We asked Saltzman to rate four popular models to find out.

1. iPhone 4
Carrier: Bell, Telus, Rogers
O/S: Apple iOS4.1
Memory: 16GB or 32GB
Screen: 3.5 inches
Available Apps: 250,000
Cost
Phone only (no contract): $659 (16GB); $779(32GB)
Total 3-year contract (includes phone + monthly voice/data plan*): $2,069 and up (32GB model)

Apple’s ground-breaking iPhone still tops most wish lists, but thanks to a starting price of $659, the cost to own this market leader is steep. Still, Saltzman considers it the “quintessential smartphone,” especially because of the large selection of apps. Apple’s innovative FaceTime feature, which allows video conferencing over WiFi networks, is a big plus.

2. Samsung Galaxy S Vibrant
Carrier: Bell, Rogers
O/S: Android 2.1
Memory: 16GB included, expandable to 32 GB
Screen: 4 inches
Available Apps: 100,000
Cost
Phone only (no contract): $499
Total 3-year contract (includes phone + monthly voice/data plan*): $1,949 and up

Featuring a four-inch Super AMOLED touchscreen, this phone has the world’s brightest display. It boasts many of the same features found on the iPhone, but at a considerably lower price point. Images and video are stunning and the Galaxy uses a new Swype method of touchscreen typing, which lets users slide their fingers around the keyboard to spell out words in record time.

3. Sony Ericsson Xperia X10
Carrier: Rogers
O/S: Android 1.6
Memory: 8GB (expandable to 32GB)
Screen: 4 inches
Available Apps: 100,000
Cost
Phone only (no contract): $ 549
Total 3-year contract (includes phone + monthly voice/data plan*): $1,949 and up

With a great MP3 player and high-resolution camera, this device offers a four-inch, scratch-resistant screen—which we found quickly smudged, making it hard to read. While the battery life seemed short, it did offer two unique applications: Timescape, which corrals all your updates into one handy place, and Mediascape, which manages your photos, videos and music.

4. BlackBerry Torch
Carrier: Bell, Telus, Rogers
O/S: Blackberry OS 6.0
Memory: 4GB (expandable to 32GB)
Screen: 3.2 inches
Available Apps: 10,000
Cost
Phone only (no contract): $609
Total 3-year contract (includes phone + monthly voice/data plan*): $1,949 and up

RIM’s latest device provides the comfort of a QWERTY keyboard, top-notch security, and touch-screen functionality. But the phone is heavy, and it’s too easy to inadvertently tap the slider-screen—which can disconnect a call or open an app. Also, the 5MP camera only shoots VGA-quality, as opposed to HD.

Bottom Line: If you’re an app-keener and want a phone that will impress your friends, then stick with the iPhone. However, you can get most of the iPhone’s features at a lower price-point with the Samsung Galaxy S.

]]> http://www.moneysense.ca/2010/11/26/iphone-killers/feed/ 67 http://www.moneysense.ca/2009/12/18/its-time-to-give-trusts-another-try/ http://www.moneysense.ca/2009/12/18/its-time-to-give-trusts-another-try/#comments Fri, 18 Dec 2009 17:13:00 +0000 Suzane Abboud http://20091101_20007_20007 Remember income trusts? They were all the rage a few years ago. At least they were until October 2006, when the government suddenly announced it would tax them. Their value plunged overnight and countless Canadians were outraged as they watched their retirement savings get decimated.

It’s putting it mildly to say that income trusts are no longer popular. During the past three years, the total assets invested in income trust funds has shrunk by a stunning three quarters, to a meagre $5 billion. But now that some time has passed, it’s worth asking whether this massive sell-off was justified. After all, bargains often lurk among unpopular investments, and some income trust funds are now offering juicy annual cash distributions as high as 5% to 7%.

I know, I know. The income trust world is marred with uncertainty. But things may not be as bad as you fear. As a matter of fact, income trusts today look less risky to me than regular equities, with more upside potential than downside. Here are five reasons why:

The market has already discounted the extra tax. You should rest assured that nothing drastic will happen when the new income trust tax comes into effect on January 1, 2011. The market almost immediately discounted this event as soon as the government announced the change. There has now been plenty of time for the market to reprice trusts according to the new tax structure.

