Donald W. Dony, 57
Occupation: Financial technical analyst, living in Victoria
Portfolio: Claymore Gold Bullion Trust Fund, iShares Canadian S&P/TSX Capped Energy Index Fund, iShares Canadian S&P/TSX Capped Materials Index Fund and cash
The investor: Donald Dony worked as a stockbroker in the 1980s. Since 1993, he has been the principal of D.W. Dony and Associates Inc., a financial advisory firm. His investment newsletter, The Technical Speculator, is published once a month and can be found at technicalspeculator.com.
Technical analysis of stocks is a primary focus for Mr. Dony. He holds "the top global designation" of master of financial technical analysis (MFTA) and teaches (and develops) courses on technical analysis for the Canadian Securities Institute and other organizations.
The investing approach: "My first step is to look at the big picture," Mr. Dony says. "I trade using a macro view of business cycles." That means being in stocks and/or commodities during economic upswings and in cash during downswings.
For timing of trades, he uses technical analysis. Of note, his long-term portfolio holds the iShares S&P/TSX 60 Fund when the S&P/TSX 60 index is above its 70-week moving average; when the index is below this moving average, his portfolio holds cash instead.
Moving averages smooth out short-term fluctuations in price or index series and help identify underlying trends. They reduce the risk of getting "whipsawed," of buying into a trend only to discover it was a temporary aberration.
"This moving average … got me out of the markets in January, 2008," he explains. "Currently, the 70-week moving average is starting to signal a buy. However, I am still sitting with about half my portfolio in cash and waiting to buy the iShares S&P/TSX 60 ETF in late October or early November [when he expects a low in the market.]rdquo;
His short-term portfolio is composed of exchange-traded funds (ETFs) tracking the gold, energy and raw materials sectors. He believes leadership shifts between natural resources and stocks "approximately every 14 to 20 years" and that natural resources took the lead in 2001.
The trigger for his positions in commodity ETFs was the weak U.S. dollar. "A falling U.S. dollar creates inflation, lifts material prices and slowly increases interest rates. … Gold leads the other commodities. The metal is the most sensitive to the dollar's movements."
Best move: "Buying the iShares FTSE/Xinhua China 25 Index in 2005 at $20 and holding until late 2007," when he sold at $59.
Worst move: "I held the Horizon BetaPro S&P/TSX Double-Bear ETF too long in 2008, realizing too late that this leveraged ETF does not track the underlying index very well for periods longer than a day."
Advice: "Most investment funds underperform the index. Investors can simply buy the index through an ETF and outperform the vast majority of professionally managed funds. Index ETFs have very low MERs. … There is no front-end, back-end or trailing commissions to pay."
Special to The Globe and Mail
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