I know, you told me already from my previous 2011 best stock pick update; I should have sold RIM! I actually did it in my portfolio, but this stock picking contest doesn’t allow you to make trades during the year. In fact, it’s pretty basic. We all picked 4 stocks at the beginning of the year and then we try our best to smile throughout the contest.

Without RIM in my portfolio, I would be among the leaders… but it’s easy to say that and others could take off their worst pick as well . However, having a stock plunge by almost 50% in your 4 stock investment portfolio is pretty hard to swallow .

Highly Speculative Choices

This year, I chose 4 highly speculative picks. I thought I would place either very high or low in the overall rankings. Mike from Money Smart Blog actually did the same thing last year betting on the drop of the price of gold… well he finished where I should be finishing this year! Hahaha!

RIM was my baby until not so long ago but I knew this stock would rock it up and down during the year. I just didn’t expect to see such poor results!

CVX will, naturally, follow the price of oil pretty closely. Since the commodity is on a downtrend for the past month or so, so is the stock! I don’t mind since it’s paying a healthy dividend and the price is still up more than 8% this year. It was also a great fit in my own portfolio (I do own shares of CVX).

I also bet on the rise of the Silver Surfer . However, speculation has brought down the stock to a “normal” return (while I was up more than 50% at one point this year!). Here again, it could also gain or lose 20% during the next 6 months J.

Finally, Potash was picked on the same assumptions: there should be some speculation around it. The stock is up slightly but if rumors of mergers or acquisitions arise again, it could fire its way to the top in a few months!

As you can see, this portfolio is not… a real portfolio! This looks more like gambling than investing… but that’s the purpose of this game .

Here are the results so far; congrats to Intelligent Speculator (from our original contest) and JT McGee (from our readers) who are ruling this competition for the moment:

Intelligent Speculator 9.35%

Dividend Growth Investor 8.89%

My Traders Journal 8.67%

Million Dollar Journey 8.06%

Where Does All My Money Go -1.01%

The Financial Blogger -3.74%

Money Smart Blog -5.72%

Wild Investor -7.69%

Beating the Index -12.01%

Entry	Result
JTMcGee	23.43%
Robert @ The College Investor	14.41%
Craig	9.59%
Lionel	5.93%
Financial Cents	2.50%
Jaymus (RealizedReturns)	-0.20%
Passive Income Earner	-0.39%
Steve Zussino	-1.80%
Kevin @ Thousandaire.com	-2.39%
SustainablePF	-16.27%
101 Centavos	-17.88%
Sean	-20.08%
DanP	-22.87%
Millionvester	-24.44%
Moloko	-29.53%
Stock Glory	-29.73%
Financial Uproar	-44.22%
kildozer	-44.58%

What will be the best stock picks for 2011? I don’t know yet but I can tell you that I didn’t make the right choices in 2010 for our stock pick competition! So before I write about my best stock picks for 2011, I’ll review what happened in 2010 with my stock picks…

When bad news comes in waves

I still believe I had good picks for 2010 and that, over the long run, those companies will perform. The proof is almost there as my 3 loser picks (RIM, MFC and GS) had grown in dramatic fashion over the last quarter. Too little, too late, I’m stuck with a losing hand for 2010!

RIM was hit big time as Apple entered in the smartphone ring with a huge uppercut. Bad news and rumors are now driving down RIM stocks towards the bottom of the pile. Fortunately, the company showed positive results and the stock is now back up.

When I first wrote about my best stock picks, I thought Manulife’s problems were over. I thought 2010 would be a great year for them and that the management team was strong enough to overcome their maelstrom…. Bad move, Manulife got hit by more bad news and was eventually downgraded by Moodys.

My last bad news bearer is one of the strongest investment banks that survived 2008 credit crisis; Goldman Sachs. If the SEC didn’t fill a lawsuit against them, they would have been pretty good in 2010. The stock is now back to where it was at the beginning of 2010, so just a small loss  for a great stock pick…

And the Winner is….

Here’s the final result of our 2010 stock pick contest. If you click on each name, you will get their latest post on the stock pick competition. Wild Investor is winning our stock competition this year but one of my reader beat all of us: Brian end-up with 94%! (here’s his picks: RHIE, ISCO, BTIM, ACTC)

Intelligent Speculator	-0.45%
The Financial Blogger	-1.64%
Wild Investor	27.15%
Million Dollar Journey	3.79%
Where Does All My Money Go	26.56%
Four Pillars	-35.25%
Zach Stocks	20.87%
My Traders Journal	10.39%
Dividend Growth Investor	26.08%
Bryan	94.66%
Chris	16.12%
Matt	18.27%
1stMillion	-6.97%

Now it’s time to play again! Best Stock Picks 2011!