Even with the tax, trust funds will yield more than most dividend funds. Yes, income trusts will have less surplus cash to distribute. By my estimate, the new tax will knock out a good two percentage points from your fund’s annual income. But even after that haircut, the trust’s income spinning structure is likely to deliver a higher yield than you would get from a normal equity or dividend fund.

Trusts can now convert painlessly to corporations. Since the 2006 announcement, the federal government has passed a new law that allows income trusts to convert into corporations with minimum tax implications. Because of that, any conversions that take place in the future should not result in losses to you as an investor. What will change is the legal status of some of your fund holdings, from trusts to high-yield equities. But well-run businesses will continue to deliver value to investors, whether they are structured as trusts or corporations.

You can profit from mergers. It’s widely expected that there will be more mergers and acquisitions in the income trust field. But if one of the trusts held by your fund manager is acquired, it will most likely take place at a premium. This means that there’s often a potential for moderate capital gains.

Income investments will get more popular. The idea that companies should pay out as much as they can in dividends is gaining traction. Investors are getting weary of executives who retain cash to fund questionable expansions that satisfy their personal egos, but don’t add value for shareholders. As well, the increasing number of retired baby boomers is creating more demand for income investments. So it looks like trusts are here to stay. And as demand for them goes up, so could their value.

Yes, the income trust universe as we now know it will change. The number of available trusts will keep shrinking for a while yet. A number of income trust funds will expand their mandate to include high-yield equities (and possibly high-yield bonds) to broaden their investment scope. However, this should not have any negative effect on your wallet. And in the meantime, many trust funds have awfully attractive yields.

As with any investment, there are risks. Like stocks, income trusts were shaken by the market crash, and there may be further short-term fluctuations in their value before the markets stabilize. Further, their cash distributions are essentially dependent on the net cash flows generated by the underlying trusts. Those cash flows are dependent on the overall economic situation. During times of economic growth,surplus cash flow results in higher cash distributions to investors, and vice versa. So when the economy foundered over the past year, it forced several income trusts to cut their distributions. There is a risk of further cuts if we have a prolonged period of slow growth, or lower oil and gas prices. However, the general consensus is that the worst is behind us.

Interested in a 6% or 7% yield? The table (below left) provides a list of well-managed, relatively cheap income trust funds, with diversified portfolios. I have not included any income trust exchange-traded funds, because I find that the S&P/TSX Income Trust Index upon which they are based is overloaded with energy trusts. Further, in these uncertain times, I feel that you need a good fund manager who knows how to select sound trusts that can sustain further economic weaknesswithout cutting cash distributions.

Market prices may go up and down in the short term. However, the ultimate value of your investment will be determined by the net income that you derive from it. That’s why, when compiling my list, I focused on the funds with the highest income distributions. To calculate the estimated yield, I divided the annualized net income distributions of each trust by the net asset value, and disregarded capital gains and return of capital. If you’re interested in funds that will spin off regular income for your retirement, you may find some of these funds interesting, but be sure to do your own research too.

Trustworthy Contenders
These income trust funds are well-managed and relatively cheap — and likely to spin off a higher yield than dividend funds.

Source: Fundata Canada Limited and FundScope Limited

This proven strategy (sometimes called “index investing”) has exploded in popularity over the last decade thanks to the arrival of exchange-traded funds, or ETFs. These funds are similar to mutual funds in that they are pooled investments that hold a number of stocks or bonds. However, unlike mutual funds, ETFs trade on a stock exchange, so you can buy and sell them throughout the day. And rather than being run by a high-priced manager who tries to beat the market by picking winning stocks, most ETFs deliver returns similar to the overall market by buying virtually every stock in an index. As one proponent of the strategy puts it, instead of looking for the needle, you’re buying the haystack.

I’m pleased with my new portfolio, but I have to admit that building it wasn’t as easy as I expected. Until about three years ago, choosing ETFs was dead simple, because one company— iShares—had the Canadian market largely to itself. Today, there are three additional ETF sponsors in Canada—Claymore Investments, BMO Financial Group and Horizons—and the four companies together offer more than 100 different funds. There are also more than 800 other ETFs available on American exchanges. The variety is welcome, but it makes things more confusing for investors, including me. At least half a dozen times, I bought an ETF that looked good, only to sell it weeks later when I discovered one that followed a better index, was more broadly diversified, or had a lower fee. As a result, I blew a few hundred bucks on trading commissions. But just because I wasted my time and money, that doesn’t mean you have to.

