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Technical analyst Donald Dony: 'Canada’s market may be a little different, but for example, if the rest of the world is going up, we’re not going to go down.'

Donald Dony, 59

Independent technical analyst and newsletter publisher

Portfolio: iShares S&P/TSX 60 Index Fund

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Since Me and My Money last looked at Donald Dony's investment strategy in October, 2009, the technical analyst has been doing a little travelling. And, delivering talks on investing in Europe and Australia, he says he's altered his approach to factor in how closely knit the major markets have become. "In Australia, people said they were separate from the rest of the world and, as long as China keeps growing, they would be okay," he says. "But I'd put up charts of a number of different indices and they couldn't pick theirs out, because they all move in sequence."

How that helps

Predicting where Canada's market is heading became a lot easier once he realized different markets move together. "There are so many world indices and ETFs, that it's easy to see whether as a group they are heading up or going down," he says. "Canada's market may be a little different, but for example, if the rest of the world is going up, we're not going to go down."

His approach

These days, for his own investing, Mr. Dony sticks to the Toronto Stock Exchange. In general, if his analysis shows markets heading up, Mr. Dony will be invested in the iShares S&P/TSX 60 Index Fund. If the signs are negative, well, he'll be largely or completely in cash. Investing this way, he says, takes currency concerns out of the equation, gives instant diversification, instant liquidity, a dividend, and "You get 60 of the biggest companies in Canada in a nice, neat little package."

His current position

Mr. Dony got fully invested in the middle of January, in part because of the so-called "January effect," which says that month's returns are a good indicator of what the entire year will be like.

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Best move

In 2006, Mr. Dony bought into an ETF that tracked the Shanghai index after his technical indicators told him it was on the way up, and in less than a year he had made a 40-per-cent return. "I hadn't expected it to move up so fast, but it took off like a bullet."

Worst move

In 2010, Mr. Dony invested in a leveraged ETF, the Horizons BetaPro S&P/TSX 60 Bull+ ETF. Using derivatives, the ETF is designed to give investors a return double that of the index. He was still thinking the bull market would continue, but then there was big drop, and he lost some 30 per cent, since the ETF gives investors two times the market's return not just on gains but on losses, too. "I learnt my lesson and will never go there again."

Advice

"First of all, be conservative and buy the index."

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Special to The Globe and Mail

Want to share your strategies?

tony.martin@sympatico.ca

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