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Table of Contents
Put your financial adviser on a leash
February 11, 2000
100% Foreign content for your RSP
December 22, 1999
Tax Loss Selling or Dealing With Your Mistakes
November 26, 1999
Life Stages of your RRSPs
November 12, 1999
Just give me boring (but great) rates of return
November 3, 1999
De-mystifying Demutualization - part Two
October 25, 1999
De-mystifying Demutualization - part One
October 19, 1999
Seg funds for the simple minded
September 14, 1999
The interest rate game Part 2
August 12, 1999
The interest rate game Part 1
July 30, 1999
Choosing funds: Five for the long run
July 14, 1999
New Funds: To buy or not to buy
July 2, 1999
Making sense of momentum investing
June 18, 1999
Rating the fund managers
June 4, 1999
Resource recovery hinges on supply and demand
April 30, 1999
Tech funds draw strength from favourable trends
March 24, 1999
Withdrawing from your RRSP
March 9, 1999
The economic implications of the euro - An interview with Ranga Chand
February 12, 1999
Underperforming small-cap funds have strong upside potential
January 29, 1999
How to pick a winning equity fund portfolio
January 15, 1999
View the Weekly Insight archive

Five for the long-run

Wednesday, July 14, 1999

With over 2000 funds to choose from can anyone have the audacity to pick just 5 funds to hold long-term? Are there one-decision funds that could be put away until the year 2010? asked me to give it my best shot with the following proviso: no RSP limitations and all equity funds. Remember, this is only my opinion. I expect some disagreement from users and plenty of calls from fund company marketers. Please express your thoughts on the discussion forum.

Readers of Smart Funds know my bias is toward money managers with sustainable and demonstrable performance. Personally, I am also inclined to the U.S. market because of the world class companies there.

My biggest concern is buying and holding mutual funds in an industry rife with manager departures and potential consolidation over the next few years. Therefore, for this exercise, I focused on long-term players with managers locked in for the foreseeable future at companies with solid depth.

Green Line Science & Technology. Chip Morris of T. Rowe Price manages this fund on behalf of TD Bank. Morris runs the largest portfolio of high-tech names in the world and has been a leader in this sector. Given the Internet and technology revolution underway, you must have an investment in this category. This one you can lock away for 10 years. Opening net asset value (NAV) in December 1993, was $10 and it was at $42 this week, plus long-term unit holders got distributions per unit of $0.72 in 1995 and $2.04 in 1997. The fund is up 59% in the past 12 months and the compound annual growth rate (CAGR), for the 5-year period ending June 30, 1999, was 35.23%.

Phillips, Hager & North Dividend Income. As bullish as I am on the U.S. market, there is a role for a Canadian fund. I like this one for its long-term record and the tax-advantage of the dividend stream. This Canadian blue-chipper will continue to bring steady returns from one of the best money management firms in Canada. This private firm has had almost no manager turnover and should remain immune to the consolidation game. Its CAGR for the 10-year period ending May 31, 1999 was 13.6%, which includes a dividend of about $0.60 per unit each year.

AIM Global Health Sciences. With aging populations comes increased health care expenditures. This is another must-have category and John Schroer of Invesco is one of the best in the industry. This fund has seen its NAV rise from $5 at inception (October 1992) to $16.97 as of June 16. Its CAGR from inception to June 30 of this year is about 22%. AIM is part of the worldwide management firm AMVESCAP, which has over $200 billion under management. The CAGR for 5 years is 28.32%.

Royal U.S. Index. It has proven frustrating for active managers to compete with the S&P 500 index. This one has the lowest management expense ratio (MER) in Canada, and is provided by Canada's largest bank. Index funds are always fully invested and have very little taxable distributions. The fund has returned 7.2% so far in 1999 (the S&P's return was 7.3%).

Templeton International Stock . Managed by Don Reed of the huge Franklin/Templeton group, this fund excludes the U.S. market and is more value-oriented than the other candidates, so it will provide a nice diversification to the group. This fund has a ten-year CAGR of 14.2%.

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