What are dividend stocks and why should they should be a part of your portfolio?

Since the credit crisis of 2007, central banks around the world have pushed interest rates to historic lows in an attempt to stimulate economic growth. That has led investors to develop an appetite for dividend paying stocks.

So, what are dividend stocks and why should they should be a part of your portfolio?

To understand what dividend stocks are, you have to understand the difference between owning and loaning. If you buy a fixed-income investment, such as a bond or a GIC, you are making a loan to a borrower. The borrower typically agrees to repay you the capital and pay you interest over some set timeframe. However, the interest rate is typically fixed and you may find that over time inflation has eroded the value of your capital and income.

What are dividend stocks part ownership business

What are dividend stocks and why should they should be a part of your portfolio?

When you buy a stock, you are buying a part ownership in a business. Stocks represent a claim on the business’s assets and earnings. A dividend is a portion of a company’s earnings that is returned to shareholders. A well-managed business should grow over time. As earnings increase, management have the option of increasing the dividend.

Why do some businesses offer dividends while others don’t? Businesses that offer dividends are typically ones that have progressed beyond the high growth phase. When businesses no longer benefit sufficiently by reinvesting all of their profits, they usually choose to pay out a portion to their shareholders. Dividends make holding the stock more appealing to investors and can over time increase demand for the stock and therefore increase the stock’s price.

Consider the following example: In 2005 BCE Inc. (TSE:BCE) paid an annual dividend of $1.32. In 2015, the company paid its investors an annual dividend of $2.60. In the same period, BCE’s stock price has risen from around $25 to $58.

When monitoring their portfolios, investors should think about total returns. Total investment returns include both dividend income and capital gains. Some stocks pay no dividends, but may offer the potential of capital gains. On the other hand, high yielding dividend stocks may offer limited capital gains potential. A well-diversified portfolio should include both.

Traditionally, investors with modest portfolios have held dividend stocks inside mutual funds. Over the past decade, investors have moved billions of dollars out of mutual funds and into exchange traded funds. Why are ETFs popular? Low management fees are the main reason. ETF fees are in the 0.5% range, compared with 2% to 3% for many large Canadian mutual funds. However, ETFs can expose investors to unexpected risks. 

We believe that investors can benefit from our three-part value investing strategy. In our view, it is the best way to reduce risk and volatility and earn consistent returns over time. Our diligent, patient and opportunistic approach has served our clients well, through good and bad markets:

  • Appraise the intrinsic value of each company over a business cycle;
  • Seek long-term growth of capital by investing in companies that we perceive to be mispriced;
  • Utilize a margin of safety to promote return of capital…not just return on capital.

Why does our value investing approach work? The prices of well-established, high-quality stocks tend to rise over time as the companies create value for shareholders.

What is Successful Investing? Learn more here>>

Download Our Free Special Report – How to Hunt For Value Stocks. Michael Sprung will share with you 5 stocks set for long-term gains here>>

We believe that investment management is about managing risk, not chasing speculative returns. Like to learn more? Please contact us here>>

The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

CRM2 – Mutual Funds vs Portfolio Management

CRM2 – Mutual Funds vs Portfolio Management – Beginning in July of this year all Canadian investors now have to be advised of the costs (immediate or deferred) associated with the sale or purchase of all securities, including mutual funds, investment funds and ETFs.

This requirement is part of the new rules prescribed by the Canadian Securities Administrators (CSA). The rules are often referred to as CRM2, which stands for Client Relationship Model, Phase 2. What CRM2 means for mutual funds is that investors must now receive timely, easy-to-understand, detailed information about all of the costs and the performance of their funds. The following costs must be disclosed:

  • The charges investors will pay for the purchase, or a reasonable estimate if the actual amount is not known at the time of disclosure;
  • Details of any deferred charges that the client might be required to pay, including the fee schedule that will apply;
  • Any ongoing commissions that will be received by their advisor.

CRM2 is being phased in over three years. By July 2016, investors will receive statements showing, in dollar amounts, the costs associated with each of their products. A separate statement will tell investors how well their investments have performed in dollar terms and percentage terms over several time periods.

