your investment
being guaranteed? By doing that, you would enjoy Gordon Pape's
lowest level on the risk scale, and enhance your investment return in
Your investment in
75% of the World's Equity Markets can be 100% RRSP eligible, and does
not encroach on the 18% foreign content rule.
For additional information,
and a no-cost, no-obligation consultation, contact Hans Mathisen .
Phone (306) 242-7042.
Fax: (306) 242-4314.
P.S.: You'll be glad that you did. After all, it's your hard-earned
money that's involved.
Try Market Timing !
If you believe you can outsmart the
stock market, this graph proves otherwise:
Successful Market Timing?
S&P Index (December 31, 1982 to December 31, 1998)
Over the past 16 years,
your average annual return on your investment could have been 14.51%
if you were invested in the Standard & Poor's 500 Index for the
This period consisted
of about 4,000 business days on the Exchange.
the 10 best days during that time, and your return falls to 11.18%.
the best 40 days ( only 1% of the 4,000 trading days), and your average
annual return goes down to 5.63%.
Canada comprises only
1.8% of the World's total capital markets.
Source: Newcastle Capital Management Corp. 31-Dec-98
Two of Gordon Papes rules
1. The broader the Base of the Fund, the Less
the Risk; and,
Funds are Highest on the Risk Scale
Based on the fact that Canada comprises only 1.8% of the world's total
capital markets, together with Gordon Pape's rules, investing
in Canada means investing in a High Risk Sector Fund.
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