HUZ – Silver ETF, There is a problem with gold

I’m not a big fan of commodities. Why? Because they are based on pure speculation…but this is also the goal of our stock pick contest, isn’t? I’m taking a Silver ETF because I think it is undervalued compared to gold. The price of silver usually follows gold by 1/16 and now we are at…. 1/46! So either the price of gold is too high, or the price of silver is too low. I’m betting on the latter.

RIM – Research in Motion Strikes Back!

I still believe RIM is a good stock pick. And I think that it will be one of the best stock picks in 2011. RIM is the best player in emerging markets and now that the economy is restarting, they should increase their sales. At least Apple shouldn’t be able to play in this market for now as the iPhone cost and network coverage are too expensive for emerging markets for now.

CVX – Chevron, For those who are scared

I am slowly converting to dividend investing with my latest buy; The Dividend Guy Blog. I have a Chevron stock analysis over at this blog and I think this will be a good stock pick to stabilize my gambles. I think that Chevron will continue to pay a good dividend and the stock should be stable throughout the year. Therefore, it will be a good pick if silver or RIM fail at some point .

POT – Potash, once investors are converted to believers, it will blow!

In 2010, we almost lost the biggest potassium producer in the world with the hostile bid by BHP Billiton. While this event helped Potash to be one of the best stock picks in 2010, its value will increase as the commodity will continue to rise. Potash seems like a good bet for such a competition.

Want to get more Stock Picking Ideas? Look at the other 2011 Best Stock Picks Contestants:

Here’s the chart with all the participants. If you click on each name, you will get more details on their stock picks (more to come in the upcoming days )

Money Smart Blog

Dividend Growth Investor

Wild Investor

Intelligent Speculator

My Traders Journal

Beating The Index

Million Dollar Journey

Where Does All My Money Go?

You want to Join in? Put your 4 stocks picks in the comments and tweet this post! IF YOU BEAT ALL OF US, I’LL MAKE SURE YOU GET A PRIZE

Last year, a few readers posted their picks, I want to encourage you to do it and I’ll offer a prize to the winner if you can beat our group of bloggers for the 2011 Best stock pick contest. If you want to participate, you simply have to put your 4 stock picks in the comment section and use the tweet box on the top of this blog (or the following:  Best Stocks Picks 2011 Contest @FinancialBlogr : http://bit.ly/gooxCw. Enter your 4 stock picks in the comment section to be in!) . I like Apple products, do you?

image credit

disclaimer: I do hold RIM in my portfolio (and Chevron is on it’s way!)

I actually like what is going on in the markets right now as I believe there is a huge opportunity for us to make money over the long term. While many investors thing the stock market is sick, I’d say it is just another rough patch to ignore.

The good side of things is that our Canadian dollar is still pretty strong (fluctuating between $0.95 and $1.00 US) and the US stock market hasn’t recovered as it should have (keep reading to know why).

This should give you 2 great reasons to think about investing in the US stock market:

Our dollar is strong

The fact that our dollar is strong compared to US money is really good news. We presently benefit from the good reputation of our economy (thanks to our Canadian Banks ). This brings more foreign investors to invest in Canada (either in our stock market or via Canadian bonds, government and corporate). We also host several major players in the oil and gold industries. Since China and India are still very hungry for these resources, our Canadian dollar has remained at a higher level than usual.

However, I think that once the concerns about the US economy are resolved, our dollar will start going down again. The US has a more diversified economy and was built with strong companies with a lot a liquidity and positive cash flows. Sooner or later, this will have an impact on their economy and it will recover from their housing-bubble-credit-swap mess.

In the meantime, it gives you a great opportunity to convert strong Canadian dollars into weak US dollars and buy US stocks. And this leads me to my second point:

US Stocks are being ignored

Since the credit crunch in 2008, there is a cloud of fear over the head of the US stock market. People seem to think that all companies have the H1N1 virus and we best kept our distance from them.

After further analysis, I have realized there are several interesting plays to make on the stock market. If you just take into consideration their PE ratios, you will notice that some US stocks are just ignored by most investors:

As you can see, you can probably find great investing opportunities with some companies providing serious dividend payouts as well. If you are looking for a long term investment such as inside an RRSP, I think that some US investments couldn’t hurt .

If you are not completely decided as to which stocks to buy, you can also consider US index ETFs or mutual funds (you can look at this article for more small portfolio investment ideas: investing a $1,000 or less). But take one that is not hedged against the currency to make sure to benefit from the future Canadian dollar drop (it may happen faster than we think if you agree with the idea that we are about to burst the Canadian housing bubble soon…).

Image credit

- Index investing is probably one of the best way to make money without worrying too much about the trades to make.

- Dividend investing is also a great way to build a strong portfolio that generates income.

And yet the 2 strategies are not serving the same purpose:

- Index investing is looking forward to produce long term growth.