CRM2 Mutual Funds Portfolio Management

CRM2 – Mutual Funds vs Portfolio Management

In spite of a decade of lacklustre performance and high fees, many Canadians continue to hold their investment assets in mutual funds. Even the emergence of exchange traded funds (ETF’s) has failed to put much of a dent in the mutual fund industry. As of November 2013, mutual fund assets in Canada were $986 billion; Canadian investors held only $62 billion in ETF’s.

One of the reasons for the ‘stickiness’ of mutual funds may be that investors are not fully aware of how much they are paying in fees and how much their advisors are receiving in ongoing commissions for selling funds to them. CRM2 means that, in effect, investors will now receive an invoice detailing exactly what they are paying.

One of the key differences between advisors (brokers and financial planners who sell mutual funds) and portfolio managers is that portfolio managers have always disclosed all costs to their clients by directly invoicing them for their services. We also report investment performance—something advisors won’t have to do until 2016.

Before describing how portfolio managers work with their clients, let’s take a quick look at how mutual funds function. A mutual fund is an investment vehicle that is made up of funds collected from many investors. The manager invests those funds in securities such as stocks, bonds, money market instruments and other similar assets. Individual investors own units in the funds in proportion to the amount they have invested.

While the first mutual funds were founded in the 1930’s, they grew in popularity beginning in the 1960’s. In an era of high trading commissions, their main benefits were that they gave small investors access to professional management and diversification at lower cost. With the advent of discount brokerage in the 1980’s and ETF’s in the past 10 years, mutual funds are no longer a low cost option With many large Canadian mutual funds still charging fees in the 2% to 3% range, they are now an expensive way to invest.

Why have many mutual funds performed poorly? High fees are certainly one reason. Another is that mutual funds tend to be over-diversified. Larger funds have so many assets (i.e. so much cash to invest) that they have to hold hundreds of stocks. This can make it difficult for funds to outperform market indices.

Despite this difficulty, brokers and mutual fund managers feel that clients expect them to out-perform the market. To do that they are forced to take on more risk. However, if a fund out-performs in a rising market, it will likely under-perform in a declining market. That is exactly what many Canadian investors experienced in 2008: while the TSX Composite Index declined by just over 30%, many supposedly ‘conservative’ large-cap equity funds declined by 40% or more.

Given the poor performance of many large Canadian mutual funds, why do so many investors continue hold them? The reality is that mutual funds, like life insurance, are sold not bought. Brokers like to sell mutual funds to their client because they are paid commissions at the time of the initial sale and ongoing trailer fees that in the past were largely invisible to their clients.

It is also worth noting that there is growing evidence suggesting that the sort of people most likely to go into the lucrative financial service sales roles are precisely those least suited to judging risk. Read more here>>

CRM2 – Mutual Funds vs Portfolio Management – What’s the difference between a portfolio manager and a broker?

It is a source of pride for us that we are discretionary investment managers, not brokers. We are independent of any bank or broker and our only source of revenue comes directly from our clients. We do not receive any kind of commissions or trailer fees. Sprung Investment Management is committed to meeting a fiduciary duty. A fiduciary duty or best interest standard (already the norm for accountants, lawyers and some other professionals) is a legal requirement that an adviser must put the client’s interests first. That includes avoiding all conflicts of interest and making the best recommendations for the client even if it means lower compensation.

Canadian securities regulators are reviewing the potential benefits of introducing a fiduciary standard for brokers. Their industry body, the Investment Industry Association of Canada (IIAC) is fighting against this proposal. Learn more here>>

At Sprung, our investment management approach is based on the value investing principles developed by Ben Graham. Graham explained that “the essence of investment management is the management of risks, not the management of returns.” Learn more here>> The management of risk begins when a new client joins us. Clients meet directly with Michael Sprung and other members of our team. We take the time to get to know our clients in order to understand their investment objectives and risk tolerance.

Based on that understanding, we begin to build a portfolio that includes high quality dividend-paying stocks and Canadian government bonds. Whereas mutual funds often hold hundreds of stocks, our client portfolios typically hold 20 to 25. We believe this is a sweet spot for diversification. If you hold more, gains in any single stock will hardly affect the total value of your portfolio. If you hold fewer, losses in any stock can have an adverse effect on your portfolio.

