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Ideas for your RRSP - Part I
Canadian funds worth a look

Like the leaves turning colour and blossoming trees, the season of the RRSP is entering into the seventh-inning stretch. This time of year is usually witness to a barrage of fund company marketing campaigns, investment seminars, and the mad rush to make that last minute RRSP contribution. Before the eleventh hour is upon us, it might be wise to do a bit of homework before plunking down this year's annual contribution. Hence, this week is the first of a two-part series providing some food for thought as we head into the last couple of weeks of this season.

Get back to basics

I've written this so many times in this space, you're probably tired of hearing it, but it is the most important lesson an investor can learn. When making investment decisions, your reference point should always be back to the basics - your objectives and constraints.

I'm talking about developing a strategy, first and foremost, before even thinking about specific investments. A previous article expands on the finer details to ponder in developing your strategy.

Having a strategy based on well thought out goals and expectations are key to avoiding the classic mistakes that investors have repeated over and over through time. How do you know if you've broken the cycle or not? Are you just now jumping into precious metals funds and bond funds after a year of socking piles of dough away in money market funds? If so, you may still be running in circles. If not, let's talk investment options.

Canadian stock funds

This category refers to funds emphasizing the shares of both larger (large cap) and smaller (small cap) Canadian companies.

If you're read my column for any length of time, you know that I have always had a bias in favour of stock funds managed with a value-orientation. While no manager ever plans to overpay for a stock, those money manager classified as "value-oriented" tend to be more conservative in their future expectations and a little stingier than most when it comes to establishing their "buy price". Some of my favourite Canadian large cap funds include CI Harbour, Spectrum Canadian Investment, Mawer Canadian Equity, and Trimark Canadian SC. As for small cap funds, some of the better choices in this category include Trimark Canadian Small Companies, Mawer New Canada, and Standard Life Growth Equity.

I think small caps remain more attractive at this time and probably deserve a weighting in most portfolios that is slightly higher than normal. However, be sure to pair your funds up properly. In other words, if you like Trimark Canadian for large caps, a good fit for small caps might be Standard Life Growth Equity. If you have a self-directed RRSP - where you can combine the funds of many firms in one plan - you'll have the kind of flexibility you need to mix and match complimentary management teams.

Canadian balanced funds

I'm generally not a fan of balanced funds, but I realize they provide some benefits to investors - namely the convenience of a "one decision" investment and the built-in stability of having stocks and bonds in one package. For more knowledgeable investors and for people who want more control over their mix of stocks, bonds, and cash, I usually refrain from recommending balanced funds. However, for those who can't be bothered there are a few that are worth investigating.

Trimark Income Growth SC, McLean Budden Balanced Growth, and Perigee Accufund.

Canadian bond funds

Picking bonds funds is much easier, I think, that most other funds. With stock funds there are things like foreign content policies, management style, types of stocks emphasized, etc. The selection process becomes so much easier as you get into more and more conservative fund categories. Put another way, the more conservative the fund type, the more important fees are in the selection process. Perigee Active Bond, Beutel Goodman Income and McLean Budden Fixed Income are three of my favourites for broad based bond exposure at reasonable fees. All have management expense ratios (MERs) well under 1 per cent. For bond funds emphasizing the higher yielding (but higher risk) corporate bonds, TD Canadian Bond and Trimark Advantage Bondare two fine choices.

While my suggestions are no substitute for personalize, professional advice, they should provide you with some direction as you run through the maze of RRSP investment options over the next couple of weeks. This week's article covers only funds for the Canadian portion of RRSPs.

Next week, we'll take a look at some top choices for foreign and specialty funds.

Dan Hallett, CFA, CFP is the President of Dan Hallett & Associates Inc. in Windsor Ontario. DH&A is registered as Investment Counsel in Ontario and provides independent investment research to financial advisors. He can be reached at dha@danhallett.com
 
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