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(TEH ENG KOON)
(TEH ENG KOON)

Earlier discussion

Investing with an online brokerage: Tips and tricks Add to ...

Gail Bebee: It's marketing and nothing more I think.



Joe: I like the idea of buying bonds directly because I can ladder them to suit my needs and also I can reduce risk by investing with the idea of holding them to maturity. Alas, I find that my discount broker (TD Waterhouse) has a limited offering and the markup for retail purchasers is high. Any suggestions as to how a small investor can access bond market in an efficient way. (I am not interested in ETF Bond funds because I want to hold bonds to maturity.)



Gail Bebee: Well, I've found the same issues with buying bonds directly. No easy answers here. My conclusion was to go with bond ETFs.



Shari MacNeill: When I sell a US stock can I keep the proceeds in a $US account with the online broker. I hate having to pay to transfer funds to Canadian currency and then pay to pay transfer fees again when I buy another US stock.



Gail Bebee: You should be able to hold U.S dollars in Canadian non-registered accounts. RRSP accounts, mostly not. Questrade and virtual brokers allow you to hold U.S. dollars in your RRSP.



Susan: I have $US from when I lived in the US, but now reside in Canada permanently. Would you transfer the funds into $CAN and invest here, or keep it in US funds and buy US Stocks?



Gail Bebee: This is a whither goes the currency exchange rate question. That is a big unknown. If you plan to stay in Canada and will be needing the money eventually in Canadian dollars, you might consider converting to Canuck bucks. If you do want to continue to invest in U.S stocks, I suggest leaving the funds in U.S. dollars moving them to your Canadian account and buying U.S. stocks in your Canadian non-registered account.



Irv: How do the typical costs of owning mutual funds compare online versus an account manager?



Gail Bebee: It depends on the mutual fund and how your account manager is compensated. If you pay an annual fees for advice, your account manager should be buying you so called F class funds, which have a lower MER because the cost of advice is stripped out. Online you shouldn't pay a sales commission but you often pay the same MER as the person with an adviser would. This is a big rip off. RBC and TD online have lower fees for some mutual funds bought online.



Walter: I do all my investing through a major on-line brokerage. The problem is availability of new product. Issues are almost always unavailable since you are at the "bottom of the food chain." Any advice?



Gail Bebee: Yes, we are at the bottom of the food chain. I don't have any advice. But, do you really want to buy an IPO? IPOs don't have the best track record in Canada. A federal government study, SME Financing in Canada 2003, SME stands for small and medium enterprises, reported that Canadian firms have low post-IPO survival rate e.g. of 95 companies with gross IPO proceeds between $1 million and $5 million, only 34 per cent survived over five years and had a positive book return with net assets worth more than the proceeds of the IPO.



Mike: So I'm with CIBC Investors Edge….they don't seem to have a savings account or pay interest on cash in the account. I'm comfortable with Money Market funds but they pay didly…I ended up opening a regular bank savings account to get my 1% interest…but I would rather the money in my investment account. Any suggestions?



Gail Bebee: These days, I don't think any brokers pay interest on cash in your account. The daily high interest savings accounts I mentioned earlier are one thought, but only pay 0.75%. For a little more risk, you could consider a short term government bond ETF such as the Claymore 1-5 year laddered government bond ETF. I think it pays around 2% currently, but that is not guaranteed.



Dan: Should you use stop loss on stocks you own? If so what are some rules of thumbs for setting and managing them?



Gail Bebee: It depends on what kind of investor you are. if you are a trader, then you'll want stop losses. Don't make them too tight ,or you will get sold out when you really didn't want to. It's an art to setting stop loss prices. You need to study the stock volatility and the company's industry to divine when a price change means you should sell. Personally, I focus on buying good stocks and holding them and I do not use stop losses.

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