In summary, the benefits of portfolio management include:

  • A personal relationship with the person who is actually making investment decisions on your behalf;
  • Holding a well-diversified portfolio that properly reflects your risk tolerance and investment objectives;
  • Avoiding the conflicts of interest inherent in the broker/fund manager model;
  • Transparency—no hidden fees or commissions;
  • Lower cost.

Download Our Free Special Report – How to Hunt For Value Stocks. Michael Sprung will explain our approach to identifying value stocks and share with you 5 stocks set for long-term gains.

Is Your Stock Broker Acting in Your Best Interest? Read more here>>

Exchange Traded Funds Expose Investors to Unexpected Risks. Read more here>>

Investment Management – Risk vs. Return. Read more here>>

We believe that investment management is about managing risk, not chasing speculative returns. Like to learn more? Please contact us here>>

The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

ETF – So, Just What is “Smart Beta”?

ETF – Smart Beta – They seem to promise what all investors are seeking: higher returns and lower risk. That should prompt skepticism.

The financial engineers of Bay and Wall Streets love coming up with new jargon. Typically these terms have more to do with marketing and selling new products than with sound investment principles. The latest one to be bandied about by the ETF industry is “Smart Beta” So, just what is “Smart Beta”?

ETF Smart Beta

ETF – So, Just What is “Smart Beta”?

Beta is a measure of the volatility, or systematic risk of a security or a portfolio in comparison to the market as a whole. The term “Smart Beta” is now being appended to crop of new exchange traded funds (ETF’s). They seem to promise what all investors are seeking: higher returns and lower risk. That should prompt scepticism. Before exploring what the term smart beta actually means, let’s recall what ETF’s are.

ETF’s are investment funds that trade on stock exchanges, much like stocks. As with mutual funds, ETF’s holds assets such as stocks, commodities, or bonds.  Many ETF’s track an index, such as the S&P/TSX Composite here in Canada or the S&P 500 in the US. Others track market sub-sectors, such as the S&P/TSX Capped Energy index.

Why are ETF’s so popular? Low management fees are likely the main reason. ETF fees are in the 0.5% range, compared with 2% to 3% for many large Canadian mutual funds. The pitch from the ETF industry goes something like this: your mutual fund isn’t out-performing the market, so why are you paying high management fees? Why not just buy the index? Your performance will match the index and you will pay much lower fees.

Many ETF’s are ‘capitalization-weighted’, meaning that stocks in the funds are weighted in proportion to their market capitalization. For example, in a fund that tracks the S&P/TSX Composite Index, Royal Bank, with a market capitalization of $105.66B, will form a higher proportion of the fund than Westjet, with a market capitalization of $2.97B.

In smart beta funds, the component weightings are based on other criteria, such as valuations, dividends, momentum or volatility. By a curious coincidence these are the same sort of criteria that active managers use to look for stocks. Of course, active managers use these criteria simply as a screen: stocks that meet a given criteria are then subject to thorough analysis prior to being selected. In a smart beta fund all stocks that meet the criteria are included in the fund.

The ETF industry has said that active management can’t beat the index, so investors should just hold index ETF’s. Now they are saying, that they are smarter than traditional managers and that their smart beta products offer better than market returns at low cost. Sound too good to be true, doesn’t it?

Download Our Free Special Report – How to Hunt For Value Stocks. Michael Sprung will share with you 5 stocks set for long-term gains.

The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

 

    Is Your Stock Broker Acting in Your Best Interest?

    The OSC is considering imposing a ‘best interest’ duty on stock brokers. Their industry body is resisting.

    OSC considers imposing best interest duty on stock brokers. Their industry body is resisting.

    Is Your Stock Broker Acting in Your Best Interest?

    How do stock brokers choose investments for their clients? Most investors assume that stock brokers (who call themselves investment advisors,) assess their client’s risk tolerance and investment objectives and select investments that best match them. Indeed, stock brokers are legally required to select investments that are ‘suitable’ for their clients. Unfortunately, ‘suitable’ is a very broad term–learn more here>>

    Have a look at your investment account statements. Ask yourself the following question: how did my broker choose the investments that I currently hold?

