Plan­ning to re­tire early or well? Or maybe you just want some ex­tra money to spend now. In ei­ther case, chances are that you will need to stash some of your hard-earned salary into some in­vest­ments other than just your house. But mar­kets are skit­tish and

National Post (Latest Edition) - Financial Post Magazine - - CONTENTS -

Nine­teen things you need to know about in­vest­ing, plus David Rosen­berg’s big­gest les­son learned.

The quick­est way to grow your money — aside from an un­ex­pected wind­fall — is to in­vest what you al­ready have. It’s also the quick­est way to lose it all if you’re not care­ful. That’s one rea­son why there are so many rules and in­vest­ing or­a­cles, though only one of Omaha. Fol­low­ing the ups and downs of the mar­ket and the swings of mar­ket com­men­ta­tors can all be a bit ex­cit­ing, but it shouldn’t be. Much like the stan­dard 60/40 split be­tween stocks and bonds, which, by the way, doesn’t work for ev­ery­one all of the time, in­vest­ing should be a bit bor­ing.

“In­vest­ing should be like watch­ing paint dry or watch­ing grass grow,” says Martin Pel­letier, port­fo­lio manager at TriVest Wealth Coun­sel Ltd, a Cal­gary-based pri­vate client and in­sti­tu­tional in­vest­ment man­age­ment firm. If you want ex­cite­ment, go to Las Ve­gas.”

The hot stock, the hot IPO , the hot bought deal, all prob­a­bly best left alone, es­pe­cially if they take off with­out you. It’s bet­ter to sit on the side­lines than chase re­turns. “Mar­kets can re­main ir­ra­tional longer than you can re­main sol­vent,” Pel­letier says. “The four most danger­ous words in in­vest­ing are: This time it’s dif­fer­ent. Peo­ple of­ten praise in­vestors who have a good run or fire man­agers af­ter a bad run. They are, on av­er­age, wrong on both de­ci­sions.

Or, as Jonathan Ri­vard, a fi­nan­cial ad­vi­sor at Ed­ward Jones in Rich­mond Hill, Ont., puts it, “fol­low your goals, not the herd.” One ex­cep­tion to that rule, says Peter Hod­son, CEO of 5i Re­search Inc. in Toronto, is to buy a com­pany when it de­clares its first-ever div­i­dend. The com­pany will likely raise the div­i­dend in the fu­ture, but even if it doesn’t, it will still at­tract yield seek­ers, which should keep the stock buoy­ant. A div­i­dend will also help you stay in the stock when tem­po­rary macro-eco­nomic con­di­tions force the price down as pan­icked in­vestors flee for safer ground. As Pel­letier notes: “More money has been lost try­ing to an­tic­i­pate and pro­tect from cor­rec­tions than ac­tu­ally lost in them.”

But much of in­vest­ing is pretty pedan­tic and re­quires in­vestors to fo­cus on the de­tails of both the fun­da­men­tals and how they in­vest. For ex­am­ple, in­vestors should hold long-term in­vest­ments in ei­ther a dis­count bro­ker­age ac­count or a trans­ac­tion-based full-ser­vice ac­count so that they don’t in­cur fees while they wait, says David Kauf­man, pres­i­dent of West­court Cap­i­tal Corp., a Toronto-based port­fo­lio manager spe­cial­iz­ing in tra­di­tional and al­ter­na­tive as­set classes and in­vest­ment strate­gies. But in­vestors who trade fre­quently on their own re­search, es­pe­cially in small-cap com­pa­nies, should use dis­count ac­counts with fixed trad­ing com­mis­sions. “Full-ser­vice bro­kers still charge on a per-share ba­sis, mean­ing that it’s twice as ex­pen­sive to buy $10,000 of Ap­ple the day af­ter a split than it was to buy $10,000 of Ap­ple one day prior, which is crazy but true,” he says. “Fixed-fee dis­count ac­counts don’t care about the num­ber of shares, just the num­ber of trans­ac­tions.”

No mat­ter what kind of ad­vi­sor — if any — in­vestors de­cide to have, they should feel com­fort­able that they are get­ting the best ad­vice at the right price. That will be­come eas­ier when new reg­u­la­tions gov­ern­ing what ad­vi­sors must dis­close to their clients — in­clud­ing all fees and ac­tual re­turns — start go­ing into ef­fect in July.

The rules, called Client Re­la­tion­ship Model - 2 and man­dated by the Canadian Se­cu­ri­ties Ad­min­is­tra­tors, have been known for a while, which has given ad­vi­sors plenty of time to pre­pare their sys­tems ac­cord­ingly. That’s also given them a lot of time to churn up their client port­fo­lios in the weeks and months lead­ing up to the im­ple­men­ta­tion of CRM -2. Most ad­vi­sors, of course, won’t do any­thing un­to­ward, but in­vestors might want to be­ware any ex­ces­sive buy­ing and sell­ing in their ac­counts un­til sum­mer. Fore­warned is fore­armed.

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