I swear to God, some people walk into a bank thinking it is a McDonald’s!

A colleague of mine walked into my office the other day with her eyes so big they were ready to pop out of their sockets.

“Have you seen this? ING is offering 3% (annualized rate) for the next 3 months on an RRSP contribution! This is way more than what we offer!” she said, panicked by the thought of losing accounts to the big orange online monster.

“So what?” I replied almost as interested by her announcement as I was when they said there were going to add a bus line on Sunday morning.

“How can I compete with this? The Bank won’t budge on their GIC rates and we are so far away from this offer!” she insisted (that’s it, I think her eyes dropped from her head and started some break dancing on my desk).

“Do you know that if your client invests $5,000 for 3 months at a 3% rate (annualized) he will make about $35? How can you not compete with a huge profit of $35? What is your client going to do in 3 months since he will only retire in 30 years?”. I knew the answer: he will transform himself into another rat (i.e. rate shopper!). But the key is that he won’t get much from jumpin’ from one rate to another (especially with the marvellous rates we have in the industry!).

Unfortunately, some people prefer to see financial advisors as trustworthy as mechanics or politicians. Therefore, they prefer to trust themselves and invest in something they understand. 3%. That, they understand. They don’t figure it’s only for 3 months and that they won’t do much after this period. They understand the 3% concept and they are happy with it.

The key point is not to manipulate our clients and make them invest in something else. The point is to help them understand that they are losing their time and most importantly their money chasing ridiculous rates for 3 months when they won’t be touching this money for the next 30 years.

Each investor should have a plan. He should know how much he invests, where he invests and (most importantly) why he does it this way. If you are investing without knowing the answers to those 3 questions, you are not investing in the right way. Then, you are in serious trouble and I hope you are putting a lot of money aside because you won’t make it to retirement…

Notice that I didn’t talk about how much you will make. This question is useless as nobody knows the real answer. However, if you stay invested during the next 30 years, you should be making around 4 to 6% depending on your investor profile. In any case, it will be better than investing in GIC’s!

I have living examples to prove it: I had looked at one of my clients who invested his money in an investment strategy back in 2004. As of the end of 2009, he was making an annualized return of 5.13% (with a balanced fund). While he was making more than any 5 year GIC back in 2004 (they were giving about 4.50% to 4.75%), it was also tax efficient and liquid at any time. In addition to that, we have to mention that his portfolio went through the worst investing period of all time. Therefore, I am ready to bet that he will be making much more than 5% annualized rate at the end of 2010 while the other individual will have to renew his money at 3% for 3 months…and then… 3% for the next 5 years?

Next time you see an investment promotion, don’t ask yourself if it’s a good deal or not, ask yourself if it fits your investing strategy or not

image source: Beau B

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As I mentioned yesterday in my 2009 Best Stock Picks article, the same fellow bloggers and I have decided to pursue our stock pick competition in 2010. Although I finished 4^th with my stock picks last year, I am willing to take more risk this time around and aim for the top 2! Nonetheless, I was very satisfied with my 2009 stock picks since I finished with a considerable return of 44% even with a defensive stock (JNJ) on hand. I do think that 2010 will be a great year for the stock market since there is a lot of room for growth and there is still a lot of hesitation from investors as well.

2010 Best Stock Picks Contest

The rule of our contest is fairly simple: each Blogger will pick 4 stocks they think they will overperform through 2010. We can pick any stock, ETF, etc in the Canadian or American Stock Markets. In order to make it fair, we also include the dividend yield of our stock picks (because it is part of the investor’s yield anyways). This is a friendly competition, so you won’t see any stock picking recommendations here. You are more than welcome to comment and add your analysis of those stocks as we probably picked them for some reason

So here are my choices for the 2010 best stock picks contest:

Research In Motion (TSE: RIM, $71.03 )

This is a half rational, half emotional stock pick as I really like my Blackberry Nonetheless, I think that RIM stock has been unjustifiably pummelled by financial analysts since the company has announced lower results than expected. Financial analysts are also afraid of Apple’s attack on RIM’s market with the iPhone. I would say that the Blackberry and the iPhone are 2 really cool intelligent phones but they are nowhere close to be comparable competition. They actually don’t serve the same purpose! In addition to that, the recent strong earnings and the agreement to enter China will soon affect the investors decisions and restore their trust in this stock. I think we should get pretty good 2010 results for RIM!

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Manulife Financial (TSE: MFC, $19.33 )

Another of my investing ideas for 2010 is to go with Canadian insurance companies. Why? Simply because they took a hard hit in 2008 (as Canadian Banks did) but they didn’t come back as strong as Canadian Banks. I think that Manulife had its share of problems with their involvement in the US. However, if they are able to boune back with strong numbers in 2010, it won’t take long for them to gain investors’ trust again. Plus, its dividend (almost 3%) makes it a great investment idea for your portfolio in 2010.

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Goldman Sachs (NYSE:GS, $168.84 )

I am leaning towards financials again for my 3^rd best stock pick for 2010. If the economy starts picking up in Stateside (which will  happen eventually), Goldman Sachs will definitely be poised to benefit from the economic revival. Financials that survived the credit crunch should be in a good position for 2010. The idea behind this investment is based on planning on an economic rebound in the States. I hope I am right on this one… if not, this pick could be the worst one of my portfolio in 2010

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Vanguard Emerging Market ETF (NYSE: VWO, $41.00 )

My last investment idea for 2010 is to invest in emerging markets. Nothing really innovative here but I am not picking stocks to be creative, I am picking stocks that I think will be the best performing ones in 2010 . Since US consumers may still have a hard time in 2010, I preferred to play safe and look towards countries that enjoyed great economic growth in 2009.

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So here are the other participants and their investment ideas for 2010:

*Disclaimer: this is a friendly competition among bloggers. There are no recommendations done in those posts. One must do his own due diligence before trading on the stock markets.

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