    Mutual Funds

    There are over 5,000 mutual funds are available in Canada. They’re classified into more than 30 categories: bond funds, equity funds, sector funds, specialty funds, regional funds, diversified funds, balanced funds, index funds, etc. Stock brokers like mutual funds because they are paid sales commissions and ongoing trailer fees that are invisible to their clients. Did your broker choose a fund that meets your risk tolerance and investment objectives, or the one that pays him the most? How many funds are enough? Learn more about why mutual funds are still popular despite high fees and poor performance here>>

    Stocks

    There are thousands of stocks available on Canadian, US and international equity markets. One of the pitches that stock brokers make to prospective clients is, “as a client you will have access to our analysts’ propriety research.”  Brokerage businesses earn large fees by raising capital for publicly traded companies (known as IPO’s or initial public offerings,) and from mergers and acquisitions advice, (M&A’s). Studies show that the vast majority of analyst reports are buy recommendations, rather than hold or sell recommendations.

    Exchange Traded Funds

    Why have Exchange Traded Funds (ETFs) become so popular? Low cost diversification and low management fees are the main benefits touted by the industry. ETF fees are in the 0.5% range, compared with 2% to 3% for many large Canadian mutual funds. However, in many cases, investors are switching to ETF’s without fully understanding what they are buying. You can read more about the risks associated with ETFs here>>

    While ETF’s may offer low fees, stock brokers often charge clients a management fee to select funds on their behalf.  Holding a large number of ETFs can lead to over-diversified and potentially inappropriate portfolio diversification in relation to clients’ risk tolerance.

    Alternative Asset Classes

    Over the past few years, there has been growing interest in ‘alternative assets’ such as hedge funds and private equity funds. These funds often promise higher returns than public equity markets and paradoxically, lower risk. Not surprisingly, many have failed to deliver either.

    Hedge and Private Equity fund managers typically charge clients based on a ‘2 and 20’ fee structure: an annual management fee of 2% of assets, plus 20% of profits above a pre-set threshold. This means managers have a big incentive to take on more risk. They also share those fees with stock brokers who sell their funds.

    How can you protect yourself from the many conflicts of interest inherent in the brokerage business?

    In each of these cases, there is a potential conflict of interest between the clients’ best interest and stock brokers’ incentives to earn higher fees. The OSC is reviewing the potential benefits of imposing a fiduciary, or ‘best interest’ duty on stock brokers.  Not surprising, their self-regulating body, the Investment Industry Association of Canada (IIAC) is resisting this initiative. Learn more here>>

    At Sprung Investment Management, we are discretionary investment managers, not stock brokers. We are independent of any bank or broker and our only source of revenue comes directly from our clients. We do not receive any kind of commissions or trailer fees from stock brokers or fund managers. We are committed to meeting a fiduciary duty. A fiduciary duty or best interest standard (already the norm for lawyers, accountants and some other professionals) is a legal requirement that we put the client’s interests first. Our investments are made in your best interest.

    At Sprung, our investment management approach is based on the value investing principles developed by Benjamin Graham.  Graham explained that “the essence of investment management is the management of risks, not the management of returns.” Learn more here>>

    The management of risk begins when a new client joins us. You will meet directly with Michael Sprung and other members of our team. We take the time to get to know you in order to understand your investment objectives and risk tolerance.

    Based on that understanding, we begin to build a portfolio that includes high quality stocks and investment grade bonds. Whereas mutual funds often hold a large number of stocks, our client portfolios typically hold 20 to 30. If you hold more, gains in any single stock will hardly affect the total value of your portfolio. If you hold fewer, losses in any single stock can have an adverse effect on your portfolio.

    On the fixed-income side, we hold good quality investment grade bonds. We manage the duration of your holdings to reflect our view of the existing interest rate environment.

    In summary, the benefits of portfolio management include:

    • A personal relationship with the person who is actually making investment decisions on your behalf;
    • Holding a well-diversified portfolio that properly reflects your risk tolerance and investment objectives;
    • Avoiding the conflicts of interest inherent in the broker/ fund manager relationship;
    • Transparency—no hidden fees or commissions;
    • Lower cost.

    Does your portfolio properly match your risk tolerance and investment objectives? Sprung Investment Management Is Pleased To Offer Qualified Investors A Free Portfolio Review—Without Cost or Obligation. Learn more here>>

    UPDATE March 27, 2014: Barry Critchley of the Financial Post interviewed Michael on the topic of a best interest standard. You can read the complete article here>>

     

    Exchange Traded Funds Expose Investors to Unexpected Risks

    In June’s market turmoil, some fixed-income Exchange Traded Funds “decoupled” from their underlying net asset value.

