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investor clinic

Globe and Mail reporter John Heinzl.The Globe and Mail

We recently sold our house and will be renting for the near future in the Toronto area. I now have a sizable amount of cash and I am thinking I will pay half the mortgage on our investment property and invest the balance. Is this a bad time to dump a lot of money into the stock market?

Let me get out my crystal ball … oops, sorry, it seems to be broken.

The truth is I have no idea what the stock market will do next week, next month or next year. Nobody does. The only thing I'm comfortable predicting is that, over the long run, the market will rise.

Rather than worry about the market's short-term direction, I suggest you focus on building a properly diversified portfolio. You can accomplish this with low-cost index mutual funds, exchange-traded funds or – if you have the time and knowledge – a portfolio of individual companies. (For some ideas, check out my Strategy Lab model dividend portfolio at

I'm a big fan of stocks that pay dividends and raise them regularly. One reason is financial: Studies show that dividend-growing stocks have produced solid returns historically. Another reason is behavioural: When the stocks or funds you own pay a regular dividend and that dividend grows, it's a powerful incentive to stay invested. As the old saying goes, it's time in the market, not timing the market, that creates wealth.

If putting a big chunk of cash to work all at once makes you nervous, you could always invest your money in stages – a little bit now, a little more a few months from now and so on. If the market goes for a tumble, you'll be glad you didn't jump in with both feet. However, studies have shown that the lump-sum approach produces the best results on average; that only makes sense, given that the market's general direction is up.

Whatever you decide, it's important to remain focused on the long run. Market setbacks can't be avoided; they are a normal part of investing and you should not let them derail your plan. Stay diversified, collect your dividends, reinvest them if you don't need the cash – and let time take care of the rest.

In your Yield Hog column, you mentioned that Brookfield Renewable Partners LP (BEP.UN) had an annualized total return of 13.4 per cent for the five years ended June 30, assuming all distributions were reinvested. Does BEP.UN have a dividend-reinvestment plan (DRIP)? Isn't the return you quoted misleading if someone doesn't reinvest their distributions?

Yes, BEP.UN does offer a DRIP, which is administered by its transfer agent, Computershare Trust Company of Canada. The plan allows purchases of fractional units, which means that the entire distribution can be reinvested. Typically, investors need to register shares in their own name in order to enroll in such a "true" DRIP operated by a company's transfer agent.

Many brokers also operate "synthetic" DRIPs (check with your broker to see if BEP.UN is eligible). In most cases, however, broker-operated DRIPs only allow purchases of whole shares, which means that some residual cash will be left sitting in the account when a dividend is reinvested.

Even if you don't reinvest your dividends, total return is still a useful – albeit theoretical – measure.

By including both capital growth and dividends – and assuming all dividends were reinvested – it provides a standardized way to compare the returns of two securities, or the returns of a security and an index. (Many major indexes publish a total return version. For the S&P/TSX composite total return index, for example, enter TSXT-I in the search box at Historical values for the total return index can be found here.

Speaking of total returns, several readers have noticed that the calculator at – one of my go-to sources for total return data – has been down for the past few months. The website lost one of its data providers and the owners are trying to find an alternate supplier so they can put the calculator back online.

In the meantime, for Canadian stocks, you can try the total return calculator at Canada Stock Channel. For U.S. stocks, you can give this calculator a spin.

Another source of total return data is the watchlist tool at If you choose the "dividends" view, you'll get the one-year and five-year total returns. Note: These returns include dividends paid but do not assume they were reinvested.