DOLLARS AND SENSE
TIMES ARE changing. And

your investment strategies
should be changing as well.

: .“Two of the biggest mistakes
people make are failing to use the
right strategies for the times -— the

°90s are different from the ’80s —
and believing that somehow it will
all work out,” said author and

. broadcaster Gordon Pape in a semi-
. har sponsored by McDermid St.
Lawrence Chisholm Ltd. ;

. Pape is a firm believer in mutual .
funds. —— :
While they certainly enjoyed a

surge in popularity last year, you
should also look at the other invest-
ment choices, which include debt

reduction, guaranteed instruments, a
principal residence, revenue proper-
ty, individual stocks and bonds and
your own or somebody else's busi-
ness.

_. Ideally, invest your money in as
“many of those options as possible.

. Other than reducing debt, which
‘should usually be completed as
quickiy as possible, investing
should be a long-term exercise.

“2. The key to successful investing

ds the time/expertise you can. _

">... “devote/develop, even if you put

‘money into mutual funds and pay
the fund managers to make the buy-
ing and selling decisions.
°° Most people will still hold at
least some money in term deposits
or GICs, whether inside or outside
an RRSP,

_ = Although interest rates have fall-

_en over the last few years, the net
return after inflation hasn’t changed
‘that much, > ;
“However,” said Pape, “an extra

1% is more meaning (ul today than a
couple of years ago. Earning 6% is
a 20% increase over earning 5%
today —- while earning 11% instead
of 10% was only a 10% difference
then.”

Avoid savings accounts, most of
which pay little or virtually no
interest. Put short-term savings into
short-term deposits, treasury bills or
a money-market mutual fund.

Pape said investing outside
Canada is a way to diversify and
reduce your risk if you are con-
cerned about the future of the
Canadian dollar and economy in
general.

However, the Royal Bank's
first-quarter International

“Investment Outlook says: “This is a

time for investors to consider mov-
ing toward risk-reduction strategies
and away from maximizing of
returns.”

As most of the world’s
economics show growth, the risk of
higher interest rates brings a risk of
turbulent and possibly some lower
stock prices.

The bank expects the Canadian
dollar, British pound and Japanese
yen to weaken against the U.S. dol-
lar while the Swiss franc should
remain stable and the German mark
should strengthen. -

Patrick McKeough sees “an
unprecedented era of wealth cre-
ation around the globe,” providing
opportunities for companies to
make money and for their shares to
rise in value.

But, he warns, there are no short
cuts: “Successful investing is a
long-term, pitfall-riddled process —
like child-rearing or building a
career or business.” .

‘McKeough is the author of
Riding the Bull (Key Porter,
$19.95) and editor of the /nvestinent
Reporter, a Canadian stock market
newsletter named “world’s best
investment advisory” by the
Washington-based Newsletier
Publishers’ Foundation.

“People who get rich as
investors do it by picking a portfo-
lio of high-quality stocks, then buy-
ing more and tore of them gradual-
ly, over a period of years or
decades,” he said.

He suggests choosing stocks of
companies that form part of the
core of the economy and can build a
repeat business, established compa-
nies with a good history of paying

.. dividends.

Diversify and buy stocks you

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might want to keep indefinitely but
“keep an open mind on them,” he
says. “If bad news surfaces and you
find yourself hoping the bad news
will go away, sell right away.”

On mutual funds, McKeough
suggests investors disregard extra-
ordinary short-term performance,
avoid funds whose assets have
grown sharply and avoid balanced
funds (you pay lower fees if.
instead, you choose funds that
invest in stocks and then hold GICs
with staggered maturity dates as the
fixed return part of your portfolio.)

Pape said one of the keys to suc-
cessful investing is to know the pat-
terns — what happens to invest-
ments during different parts of the
business cycle both in Canada and
internationally and to realize these
patterns tend to repeat.

Mike Grenby is a North Shore-
based columnist and independent
financial adviser wha works with
individuals; he will answer your
questions in this column as space
allows — write to him c/o The
North Shore News, 1139 Lonsdale
Ave., North Vancouver V7M 2H4.

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