I’d like to walk you through the important questions you need to ask when choosing the right ETFs for your investment goals. You’ll learn how each fund chooses the stocks or bonds it holds, and why you should consider fees, diversification and the effect of foreign currency exchange. Some of this information is complicated, but we’ve organized it into easy-to-follow sections, so you can get all the detail you want, or simply skip ahead to our model ETF portfolios (see “Ready to build your own portfolio?”), where I’ve done the heavy lifting for you. Ready to go? Then let’s begin with the first question.

Which index do you want to follow?

Indexes have been around since Charles Dow created the famous Dow Jones Industrial Average in 1896. Simply put, an index is a group of stocks or bonds used to measure the performance of a particular market. For instance, the Dow includes just 30 large American companies from various sectors, but it is considered a barometer of the entire U.S. stock market. The S&P 500 and the Russell 1000—which include 500 and 1,000 stocks, respectively—are much broader indexes of large American companies. The S&P/TSX Composite Index, which includes about 200 companies, is the most popular benchmark for Canadian stocks. Other indexes measure the fixed-income market, such as the widely used DEX Universe Bond Index, which covers both government and corporate bonds.

An ETF attempts to deliver the same return as its underlying index, and it does this in a straightforward way: by owning all (or almost all) of the stocks or bonds in that index. Whereas a mutual fund manager might pick the 15 or 20 Canadian stocks he thinks will outperform the S&P/TSX Composite, an ETF would simply buy all 200.

This was easy to understand when there were just a few ETFs and they all used well-known indexes. But today there are thousands of indexes tracking every region, asset class, market segment and investment style. You can find indexes and ETFs that track Vietnamese stocks, the wind power sector, the Indian rupee, and the price of corn.

It’s easy to learn which index an ETF tracks: just visit the sponsor’s website (see “The ETF marketplace”) and find the section devoted to that fund. The index is always listed prominently, usually with a full explanation of what it includes. The more difficult question is whether the index is of any value to investors.

“People can use common sense for the most part. If it sounds weird and wacky, it probably is,” says Mark Yamada, president of PUR Investing, a Toronto firm that builds custom ETF portfolios for its clients. One recently deceased ETF included only Wal-Mart suppliers. “There was another one for suppliers to the Beijing Olympics. Somebody must have thought these were good ideas.”

Couch Potato investors looking to build a basic portfolio should steer away from niche products and stick to indexes that follow the major asset classes, such as Canadian stocks, U.S. or international stocks, and government or corporate bonds. If you’re including only three or four funds in your portfolio, each should be as broadly based as possible.

How does the index choose its holdings?

The most important things to understand about an ETF’s index are how it chooses the stocks or bonds it includes, and what proportion of the index each will comprise.

Traditional stock indexes select the largest and most frequently traded companies, and then weight them by their market capitalization. (You can find a company’s “market cap” by multiplying the number of outstanding shares it has by the current price of each share.) This method produces what’s called a “cap-weighted” index, where the bigger the company, the greater its influence. This is the method used by most of the indexes you’ve heard about, such as the S&P/TSX Composite or the S&P 500. iShares uses cap-weighted indexes for almost all of its equity ETFs, including its Canadian Composite Index Fund (TSX: XIC) and the Canadian S&P 500 Index Fund (TSX: XSP).

Cap-weighted indexes are the simplest to create (and the cheapest to buy), but critics point out an inherent flaw: if a stock is overvalued, it gets a bigger share of the index, while undervalued stocks get underrepresented. That makes cap-weighted indexes vulnerable to bubbles: during the 1990s, technology companies went from 5% of the cap-weighted S&P 500 to almost 30% as their stock prices ballooned, and here in Canada, Nortel alone grew until it made up more than 36% of the S&P/TSX Composite. When it turned out that tech companies were wildly overvalued, the bubble burst and ETFs tracking cap-weighted indexes were hammered.

To avoid such situations, a newer strategy called “fundamental indexing” was introduced a few years ago. In this method, companies are chosen not by their size, but according to other characteristics, such as their dividend payments, cash flow, sales and book value. The fundamentally weighted FTSE RAFI Canada Index is the benchmark for Claymore’s Canadian Fundamental Index ETF (TSX: CRQ). Using this methodology makes a big difference: the mining company Teck Resources, for example, makes up about 1.3% of a cap-weighted index, but more than 8% of Claymore’s. In general, this strategy places greater emphasis on smaller companies and those that appear to be underpriced.

