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RRSP season: Places to invest amid market minefield


With the RRSP deadline looming Monday amid a stock market meltdown, it's not easy for investors to figure out where to stash their cash.

"Most investors are fearful ... not knowing where to invest, but knowing that they do need to contribute to a nest egg," says Sherry Cooper, chief economist at brokerage BMO Nesbitt Burns Inc.

A Bank of Montreal survey released yesterday indicated that two-thirds of respondents planned to contribute to their retirement savings plans this year, up from only half in 2008. The economic downturn and falling markets have spurred people to reduce expenses and ramp up savings, Ms. Cooper said.

While investors may want to stick with "safe" investments such as money market funds or term deposits, they should not stay away from the market if they have at least a decade before retirement, she said.

"Stock markets respond to an improving economic situation roughly four months in advance of the actual rebound in the economy," she said. "Once that begins on a sustained basis, the rebound in asset values - stocks and corporate bonds - is very sudden and very sharp. Given that no one will send you an e-mail the day before that happens, it is prudent to continue to keep money in the stock market."

While the timing for a market turnaround is still murky, we asked three fund analysts to give their picks for this RRSP season in case some investors want to stake their positions for a recovery.


"Investors looking to invest today have very attractive prices before them," he said. "An investor buying today will be pretty happy 10 years from now."

For those who may be uncomfortable investing a large sum of cash, they can do so gradually through a monthly dollar-cost-averaging program, he suggested.

Dynamic Value Fund of Canada: The stock fund "has been pinched in this decline," but it is run by David Taylor, who is a skilled manager focusing on companies that can survive this economic downturn, he said. Battered prices have enabled the fund to buy higher-quality companies than in the past.

Ethical Special Equity or IA Clarington Canadian Small-Cap: These two smaller-company funds are run almost identically by Joe Jugovic, who looks for quality companies trading at a low prices.

"Small caps have been beaten up more so than the general market," Mr. Hallett said.

iShares CDN Corporate Bond Index ETF: Government bonds look less attractive yielding an average of 3 per cent, while investment-grade corporate bonds offer a 5.6-per-cent yield to maturity, he said.

"This is not without risk as the yield is higher because there is greater credit or default of risk with these bonds. But they're not junk or distressed debt."


With the uncertainty and volatility in the stock markets, investors should consider actively managed funds, including hedge products, that strive for absolute returns, he said.

Sprott Bull/Bear RSP: This hedge fund, which gained 21 per cent over the year ended Jan. 31, is run by Eric Sprott, who is "one of the best active managers," he said. Mr. Sprott has been shorting financials, but has been bullish on gold and gold stocks.

Dynamic High-Yield Bond: Barry Allen's fund, which invests mainly in Canadian corporate bonds, has the potential to provide "equity-like returns when the market recovers," Mr. Loach said. While there is risk in the corporate bond sector, the sector historically has produced double-digit returns during an economic recovery, he added.

Beutel Goodman Canadian Equity: This fund co-managed by Mark Thomson and Pat Palozzi is run with close attention to risk, he said. "For an RRSP portfolio, this fund will act as a stabilizer and complements more aggressive Canadian [stock fund] offerings."


Investors putting cash into equity funds should be prepared to hold for five to seven years because it is impossible to predict what stocks will do in the shorter term, he said. He said his fund choices are ones considered "best in their category," and is not a call on whether an asset class will outperform over the next year.

Mawer World Investment: The low-fee, international stock fund run by Gerald Cooper-Key and David Ragan focuses on buying quality companies at low prices, he said. While the fund shed 34 per cent over the past year, it beat half of its peers.

Chou Associates: Francis Chou, who runs this deep-value fund, looks for companies trading at bargain-basement prices, he said. "There could be a whole host of problems with the companies ... but they are now trading at a price that is worth the risk." The fund has a 10-per-cent annualized return over 22 years.

Trimark Fund: This global stock fund has suffered from management turnover, but that is less of a concern because it is run with a team approach with Dana Love now at the helm, he said. The fund has a consistent investment style, which avoids cyclical stocks, and that helped them over the past year, Mr. O'Leary said.

Analysts' Top Picks for RRSP

(Jan 2009)Latest% returns (as of Jan. 31, 2009)
Fund NameCategoryAssets ($-mil)MER1-yr3-yr5-yr10-yr15-yr20-yr
Sprott Bull/Bear RSP A*Alternative Strategies153.08.2420.718.119.3
iShares CDN Corporate Bond IndexCdn Fixed Income419.00.40-1.1
Beutel Goodman Canadian EquityCanadian Equity675.31.20-24.5-
Dynamic Value Fund of CanadaCdn Focused Equity840.62.43-27.4-
Trimark Fund-SCGlobal Equity1,240.01.62-31.4-10.0-
Chou AssociatesGlobal Sml/Md Cp Eq394.11.74-30.8-10.4-
Dynamic High Yield BondHigh Yield Fixed Incm745.12.19-11.6-2.80.1-2.2
Mawer World InvestmentInternational Equity231.01.43-33.6-8.8-
Ethical Special EquityCdn Sml/Md Cp Eq196.92.76-27.2-8.83.310.5
IA Clarington Canadian Small CapCdn Sml/Md Cp Eq210.22.75-27.7-

* Minimum $150,000 for non-accredited investors. Minimum for accredited investors falls to $10,000 from $25,000 during RRSP

season until Mar. 31.


© 2007 The Globe and Mail. All rights reserved.

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