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The markets are chilling investors this month. If you’re worried about a deep freeze this winter, you might want to bundle up.

In this case, bundling allows investors to shield themselves from the emotional pain of losses while still being able to profit from the market’s upside. Sort of like having your hot cocoa and drinking it too.

While some investors can hold a portfolio of individual stocks without worry, most would be hard pressed not peek at how their stocks are progressing, only to become alarmed at the stinkers. If you’re part of the majority, you should think about buying portfolios rather than individual stocks. Funds provide just such a package and fund investors naturally focus on the performance of their funds rather than on the securities their funds own.

For instance, you can invest in the Canadian stock market by buying the iShares Core S&P/TSX Capped Composite Index ETF (XIC). The exchange-traded fund has a low annual fee (management expense ratio) of 0.06 per cent. It is a good proxy for the S&P/TSX Composite Index, which follows about 250 of the largest stocks in Canada.

The Canadian stock market provides a timely example because it isn’t doing well this year. The iShares ETF fell 2.9 per cent from the start of January to the close of Nov. 8, according to Morningstar.ca.

But the performance of most of the stocks in the index was more alarming. Half of the stocks in the index saw their prices fall by more than 9 per cent over the same period, 14 stocks fell by more than 40 per cent and five fell by more than 50 per cent. Holding them would have been torture for some investors.

Read the rest of this article here.

-- Norman Rothery, PhD, CFA, is the founder of StingyInvestor.com.

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you, you can sign up for Globe Investor and all Globe newsletters here.

Stocks to ponder

Trilogy Metals Inc. (TMQ-T). This stock may resurface on the positive breakouts list (stocks with positive price momentum). This small-cap stock has been a stellar performer with its share price more than doubling in value year-to-date. The four analysts covering the company all have “buy” recommendations on the stock, anticipating a further 66-per-cent gain over the next 12 months. Vancouver-based Trilogy Metals is an exploration and development company with operations in the U.S. The company’s development activities are focused on two projects (Arctic and Bornite) located in a prolific copper district - the Ambler mining district in northwest Alaska. 2019 is anticipated to be an active year for Trilogy Metals as the company continues to take steps towards becoming a copper producer. Jennifer Dowty reports (for subscribers).

The Rundown

Analysts expect strong results from Canada’s banks. Will investors care?

Canada’s biggest banks will report their fiscal fourth quarter results starting this week, and analysts are expecting a strong finish to the year. But given the stock market is dominated by concerns over slowing economic activity, will investors care? The quarterly results will arrive during an unsettled period for the stock market. Investors are focusing on the threat of trade tariffs, inflationary pressures and rising interest rates, which is causing wild swings by major indexes. In Canada, higher borrowing costs are weighing on the housing market, which is also adjusting to tighter lending regulations, and low oil prices are hitting the energy sector. David Berman reports (for subscribers).

There’s an ETF tracking Alberta oil prices. It’s not going well

With the rise of niche ETFs, there is seemingly an exchange-traded fund for everything. That includes an ETF for Western Canadian Select, the heavy-oil benchmark that made headlines last week when it tumbled to less than US$14 a barrel. Not surprisingly, the Canadian Crude Index ETF (CCX-T) has plummeted in tandem. Matt Lundy takes a look at where this ETF is now (for subscribers).

Auto sector outlook brightens on GM production cuts

Stalling U.S. auto sales, rising inflationary pressures and heftier borrowing costs have been weighing on the automotive sector this year. But the mood brightened considerably after General Motors Co. announced on Monday it would halt production at five North American factories. GM shares surged 4.4 per cent on the news, and other car makers went along for the ride. Ford Motor Co. rose 3.1 per cent and Toyota Motor Corp. Ltd. rose 1.3 per cent (the shares trade as American depositary receipts in New York). Even Canadian auto-parts manufacturer Magna International Inc. rose 1.8 per cent. Why did auto stocks rise after what is, on the surface, grim news? David Berman takes a look (for subscribers).