Fundamental weighting has become a hot topic among ETF investors. Its proponents argue that between 1984 and 2007 using such a strategy would have added an extra 2% to returns in the U.S., and an extra 2.7% in Canada, with lower risk to boot. (If you’re interested in learning more, read The Fundamental Index, by Robert D. Arnott.) So far, that advantage has continued. Since Claymore launched three fundamental ETFs in 2006 and 2007, all of them have outperformed their cap-weighted counterparts from iShares.

Still, not everyone is convinced. “I appreciate the critique of cap-weighted indexing, but it doesn’t follow that weighting by company fundamentals is necessarily better,” says Norbert Schlenker, president of Libra Investment Management in Salt Spring Island, B.C. It’s always possible to identify a strategy that worked in the past, but there’s no guarantee it will hold up in the future, he says. “I certainly wouldn’t want people to expect an extra 2% or 3% a year by investing this way.”

There are other weighting strategies, too. BMO has an exchange-traded fund that follows the Dow Jones Industrial Average, which is weighted by price: a stock trading at $20 per share has twice as much influence as one trading at $10. Claymore offers an “equal weighted” ETF whose index tracks the financial sector by allotting 10% each to 10 banks and insurance companies.

There’s no simple answer to which methodology is best, but keep in mind that cap-weighted ETFs are almost always the cheapest, so you should pay more for a different strategy only if you are confident it will deliver higher returns

How well diversified will you be?

An ETF should give you wide exposure to the asset class you want in your portfolio. To see if it does, start by looking on the fund’s web page to see how many securities it holds.

You’ll find that the number of holdings varies a lot. For instance, if you look at the iShares Canadian Composite ETF (TSX: XIC), which is pegged to the S&P/TSX Composite Index, you’ll find it includes 204 stocks. On the other hand, the Claymore Canadian Fundamental Index (TSX: CRQ) holds only 65. But don’t be fooled into thinking that makes XIC radically more diversified. Because XIC is cap-weighted, 20 large companies make up close to 60% of the index, and all of these are included in CRQ. So even though the iShares ETF includes three times more stocks than its Claymore counterpart, most of those stocks won’t have a huge effect on performance.

Another measure of diversification is the percentage that each fund holds in the various business sectors. Here you’ll notice some significant differences: about half of CRQ is made up of banks and other financial institutions, while XIC is more heavily tilted to energy and materials. That will have a greater effect on performance than the overall number of stocks in each fund.

Does your ETF actually hold what’s in the index?

Some of the most popular ETFs in Canada track the price of natural gas, crude oil, gold and silver. If you decide to invest in one of these commodity funds, it’s important to understand how they work.

Say, for example, you want to add a gold ETF to your portfolio and you spot three possible choices: Horizons BetaPro Comex Gold (TSX: HUG), Claymore Gold Bullion Trust (TSX: CGL.UN), and iShares Canadian Gold Sector (TSX: XGD). Look further into these products and you’ll find they hold entirely different things.

Most commodity ETFs do not physically hold precious metals, oil or grains. Rather, they hold futures contracts that give them the right to purchase the commodity at a specified price on a given date. That’s how Horizons’ commodity funds work. Claymore’s Gold Bullion Trust, however, really does hold gold bullion in a vault. (Technically it’s a “closed-end investment trust,” not an ETF, but it trades the same way.) The iShares ETF, meanwhile, isn’t a commodity fund at all: it holds stocks in 28 gold-mining companies in North America.

What are the fees?

ETF management fees are generally a fraction of those charged by mutual funds. But not all ETFs are bargains.

Cap-weighted ETFs usually have the lowest fees because they are the easiest to manage. The cap-weighted iShares Canadian Large Cap 60 (TSX: XIU) charges just 0.17%, while Claymore’s CRQ holds almost all of the same stocks, but has a management expense ratio (MER) of 0.65%. Of course, if you believe that fundamental weighting can add at least half a point in returns, as it has in the past, then the higher fee is good value.

Some asset classes are inevitably more expensive than others. Small-cap ETFs, which often hold more thinly traded stocks, tend to have higher fees than those tracking large companies. ETFs holding international stocks are often pricier than those holding U.S. or Canadian equities.

