I know. She read about index funds and liked the idea. I told her if that's how she wanted
equities exposure (she has lots of bonds) to talk to her investment advisor about either
the TSX 60 (since we're Canadian), one that tracks the S&P 500 (which I preferred over the
TSX, since it has better diversification) or one that has exposure to dividend payers.
Then one day she showed me this thing and asked me what the symbols stood for. It was sold
to her by National Bank. It's one of the bigger banks in Canada but I don't think its
interlisted on the NYSE like TD or Royal Bank.

She could have done it herself but when you're not that knowledgeable and rely on a
"professional", you think they're offering something good. People, especially as they get
older, like the sound of "guaranteed capital". I'm looking after that stuff more now so
that things like this don't happen again.

B

Last edited on: 02-14-2007 01:27 am

And what were the fees? These are simple indexes. She could have done it herself.

Yeah, I know what you're talking about as well. That's how it typically goes. There's a
new one that's being offered by a few investment banks that guarantees a certain %. I'm
guessing that their bet is basically that commodity prices - over the very long-term - go
up at least a tinsy bit, and if they leverage the hell out of that, they get terrific
returns.

Yeah, that sucks. There's no way out of those things, unfortunately... at least she gets
her principle back. What bank sold that to her?

Those guaranteed things you were talking work differently don't they? There's probably
variations but my mom's in one and it doesn't guarantee a return, it just guarantees your
capital back plus any potential returns. She didn't really realize what she was buying and
a banker will sell you anything, now she's locked into it for 8 years. It's a basket of 8
indexes, one of them tracks the price of oil and one is aluminum i think. There's a small
cap index in there as well and an index fund tracking the nikkei, along with euro dj stoxx
50, s&p500, the tsx 60 and a lehman bond index. Either way, I'd be furious if my
investment advisor sold me this as a retirement investment. I'm trying to help her get out
of it but she signed for it so now it looks locked up for 8 years. At least its kind of
diversified :/

Tell mom to buy American Idol CD's and keep them in the packaging. Sell them on Ebay in 30
years. Beats equities and bonds.
I kid. . .maybe.

2.5% would prolly be best for that mix

Also, on that second recommendation, put 2.5%-5% in T-Bills.

Finally, bonds aren't about capital gains (although those are nice). They're about
sure-fire payments down the road.

TIPS, commodity index above.

Also, yes, bonds don't make you rich. But nothing is better at preserving wealth. This is
why the best conservative money managers in the world all are heavy in bonds. And that's
why their clients all keep their money.

The above asset mix is what very conservative managers do for their well-off clients. If
you really think inflation will be out of control (unless it is 5% annually, you'll be
making money every year... also, wealth isn't made/preserved over one year... it's
made/preserved through compounding gains. 3% annually - which is what you'd be getting
pretty much if you got bonds today - goes a long way to preserve wealth)You could do
something like:
35% bonds (laddered), 10% TIPS, 5% commodity-based index, 5% alternative (long/short), and
the rest equities.