    Over the past decade, investors have moved billions of dollars out of mutual funds and into ETF’s. Why are ETF’s so popular? Low management fees are the main reason. ETF fees are in the 0.5% range, compared with 2% to 3% for many large Canadian mutual funds. However, in many cases, investors are switching to ETF’s without fully understanding what they are buying.

    ETF, Exchange Traded Funds

    Exchange Traded Funds Expose Investors to Unexpected Risks


    Exchange traded funds (ETF’s) are investment funds that trade on stock exchanges, much like stocks. ETF’s holds assets such as stocks, commodities, or bonds.  Many ETF’s track an index, such as the S&P/TSX Composite here in Canada or the S&P 500 in the US. Others track market sub-sectors, such as the S&P/TSX Capped Energy index.

    In June of this year, markets were roiled by concerns about rising interest rates in the US. Fed Chairman Ben Bernanke’s comments about ‘tapering’ or reducing QE, lead to investors dump both bonds and equities. During that time, the huge volume of sell orders caused SPDR Nuveen S&P High Yield Municipal Bond ETF to “decoupled” from its underlying net asset value. This is referred to as ‘liquidity risk,’ and means that investors selling these funds received less that the market value of the underlying assets.


    Attempting to make a virtue out of this failure, Mark Wiedman, global head of iShares, wrote an open letter to investors claiming that the “ETF price can become the true price for that market.”

    While ETF’s can be useful in constructing a portfolio to meet investors’ goals, if misused or misunderstood, they can expose investors to a number of risks:

    Market Risk Perhaps the most significant risk associated with ETFs is market risk. If you purchase an ETF that tracks the S&P/TSX Composite index for example, you have just put half of your money in the resource sector.  You will experience significant volatility as the index responds to changes in commodity prices.

    Concentration Risk –The degree of diversification in any particular ETF varies significantly and the underlying portfolio should be closely examined to see what level of diversification a fund may offer. For example, the iShares S&P/TSX Capped Information Technology Index Fund holds only 7 stocks, including a 20% exposure to RIM.

    Sampling Risk While some index ETF’s invest 100% of their assets proportionately in the securities underlying an index—referred to as “replication”–other index ETFs use “representative sampling”, investing 80% to 95% of their assets in the securities of an underlying index and investing the remaining 5% to 20% of their assets in other holdings, such as futures, option and swap contracts. For index ETFs that invest in indices with thousands of underlying securities, some index ETFs employ “aggressive sampling” and invest in only a tiny percentage of the underlying securities.

    Liquidity Risk All ETFs are purchased on an exchange with a bid and offer. In some cases, the number of shares trading in any given day may not easily support a sale or purchase at an efficient price relative to the underlying net asset value. In other cases–as some ETF investors experienced in June–where volume is high and market velocity rapid, ETFs have decoupled from their underlying net asset value.

    Leveraged ETFs – The use of leverage to amplify the rate of change for an investor has unique risks. Leveraged ETFs use swaps futures, and other derivatives to return two or three times the underlying index (or two or three times opposite that index’s movements) on a daily basis. This can expose investors to extreme volatility.

    Interest Rate Risk –As interest rates rise and fall over time, these changes have a direct effect on the value of ETFs that are investing in bonds. As interest rates rise, the value of an ETF invested in bonds should be expected to fall. In a declining interest rate environment, the value of a bond ETF investment should rise. Longer term bonds are more sensitive to changes in future inflation expectations than are short term bonds.

    Foreign Investment Risk – Many ETFs are organized to hold stocks from outside of Canada or the US. Investing in a basket of international stocks poses addition risks to shareholders including currency risk, liquidity risk, geopolitical considerations, less well established public markets and less stringent accounting methods.

    Investors are better owning equities or fixed-income investments directly, rather than purchasing them indirectly through opaque vehicles, such as ETFs, that may expose them to other risks. Discount brokerage accounts allow small investors to purchase securities and achieve diversification at low cost. Independent investment publications can help them select appropriate equities and fixed-income issues. Portfolio managers can help investors with larger portfolios achieve appropriate diversification and risk management.

    Update: the Dividend Ninja, a Vancouver based writer, makes a compelling argument for the benefits of dividend stocks over ETFs.