ETFs that track a single sector often charge high fees despite holding few companies, and may not be worth it at all. The iShares Canadian Tech Sector (TSX: XIT) includes just five stocks, yet charges an annual fee of 0.55%. If you’re planning to invest in this sector for the long haul, you should just buy the stocks directly.

Keeping fees to a minimum is especially important in a bond ETF, where returns are usually lower to begin with. “The link between higher returns and lower expenses on bond funds, including bond ETFs, is close to perfect over the long run,” says Schlenker. “So you always want to look for a lower expense ratio.” Just make sure you compare apples to apples. For example, Claymore’s 1-5 Year Laddered Government Bond (TSX: CLF) is cheaper than the iShares Short-Term Bond (TSX: XSB), but the former holds only government bonds, while the latter also includes corporate bonds. (Claymore has a separate fund, CBO, that holds only corporates.

If you want rock-bottom fees, take a serious look at the ETFs trading on American stock exchanges. Vanguard’s Total Stock Market (NYSE: VTI), for example, charges a microscopic 0.09% and holds more than 3,300 stocks.

Does it use currency hedging?

Before you buy a U.S. equity ETF on an American exchange, though, you need to understand that you’re adding an extra layer of risk. If the U.S. dollar falls against the loonie, the value of your investment will fall with it. Canadians saw that happen in 2003 and 2004, when the U.S. stock market was on fire, but Canadians who held those stocks had their returns virtually wiped out as the loonie soared. Of course, currency fluctuations work both ways: holding stocks in U.S. dollars would have cushioned your losses during last year’s market tumble.

To reduce the effect of these swings, many Canadian ETFs that hold foreign stocks use a strategy called currency hedging. The managers use complicated financial instruments designed to smooth out currency fluctuations and deliver the full return of the underlying stocks in Canadian dollars

The problem is that hedging comes with a cost—it can add about 0.15% to 0.5% to an ETF’s expenses. What’s more, hedging is not very precise. When currency fluctuations are gradual it can work well, but if the Canadian dollar rises or falls sharply over a few weeks, investors can take a bath. That’s what happened this year to folks who owned the hedged version of the iShares S&P 500 Index Fund (TSX: XSP). Over the 12 months ending in August, the index fell about 20.5%, but XSP lost close to 27%. Two sharp rises in the loonie caught the managers off guard, and it cost investors a lot. That’s why you should think twice about paying for a feature that may backfire.

Norbert Schlenker encourages investors to consider their time horizon: over long periods, currency fluctuations tend to even out, so investors with 20 or 30 years until retirement may be better off buying a lower-cost ETF in U.S. dollars. Second, having some greenbacks in your portfolio is a good idea if you plan to travel when you retire. “Even if you expect to stay in Canada and spend all your money here, you can’t simply dismiss what might happen if the value of the Canadian dollar declines. You’ll still have exposure to things that are priced in U.S. dollars, so you should have some investments outside Canada.”

How often is the ETF traded?

The cost of an exchange-traded fund is also affected by its liquidity—that is, how often it is bought and sold.

Just like stocks, ETFs have two different prices: the “ask price” is what you’ll pay if you’re buying, while the lower “bid price” is what you’ll get if you sell. The “bid-ask spread” is the difference between the two, and the wider the gap, the greater the loss to investors on both sides of the trade. The bid-ask spread depends on two main factors: the number of outstanding shares and the average daily trading volume. You can find both of these numbers on any website that provides comprehensive stock quotes.

The Canadian large-cap ETFs from iShares and BMO offer a dramatic example. iShares’ XIU, which is the oldest and largest ETF in Canada, has more than 600 million units outstanding, and more than 12 million change hands on a typical day. Its bid-ask spread is usually just one or two cents. On the other hand, BMO’s Dow Jones Canada Titans 60 (TSX: ZCN-T), which debuted in June, has just over 200,000 units in the marketplace and often trades only a few hundred shares a day. The BMO fund’s fee is slightly less than XIU, but that difference may be outweighed by higher trading costs due to the lack of liquidity.

There’s another reason to look at trading volume: ETFs that rarely trade earn lower profits and run the risk of being shut down. A Canadian ETF should be trading at least a couple of thousand shares a day if it is to remain viable.

How closely does the ETF track its index?

Many ETFs do an outstanding job of mirroring the return of their underlying indexes. Since its debut in 2000, the U.S. version of the iShares S&P 500 Index Fund (NYSE: IVV) has strayed from its benchmark by just 0.06% annually. Unfortunately, not every ETF has such a remarkable record.