- Dividend investing is looking to produce a steady flow of income right now and benefit from an eventual growth.

But what really bugs me in this dilemma is not the purpose of investing but the results you get when you compare the 2 strategies (beware, this is going to be ugly!):

In order to make a comparison between index investing and dividend investing, I have taken one of the best index funds vs one of the best dividend funds. How did I choose them? I looked at established mutual fund companies and took funds that have more than 10 years history to be able to make a real comparison. Then, I took one of the best yields for both of them (looking at 3, 5 and 10 year annualized yields). So I have the Altamira Canadian Index fund Vs the RBC Dividend fund. Since the Altamira fund was created in 1998, I had to take this point to make the comparison. So here we go (click on image to enlarge)

So there are 2 things that you can see while comparing index investing vs dividend investing:

#1 Over the past 11 years, investing in dividends shows a better return.

#2 When you look at the annualized rate year by year, you can see that the index funds will out beat the dividend fund easily in periods of growth but drop rapidly and lose the advantage as soon as it hits a market drop.

So, after looking at those two graphs and taking a good sip of coffee, I still wonder if it really worth it to suffer bigger fluctuations and ending-up with a smaller yield with an index.

On the other side, there are a few considerations to take for the upcoming year if you think of buying a dividend fund versus dividend stocks:

#1 Growth is unlikely to come from Canadian banks. They will do fine but I don’t see them increasing their profits like Apple!

#2 If you buy dividends funds, they usually include bonds and preferred shares. Therefore, their value will drop upon increases in interest rates.

#3 If we are going to enter another period of economic growth (most major companies in the US show strong financial results), chances are that index investing will be a winner for the upcoming years.

#4 We are taking 11 years to make the comparison where we had 2 majors economic crisis. If we take the same 11 years period in a few years, we would start our calculation after the techno bubble and chances are that the same graph will show different numbers.

So I’m still not convinced which one is best for a long term project…

What about you? Dividend investor or Index investor?

and if you want to learn more about dividend investing, I suggest you go look at our new blog; The Dividend Guy Blog.

Oh boy, oh boy, oh boy! This is not my year to make the right stock picks! See how things can go sideways even with good companies?

First: Goldman Sachs Lawsuit

What can you expect from a good financial stock when the company is being sued by the Federal government? Nothing but a severe plunge! While I still think that Goldman Sachs is a great company and that they will bounce back (I would buy more of them if I had liquidity right now!), I really picked the wrong time to choose it as a good investment pick in 2010

Second: Research In Motion Investors‘ Disappointment

While Investors were astonished by RIM for several years, they all seemed to turn their back on this amazing company and prefer Apple’s gadgets. I actually have an iPod and will probably buy an iPad eventually so I have nothing against Apple’s iDepartment. However, I still think that the best tool to work with is a Blackberry. The income and revenues are increasing but nothing seems to be enough for investors now that they have found their next flavour of the month!

Third: Manulife Going Down To Hell

I thought that the problems were over with Manulife and I had figured it was a good gamble for this year. Unfortunately, this is not the best pick either… investors seem to be reluctant to give Manulife credit for their operations… hopefully the wind will turn during summer time!

Fourth: Emerging Market On The Sideline

My best pick so far is also negative… man! It’s a bit depressing but I still have faith in emerging markets. They can surge at any moment and this is the kind of stock that can make me gain a few positions in our contest in no time.

So How Did It Go for the Others?

Take a look at the result so far at Q2: only 1 positive portfolio: Dividend Growth Investor at 6.39%!. You can click on each blog to view their comments about their stock pick experience so far this year:

Blog	Best Stock Picks for 2010	Ytd
Intelligent Speculator	UNG JJN SOHU GOOG	-19.06%
Wild Investor	BAC VALE CAT SLB	-7.60%
The Financial Blogger	RIM MFC GS VWO	-22.65%
Four Pillars	DZZ GLL DGZ HIG	-20.11%
Where Does All My Money Go	FUN HAT ADD CAR	-14.16%
Dividend Growth Investor	O KMP ED PM	6.39%
Million Dollar Journey	HE.TO MFC.TO CVE.TO QLT.TO	-23.65%
My Traders Journal	UUP DVY UCO SSO	-11.90%
Zach Stocks	BX AGO ICE SLV	-17.24%

Looking to trade other stocks ? Try these introduction videos about:

How to trade Crude

How to trade Futures

How to trade Stock

How to trade Forex

How to trade Gold

- If the stock is traded in Canada, trade it here. Buying and selling Research in Motion or Potash in Canada for your $CAD account will save you tons of money

- if you are looking for indices traded as ETFs, many are now traded in Canada and you end up getting the conversion done by iShares or others. If you are buying for a long period of time, it might not be worth it because you will be paying management fees annually. But as a short term investment? Absolutely!