    Winklevoss Bitcoin ETF is Risky. Other ETFs Can be Risky Too.

    The Winklevoss Bitcoin ETF is Risky. Other ETFs Can be Risky Too.

    Cameron and Tyler Winklevoss have filed a registration statement with the SEC to create new Bitcoin exchange-traded fund. The Winklevoss twins fought a lengthy legal battle with Mark Zuckerberg, claiming he stole the idea for Facebook  from them when they were undergraduates at Harvard University. Their Bitcoin ETF offers investors, as stated in an SEC filing, an “opportunity to realize a riskless profit….”

    Winklevoss Bitcoin ETF riskless profit

    The Winklevoss Bitcoin ETF offers investors an “opportunity to realize a riskless profit.”

    Most seasoned investors will likely avoid this speculative ETF. However, over the past decade, investors have moved billions of dollars out of mutual funds and into ETF’s. Why are ETF’s so popular? Low management fees are the main reason. ETF fees are in the 0.5% range, compared with 2% to 3% for many large Canadian mutual funds. But investors are switching to ETF’s without fully understanding what they are buying.

    Exchange-traded funds (ETF’s) are investment funds that trade on stock exchanges, much like stocks. ETF’s holds assets such as stocks, commodities, or bonds.  Many ETF’s track an index, such as the S&P/TSX Composite here in Canada or the S&P 500 in the US. Others track market sub-sectors, such as the S&P/TSX Capped Energy index.

    While ETF’s can be useful in constructing a portfolio to meet investors’ goals, misused they can expose investors to a number of risks:

    Market Risk Perhaps the most significant risk associated with ETFs is market risk. If you purchase an ETF that tracks the S&P/TSX Composite index for example, you have just put half of your money in the resource sector.  You will experience significant volatility as the index responds to changes in commodity prices.

    Concentration Risk The degree of diversification in any particular ETF varies significantly and the underlying portfolio should be closely examined to see what level of diversification a fund may offer. For example, the iShares S&P/TSX Capped Information Technology Index Fund holds only 7 stocks, including a 21% exposure to RIM.

    Sampling Risk While some index ETF’s invest 100% of their assets proportionately in the securities underlying an index—referred to as “replication”–other index ETFs use “representative sampling”, investing 80% to 95% of their assets in the securities of an underlying index and investing the remaining 5% to 20% of their assets in other holdings, such as futures, option and swap contracts. For index ETFs that invest in indices with thousands of underlying securities, some index ETFs employ “aggressive sampling” and invest in only a tiny percentage of the underlying securities.

    Liquidity Risk All ETFs are purchased on an exchange with a bid and offer. In some cases, the number of shares trading in any given day may not easily support a sale or purchase at an efficient price relative to the underlying net asset value. In other cases where volume is high and market velocity rapid, ETFs have decoupled from their underlying net asset value. Also, many bond ETFs seem to trade at a premium or discount to net asset value.

    UPDATE: There is evidence that this actually happened to some BlackRock funds in July 2013. Read more here>>

    Leveraged ETFsThe use of leverage to amplify the rate of change for an investor has unique risks. Leveraged ETFs use swaps futures, and other derivatives to return two or three times the underlying index (or two or three times opposite that index’s movements) on a daily basis. This can expose investors to extreme volatility.

    Interest Rate Risk As interest rates rise and fall over time, these changes have a direct effect on the value of ETFs that are investing in bonds. As interest rates rise, the value of an ETF invested in bonds should be expected to fall. In a declining interest rate environment, the value of a bond ETF investment should rise. Longer term bonds are more sensitive to changes in future inflation expectations than are short term bonds.

    Foreign Investment Risk Many ETFs are organized to hold stocks from outside of Canada or the US. Investing in a basket of international stocks poses addition risks to shareholders including currency risk, liquidity risk, geopolitical considerations, less well established public markets and less stringent accounting methods.

    We believe investors are better served by following our three-part value investing strategy:

    • Appraise the intrinsic value of each company over a business cycle;
    • Seek long-term growth of capital by investing in companies that we perceive to be mispriced;
    • Utilize a margin of safety to promote return of capital…not just return on capital.

    Like to learn more about how our approach can reduce risk and volatility in your portfolio? You can contact us here>>