The difference between the performance of an ETF and that of its index is called the tracking error: if the index is up 8% and the ETF returns 7.2%, the tracking error would be 0.8%. You should expect an ETF to trail its index by at least as much as its management fee, but sometimes the variance is much more significant.

For example, the U.S. version of the iShares MSCI Emerging Markets Index Fund (NYSE: EEM, recently launched in Canada as ticker XEM) has posted large tracking errors over the past three years, lagging its index by 4.8% in 2007, besting it by 3.3% in 2008, and trailing again by more than 9% so far this year. Meanwhile Vanguard’s Emerging Markets ETF (NYSE: VWO) follows the same index with little tracking error. The reason is that the index includes 745 stocks, but the iShares ETF holds fewer than 400 of them. Buying 745 stocks in emerging market countries can be prohibitively expensive, so iShares selects only the largest and most influential ones. The strategy is a trade-off—increasing tracking error, but lowering costs—and over the long term it should even out. If your goal is to simply track the index as closely as possible, however, the Vanguard ETF does a better job.

Admittedly, an ETF’s tracking error isn’t always easy to determine. iShares includes a Tracking Error Chart on its website, while websites such as Google Finance and Yahoo! Finance allow you to enter an ETF’s ticker and the name of some major indexes to create a line graph comparing the two. Another useful resource is the ETF Screener on the PUR Investing website, which compares every Canadian ETF in five categories, including tracking error.

Ready to build your own portfolio of ETFs? See our Buyer’s Guide to ETFs chart.

The best part is you get to meet with the lawyer for 30 minutes and it won’t cost you more than taking the family to McDonald’s. Often your bill will only amount to $20 or $40. In Ontario it’s only $6 and in Alberta and Manitoba it’s free.

What can you get done in 30 minutes? Quite a lot, actually. Since most people don’t know where to begin, they’re often only looking to get basic questions answered. They want to know, Do I have a case? What do I need to do next? Do I even need a lawyer? It lets them get oriented and decide their next step, says Kelly Robertson, who co-ordinates the lawyer referral service in PEI for that province’s Community Legal Information Association.

Don’t expect to get any paperwork done, but you’ll get solid advice, says Allan Kaplan, a Toronto lawyer who’s part of the lawyer referral service in Ontario. “I’m giving the same kind of advice I would give to paying clients.”

The only downside is that because such services are voluntary for lawyers, only a small number take part. So depending on how busy they are, it may take a while to get an appointment. And if you live in Saskatchewan or New Brunswick, you may have to keep the Yellow Pages handy — neither province currently has a lawyer referral service at all.

Guaranteed investment certificates get a bad rap. The main reason is the low rates offered by the big banks: at press time, CIBC and Scotiabank offered one-year GICs at a paltry 0.4%, while a five-year certificate at Royal Bank would net you just 2%. That hardly gets your pulse racing, especially compared to mutual funds or exchange-traded funds (ETFs) holding short-term bonds, which yield about 4%.

But it’s an unfair comparison. First, you can do much better with GICs if you enlist the help of a deposit broker. In late September Tom Glover of GIC Broker.com was offering his clients one-year GICs at 1.275% and five-year GICs at 3.3%” if you were tucking away $25,000, he could get you 3.8%.

We hear you scoffing. Even 2.5% or 3% annually from a GIC sounds underwhelming. But when you consider risk and costs, whatever edge short-term bond funds might have over GICs can quickly disappear:

Bonds are riskier

Short-term government bonds — those that mature in less than five years — will drop in value if interest rates go up. Corporate bonds carry the added risk of default. Meanwhile, GICs are insured by the federal or provincial government, so you cannot lose your principal.

Bonds can incur capital losses

The current rate on three- to five-year government bonds is less than 2.5%. Bond funds are able to pay yields of 4% because they purchased their holdings for more than face value. But when these bonds mature, they will be sold at a loss, which will lower the value of the fund.

Bond funds have management fees

Bond mutual funds in Canada often charge over 1% in fees, which quickly cuts a 3% return by a third. When you buy a GIC, you pay no commission and no annual fee, so you get the full return on your investment.