- Canadian Capitalist had discussed a strategy that might be liked by more advanced investors although it has to be used for fairly significant amounts and will not really work for RRSPs (at least not done exactly as suggested).

- Open a USD RRSP: This is by far my favourite method because USD investments will be bought and sold in US dollars so apart from the initial cost, you will not be paying such fees.  So you completely avoid the compounding effect. On the previous $20,000 example, the cost would be close to 2% of the initial 20K and the same thing at your retirement (hopefully on much more than 20K). Now unfortunately many brokers do not offer USD RRSPs but most are working on it. QuestTrade is probably the one we recommend that offers this valued option.So my question to you is: Are you aware of these costs and if so how are you dealing with them?

As announced last Tuesday, The Bank of Canada had increased its interest rate by .25%. While this is not catastrophic (it’s even good news to finally signal the exit  from this recession!), the rise in interest rates also comes with the fear of having inflation take over. As an investor, how do interest rates and inflation affect your investments?

Well while inflation will negate (or neccessitate) part of your yield (we have no control over it!), the increase in interest rates will negatively affect the market value of your bonds and will also influence your other asset classes.

Stock market: always a winner

When there is an increase in interest rates, this is usually a good sign for the stock market. At first, nobody on the Street (Bay or Wall Street for that matter) will be happy to see the interest rates on the rise. In fact, the markets will probably react negatively on speculation about a change in interest rates. However, if the rate go up, this means that the economy is doing well. Therefore, companies will show improved results and this is when the stock markets will star as the darlings at the dance.

As stocks grow faster than inflation, having a good portion of your money invested in the market remains the right thing to do.

Gold… not good..

As gold is known to be the perfect place for investors when they are afraid of the market, this is probably one of the worst places to invest your money when the investors regain confidence in the markets.

Historical stats show 2 things about gold:

#1 It demonsrates high volatility

#2 It doesn’t outperform inflation

This is why I am not a big fan of gold. I would rather buy gold mining companies or have a resources mutual fund (or ETF) that regroups companies working in the gold industry than buying the metal directly.

Money Market: get rid of it!

If there are people still parked in the money markets, they are really missing a great story. For those waiting for the big comeback of high short-term interest rates hear this: it’s not on the radar for at least another year. Therefore, the worst place to stash your money is definitely in the money market! When you think that ING is giving 1.2% right now… it doesn’t even cover inflation (and I am not even talk about after tax yield!).

Bonds; real rate interest bonds are the solution

If you want to stay in a secure investment area, I suggest you use your track investment apps to find real rate interest bonds. You can also use the investment services from your bank to establish a bond ladder so you will be covered against interest rate increases.

The problem if you don’t have a bond ladder is that you will always be tempted to play the interest rate markets. Trying to determine when it is the “right time” to invest and freeze all your money into a “good” rate. Don’t be a rate rat; invest intelligently.

And if you really don’t want to bother about interest rates and inflation, just go with real rate interest bonds that will track inflation. By keeping them to maturity, you will also avoid losing value due to an interest rate increase

While the PIGS (Portugal, Ireland, Greece, Spain) are creating a big mess on the stock market (creating a mess; isn’t that what pigs are good at anyways, right?), the price of gold is soaring. While I still think that gold is not the perfect place to put your money over the long term, there is still a good opportunity for speculation.  You can invest in gold different ways without actually buying the  physical bars or certificates

Gold Stocks

We Canadians are lucky  since we have several great gold producers available on our stock market. Buying gold producers is another way to benefit from the price of gold but also to count on solid management instead of pure speculation on the metal. However, you may consider selling gold producer once the price of gold has reach a peak.

Since gold producers will protect themselves against important gold price movements (through options and futures), you benefit from an additional protection if gold prices were to tumble.

Here are a few stock picks that could be interesting if you are looking for a promising gold producer (note: this is not a recommendation, just a stock trading idea ).

• Capital Gold TSE – CGC
• Semafo TSE – SMF
• Eldorado Gold TSE – ELD
• Alamos Gold TSE – AGI

Mutual funds

Another interesting way to diversify your risk while betting on gold is to buy gold oriented mutual funds. You will then benefit from the expertise and the knowledge from a team of portfolio managers who are looking at the price of gold on a daily basis. They may have a better chance to trade the right companies and also protect yourself from bigger losses if gold goes backwards:

• BMG BullionFund
• Sprott Gold Bar
• Dynamic Strategic Gold

ETF

You don’t really want to hedge your risk and you definitely want to make a play on gold? Then you should buy ETFs. They offer great liquidity and your trading fees are much smaller than if you buy gold bars . Here are 2 well known gold ETFs that you can trade:

• Horizon BetaBro HBU
• Claymore Gold Bullion CGL.UN

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

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.