What GM’s Oshawa plant closure – and four others in North America – says about the auto industry

General Motors Co.’s decision to close five North American factories, including one in Oshawa, Ont., marks a painful acknowledgment of the auto industry’s challenging future. Consumers in the United States are buying cars at a slower rate and driving less than they used to. Meanwhile, automakers are facing enormous development costs for the electric vehicles that some analysts expect will come to dominate sales in the near future. Ian McGugan examines the future outlook for the auto industry (for subscribers).

ETFs put hedge-fund strategies in reach of all investors

Exchange-traded funds have been revolutionary for small investors, providing low-fee, diversified access to markets. Yet ETFs providing exposure to alternative assets – such as real estate, infrastructure and hedge funds – are generally not on Canadian investors’ radar, says Karl Cheong, portfolio manager with First Trust Portfolios Canada. But these investments are certainly worth a look because they offer cheap, liquid access to strategies that are uncorrelated to broader markets, he says. Joel Schlesinger reports.

Others (for subscribers)

Tuesday’s analyst upgrades and downgrades

Tuesday’s Insider Report: President and COO together trade over $5-million worth of this large-cap stock

Monday’s analyst upgrades and downgrades

Monday’s Insider Report: President invests over $4-million in this stock

Hedge funds’ historic U.S. rate view shift switches to 5-year bonds

Oil sands woes to take focus in Big Six earning reports

Fifteen value stocks for the responsible investor

Crypto-influencers: How positive coverage of cryptocurrencies is being bought and sold

Others (for everyone)

The Globe’s stars and dogs for last week

Ask Globe Investor

Question: I have noticed that a lot of the stocks making new lows on the TSX have been preferred shares. Why are preferreds getting hit so hard?

Answer: First, let’s put the decline into perspective.

Since Oct. 1, the S&P/TSX Preferred Share Index has skidded by about 9 per cent (excluding dividends). That’s a hefty drop for sure, but for the three years ended Sept. 30, the index posted a cumulative total return (including dividends) of 32.8 per cent. So preferred shares have only given up a portion of the gains they recorded over the past few years.

Why the recent weakness? Well, the preferred share market nowadays is dominated by rate-reset preferreds, whose dividends are adjusted every five years at a spread over the five-year Government of Canada bond yield. Rate-reset preferreds tend to do well when interest rates are rising (in anticipation that dividends will reset at higher levels) and do poorly when rates are falling (in anticipation of dividend cuts).

Back in 2015, for instance, when the five-year Canada yield languished below 1 per cent for most of the year, many rate-reset preferred shares cut their dividends and the index posted a total return of negative 15 per cent. But as the five-year yield moved higher over the next few years, the index rebounded, producing solid gains for preferred share investors.

Now, with the global economy showing signs of slowing, what’s happened is that interest rate expectations have moderated. The five-year Canada yield has slipped to about 2.29 per cent, down from about 2.47 per cent two weeks ago. That’s a significant drop in a short period of time, and it was enough to rattle the preferred share market, which is thinly traded and dominated by retail investors.

James Hymas, who manages a preferred share fund and writes the PrefLetter, said the recent drop may have been exacerbated by tax-loss selling, in which investors dump losing stocks in order to offset capital gains on their winners.

“There’s also a certain amount of ‘fighting the last war’ syndrome,” Mr. Hymas said in an e-mail. “People remember what happened the last couple of times the Bank of Canada cut its [benchmark] rate (January 2015, especially) and are terrified it will happen again.”

Despite those fears, after the recent drop many preferred shares now offer even more attractive yields. That’s especially true considering that preferred shares, unlike corporate bonds, qualify for the dividend tax credit. What’s more, assuming the five-year Canada yield stays roughly where it is, most preferreds will actually raise their dividends – not lower them – on the next reset date, Mr. Hymas said.

“My advice to current holders of preferreds remains the same as it was during the credit crunch: Shut up and clip your coupons,” he said.

--John Heinzl

Do you have a question for Globe Investor? Send it our way via this form. Questions and answers will be edited for length.

What’s up in the days ahead

David Berman takes a look at the laggard of the banks this year and John Heinzl outlines three real estate investment trusts with a juicy yield.

Click here to see the Globe Investor earnings and economic news calendar.

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