A joint account is a big step on the journey from two separate lives to living as one. Getting one shows you are committed and trust each other. Practically speaking, it can simplify paying expenses and help you accumulate money for common goals. Plus, if one person passes away, an account set up with right of survivorship means the surviving partner can access the funds without going through probate. But giving up sole control of your finances can be tough to do. So before you move forward, you should have some serious discussions with your mate.

First, you should make sure you and your partner see eye-to-eye about your overall financial goals, says Karin Mizgala, a fee-only financial planner who sees couples in British Columbia. “Often the woman wants to get a plan in place for kids and a house, but the man hasn’t been terribly on top of his finances. She tries to initiate some conversations, and there’s resistance. Those are alarm bells that a lot of women just ignore.”

If you find you really don’t trust your partner, it may be a sign of a deeper problem. “You have to take a chance in any relationship,” says financial consultant and author Ruth Hayden, “but if you’re worried about protecting yourself from your partner, for goodness sake, don’t make a commitment yet. Something’s off.” If that’s the case, you may want to slow down, and address the underlying trust issues first.

If you decide to go forward, it’s fine to ease into it. Couples can start by using the joint account for smaller expenses, such as restaurant meals and groceries, then gradually expand its use to include all of the common expenses, including rent or mortgage payments.

The best strategy is for each person to keep their individual bank accounts in addition to one common joint account. Mizgala recommends that couples have their paycheques deposited into the joint account, and determine a fixed amount — say $500 a month — that will be automatically transferred into each partner’s personal account to spend as they like.

“That’s your money and your husband or wife can’t make any comments about what you spend it on,” Mizgala says. “If she wants to spend it on spas and magazines, he has no say. If he wants to buy a colour TV or something she may not approve of, she can’t say anything. There’s no guilt.”

In the end, Claire and Darrell Filafilo found that having a joint account worked out just fine. “I knew exactly when money was coming in, and I was able to have better control of everything through the central account,” says Claire. Today, 14 years after they got married, they still share the same account.

It’s a fascinating read, and strangely familiar. Roth complains about the 1920s run-up to the Depression—the inflated real estate prices, the crazed stock market infected with greed. In 1931 he writes of the pain of watching people’s homes repossessed by banks. Two years later, Roth bemoans President Roosevelt’s New Deal program (the stimulus package of its day). He worries that massive deficit spending will drive up inflation. By 1937, Roth is beside himself. After a brief recovery in 1935-36, the economy is sinking back into a morass. He fears the Depression will never end.

It’s easy to feel like Roth today. A year after the market crash, we seem to be in recovery. Then again, economists are warning about a nasty double-dip just around the corner. If nothing else, we’re in for years of sluggish growth. Did we not learn anything from the past? Perhaps not as a society, but for individuals, the crisis of the last year has been packed with useful lessons:As you near retirement, there’s no substitute for money in the bank. The great American financial planner and author William Bengen once referred to two types of retirees: the “black holes” and “the stars.” The black holes are people who happen to hit retirement age at the start of a downturn, such as in 1929, 1946 and 1973. In some cases these people lost half their investments upon retirement.

The stars, on the other hand, are those who were lucky enough to retire during the early stages of a boom. Someone who retired in 1950, for instance, would have seen a return of 12.9% compounded over the next decade. The black holes didn’t do anything wrong, and the stars didn’t do anything particularly right. How they fared in retirement had a lot to do with dumb luck.

You can’t control what the market does after you retire, but you can control how exposed you are to its roller-coaster ride. That’s why as you get older, you should put a higher and higher percentage of your portfolio into bonds and GICs. Tom McCullough, president of Northwood Family Office, a Toronto-based adviser to wealthy clients, points out that an equity investor who lost 24% during the downturn would have suffered just a 9% decline if half of his money had been in bonds.Pay close attention to your investments. No one else will. One of the striking things about Roth’s Great Depression diary is his growing frustration with economists for not seeing the crisis coming or offering useful direction. Eventually he gives up, concluding that people need to do their own thinking. His advice is just as relevant today as it was back then. Before the crash, too many investors assumed their adviser would warn them and protect their money. And many were surprised to learn just how risky their investments were. If there’s one thing we’ve learned it’s you have to pay closer attention to where your money is invested. “You are responsible for preserving your assets. No one else will do it for you,” says Jim Otar, founder of RetirementOptimizer.com.

