Someone came here (or to "Money Saving Tips" or "Household Finance") a while ago to say that they'd suggested it some time ago, but it didn't happen.

I'm a Canadian, so not that familiar with U.S. market, but a guy up here who writes in what many of us believe to be Canada's best money management magazine (no ads - totally subscriber driven) has given us for 10 years a proposed investing system based on the component companies of the major Canadian market index.

It takes little time to implement and manage and has produced excellent average rate of return, despite some years of losses. Record above almost all equity-based mutual funds, over the past 20 years or so.

It is patterned on the "Dogs of the Dow", that uses low priced high yielding stocks. It ranks the stocks in the Dow Jones (Industial index, I think) from the high yielders down, then picks the 10 cheapest ones and invests an equal amount in each. Lets it run for a year, then revisits the system. Takes a couple of hours of time, annually. Quite a large number carry over from year to year.

Another system is to use only the five cheapest, and a third ignores the cheapest one, as sometimes a stock that's beaten up and may be about to cut dividend; maybe has rather bad prospects, as well. That system takes a double amount of the second cheapest high yielder.

I don't know how well that system has worked in the states, but some appear to like it.

Stocks paying high dividends tend to drop less in down markets than those that pay low rate, or none.

At an invwestment group that I've attended monthly for six or seven years, they say that the losses that most of us have suffered over the years is our tuition in the school of hard knocks, learning how to manage money well.

HTH.

Good wishes for learning how to manage both your income and your assets more effectively.

ole joyful

P.S. Or ... you could buy some Canadian Oil and Gas stocks. While they may be priced a bit high right now, one figures that they aren't about to deteriorate for long, over a longer term.

But - why should I tell you this?

And encourage more of Canadian resources to be owned by furriners - having future profits go there, while the guys where the resources are become hewers of wood and drawers of water.

o j

You can find good stock investing forums at Yahoo Groups. There are a billion of them so it takes time to filter and find one to your liking.

I am a professional stock trader and the best advice I can offer to investors/traders is to ignore the press in all forms: television, radio and print and do your own homework. Many amateur investors use mutual funds as their investment vehicles. Most would be better off investing in Exchange Traded Funds or ETF. The major issuer of ETF's is ishares.com. You buy and trade ETF's like stocks and the fees are a fraction of those charged by fund companies.

Why are ETF's preferable to funds?

Two primary reasons:

1. Expenses are lower;
2. ETF's can be traded like stocks.

ETF's offer the typical investor an excellent opportunity to diversify your portfolio. Most ETF's will be mimic an index, either by type like the S&P500, or by capitalization - large caps, midcaps, etc. - or by domestic/international, as well as other ways. Most investors would experience better returns through index investing. Most pros have difficulty in consistently beating the indices. To see evidence of this, go to Yahoo and screen for actively managed Mutual Funds and see the fund record versus its index.

What I really mean is why should I buy a S&P 500 ETF over a S&P 500 Fund?
I see the Vanguard Fund has very low expenses.
I'm not comparing an actively managed Fund.
I don't see the advantage of the ETF, maybe for me there is not one.
Thank you for any insight into this.

ETF expenses are lower than mutual fund expenses. For example, the Vanguard S&P500 mutual fund expense ratio is 0.18%. IShares S&P500 ETF is 0.09%.

This may not apply to you but funds typically have a minimum purchase requirement. The Vanguard S&P500 fund has a $3,000 minimum purchase.

ETF's are bought and sold like stocks. IOW, you can buy and sell throughout trading hours. Mutual funds, with a few exceptions, can only be traded at market close. This is not a huge advantage for typical investors but could come in handy one day. Picture a meltdown of the market and you trade out of your ETF at 10 am instead of waiting until 4 pm. Again, I don't envision or recommend this for most investors, but it is nice to have the ability just in case.

But, what commission do I pay to purchase the ETF?
I can buy the Vanguard Admiral for .09 expense with no commission.
I due understand the advantage of midday trading, that is one advantage I see.

The commission you pay depends on your broker...

Do you mean buying the Admiral fund within your 401-K? The published expense ratio, according to Yahoo Finance, is 0.30% plus a 0.5% front end load.

The Admiral is a relatively new fund and is an emerging market fund. Do you currently own it? Well, just noticed that Vanguard also has a MM fund named Admiral. Hmm....confusing...

I was referring to this fund Vanguard 500 Index Fund Admiral Shares (VFIAX). Expense ratio as of 12/31/2006 0.09%. I do not have a 401k, I am considering individual purchases. (cut & paste)
I notice many funds have the name admiral attached, but I am only referring to the one above.

Vanguard has a lot of Admirals for one ship...

Obviously, with a fee of 0.09%, it negates the cost advantage of the ETF. I still prefer to trade like stocks but then I am a stock trader...:)

Hi Marlin,

Why not just study the market some, then buy a quality stock?

I bought some shares of a Canadian bank (there are about a half dozen big ones - by Canadian standards, that is) that are reasonably well regulated 45 years ago, for about $4.20 or so: it was four times that price, then - but they split 2:1 twice, since.

Paying about 10 - 12 cents a year dividend, which is taxed at a lower rate than wages, pension or interest - the kind of income that most Canadians have.

In June of '07, I could have sold them for $107./share ... and they were paying $3.08 per year dividend - taxed at an even lower rate than earlier.

In the early fall of '07, they increased the dividend to $3.48 annually.

They had substantial exposure to the U.S. engineered financial fiasco of a few years ago ....

... and the price per share dropped to as low as $40.00.

Did I sell? No - I knew that the bank wouldn't go broke and, though it would take a while, the share price would recover ... and, at $40.00 per share, that $3.48 annual dividend was between 8 - 9% return.

They've since gone back up to about $75.00.

Though I'm over 80, do I plan to sell them any time soon?

No ... they're working well for me ... and now, or on my death, those old ones that have developed a large capital gain can be given to charity, in which case I/my estate will get a charitable receipt for the full value ... and I/my estate am/is exempt from income tax on any of the capital gain. If I sell the stock and give the money to charity, I'd be liable to pay income tax at regular rate on 50% of the capital gain.

But - my point is - that during those 45 years, I have paid no manager any fee whatever to manage that part of my portfolio ... and if 1% per year would have been deducted, year by year, over those years - that would have developed to over 45%, when one considers compounding!

A nice little piece of change that I prefer to keep in my own pocket.

If that old stock were to go to my offspring - they, being or crowding 50, don't have need of the money, my estate would have paid the tax, and they'd own it at each share's base value at the time of my death.

If they were to need some money, they could use the shares as collateral to make a temporary loan at the bank/credit union, then pay it off as soon as possible, if they expected that the shares were undervalued at the time.

And the management fee that the stock would be incurring, over the years of their ownership?? Nil! Not one red cent!

Just what would have been my 2 cents worth, when I was young - likely more like a dime ... or a quarter, now.

ole joyfuelled

Hello ...

... hello! ...

...anybody home??

ole joyful

P.S. I'm pretty sure that there was a topic on the list called "Investing", some years ago.

But there were no posts.

Don't know whether one could have made one - probably I would have, had it been possible.

ole joyful