Sometimes there’s nowhere to hide. If you were invested in the stock market last year, you lost money. It’s that simple. So don’t beat yourself up. Even value stocks and high-yield stocks, which have provided some shelter in past bear markets, didn’t do well this time, says Norm Rothery, chief investment strategist at Dan Hallett & Associates. Uncharacteristically, the stocks that did the best were growth stocks and dividend growth stocks. Not that those provided much solace either. While value stocks crashed by 62% and high-yield stocks by 57%, growth stocks still dropped more than 46%.

Sobering as that last point may be, there’s room for optimism. Consider Roth. Sure, he endured the Great Depression, but by the time he died in 1978 he’d witnessed the great post-war boom too. So relax. Just as all economies crash, recessions, no matter how great they are, eventually pass.

Benjamin Graham had the answer. You should help out manic-depressive investors. Buy when they rush to sell. Sell when they line up to buy. That’s why I suggested that it was a good time to buy stocks in MoneySense last February. As it happens, my timing was dead on, because the market hit bottom in March and it’s climbed smartly since then. Today’s higher prices also mean that I’m now more cautious on the markets than I was in the spring.

But I’m still keen on individual stocks. To find interesting candidates I turn to Graham’s Simple Way. So far, the results have been good. If you had purchased equal dollar amounts of each Simple Way stock for your RRSP and rolled the profits into new Simple Way stocks every year, you would have enjoyed a 45% gain in 70 months, not including dividends. Over the same period, the S&P500 dropped 8%.

I regularly track Graham-inspired techniques for clients and, at the start of March, I reformed the Simple Way portflio. You’d have done well to buy in the spring because the new portfolio was up 73.4%, not including dividends, by the start of October. So, while Graham’s stocks got beaten up with the rest of the market last fall, they also snapped back swiftly.

Graham’s aversion to debt helped investors avoid dangerous situations over the last few years. More specifically, Graham wanted his stocks to have leverage ratios (the ratio of total assets to shareholders’ equity) of two or less. That single requirement steered investors away from highly leveraged banks and other financial stocks which got crushed in the collapse.

Graham also wanted his Simple Way stocks to be cheap. He sought stocks with earnings yields at least twice as large as the average yield on long-term AAA corporate bonds. The yield on 20-year AAA U.S. corporate bonds was 5.22% when we selected this year’s batch of Graham stocks. So, stocks pass the test if they have earnings yields of 10.44% or more.

When it came to selling, Graham suggested waiting for either a 50% profit or for no later than the end of the second calendar year after purchase. To make things even easier, I take the more straightforward approach of selling the previous crop of Graham stocks whenever a new bunch is selected.

With Graham’s criteria in hand, I useda stock screener to find a short list of interesting candidates. I narrowed the list down by focusing on the 10 cheapest stocks in the U.S. with market capitalizations of more than $500 million. (All figures are in U.S. dollars and as of October 2.)

The 2009 bargain bin contains three heath-care stocks. Offering the highest earnings yields are Gentiva Health Services (GTIV, $24.18), which provides home nursing, and biotech firm OSI Pharmaceuticals (OSIP, $34.16), which focuses on cancer, diabetes and obesity drugs. Offering a slightly lower earnings yield is Healthspring (HS, $12.15), which specializes in managed care for Medicare patients in the U.S.

Oil & gas contract drillers, and offshore support service firms, are also well represented on this year’s list. Noble (NE, $36.15), Rowan (RDC, $21.63), and Ensco (ESV, $40.00) all drill for crude offshore. Noble happens to be the largest Graham stock this year with a market capitalization of $9.8 billion. Ensco and Rowan are the second- and third-largest respectively. Tidewater (TDW, $45.27) and GulfMark (GLF, $31.21) are in the related business of providing vessels and marine support services to the energy industry.

Moving away from bubbly crude, CNA Surety (SUR, $16.16) provides commercial and contract surety bonds throughout the United States. Finally, in a blast from the Internet past, EarthLink (ELNK, $8.47) rounds out the Top 10 list. While it isn’t a growth story, the company provides legacy dial-up Internet connections to consumers, sports a 6.6% dividend yield, and a strong balance sheet.

I have high hopes that Graham’s Simple Way will continue to do well in the long run, but all the usual warnings apply. Use Graham’s list as a starting point for further research and not the final destination. Don’t expect to outperform the market each and every year. And keep in mind that we’ve already seen a big bounce, so the bargains are starting to disappear. m