1. Macleans magazine's Jason Kirby on the lessons investors should learn from the fall of 2008 (but probably won't). Somewhat predictably, David Trahair is still making the case for GICs by ignoring dividend income from stocks.
2. In theory investors can diversify away non-systemic risk with a portfolio consisting of a random selection of 10 to 40 stocks. In practice, however, writes Jason Zweig in The Wall Street Journal, investors are more likely to assemble non-random portfolios.
3. Larry Macdonald has compiled a handy synopsis of quotes from a number of books on passive investing in a series of blog posts. You can find Part 1 here and click through to subsequent posts in the series.
4. In a guest post on Where Does All My Money Go? mutual fund industry critic Ken Kivenko points out yet another downside of active funds in taxable accounts: year-end capital gains distributions.

Five years may not count as "long term" in the investing world but on the Internet, it is certainly a long time. And that's how long this blog has been in existence. In those five years, I've written over 1,250 posts and you've chimed in with over 23,000 comments and registered more than 2 million visits. Thank you for your support!

Giveaway: I'm celebrating by giving away 5 gift cards from a retail store of your choice worth $100 each. Participating in the giveaway is quite simple: Just leave a comment to this post (please don't send me an email) and don't forget to include your email address. If you are reading this through your favourite RSS Reader, you have to click through to the website and scroll to the bottom of the page and type in your comment. There are just a few simple rules:

1. Deadline for entries is 8 p.m.

As TD Bank, Scotia Bank, BMO and CIBC increased the interest rate on existing secured and unsecured lines of credit, Royal Bank remained the lone holdout. No longer. Effective January 5, 2010, RBC is increasing the interest rate on existing credit lines by 1%. The bank is sending out letters to clients advising them of changes to credit accounts:

As a financial institution, we borrow from many different sources in order to lend to our clients. Over the past year, given the economic environment, the cost of this borrowing has increased for all banks. While many have already responded with interest rate increases, we delayed increasing our rates for as long as possible. However, high borrowing costs have persisted, making it difficult to maintain our interest rates at current levels.

The best rates available on both new and existing secured lines of credit with all the big banks is now Prime Rate plus 1%.

Recent returns from conventional asset classes such as stocks and bonds have been, to put it mildly, disappointing. But, there is one asset class that has posted red-hot returns: gold. Since 2000, the price of gold has more than doubled in Canadian dollar terms but the price trend has been accelerating in recent years. In the past five years, gold has appreciated (in CAD) at an average annual rate of close to 20%.

Like moths to a flame, investors are attracted to recent returns. The prospectus for the SPDR Gold Trust (GLD) provides a fascinating insight into the gold market. Jewellery, the primary source of demand for gold has been dropping at the same time that investment demand has been exploding. In the past five years, demand for retail investment products such as coins and bars and gold ETFs has tripled and investment demand alone now accounts for a quarter of total gold demand, up from 10% in the early 2000s.

1. It is funny and incredible at the same time. Jon Chevreau reported on the Wealthy Boomer Blog that as a joke an author faked a news release announcing the launch of the first 100x leveraged ETFs - the Kelly Daily NASDAQ 100 Bull 100x ETF (Ticker: SOAR) and the Kelly Daily NASDAQ 100 Bear 100x ETF (Ticker: SINK). What happened then makes you wonder about the sanity of investors: 65% expressed an interest in owning these ETFs, 5% were "pretty sure" they already owned the 100x ETFs and only 30% got the humour. I wonder if Scott Reynolds of Steady Hand should have kidded about the H1N1 Fundamental Vaccine Equity Plus Fund
2. It is heart warming to read Tax-Free Savings Accounts are proving to be very popular with Canadian investors. The Globe and Mail reported that Canadians have opened up 3.6

We are just recovering from a punishing recession in which millions of jobs were lost and portfolios decimated by a market downturn. Across the border, home owners are defaulting on their mortgages in record numbers because they loaded up on mortgage debt at teaser rates and were unable to make mortgage payments when the rates reset at a much higher level. Therefore, it is surprising to read that many Canadians refuse to learn from recent experience and are loading up on long amortization, variable-rate mortgages. The Globe and Mail reported today that mortgage brokers are doing brisk business as many first-time home owners rush in to take advantage of today's (probably temporary) low rates:

It's these buyers who have raised fears of a bubble, negotiating mortgages at historic lows, opting for 35-year terms and making small 5-per-cent down payments to keep monthly outlays down and put previously unaffordable homes within their reach.

Unlike Mackenzie, which opted for a strategy of attacking the enemy, Invesco Trimark is adopting a strategy that can only be described as "if you can't beat them, join them". As Jon Chevreau reported yesterday, Invesco Trimark has launched mutual funds that hold US-listed PowerShares ETFs and pay a trailer fee, which would make it attractive for the advisor channel.

It is hard to get excited about these new-fangled mutual funds because rather than providing investors with a genuinely better product, Invesco Trimark's approach smacks of a fund company trying to cash in on a hot trend. The first thing you notice about these funds is that five of the six new funds track narrow, niche sectors such as Agriculture, Water, Precious metals, Clean Energy and China –hardly the first, or for that matter, last, choice of index investors.

The funds are also pricey - the cheapest fund sports a fee* of 1.65%

I was a big fan of the Getting Going column that Jonathan Clements used to write The Wall Street Journal. Mr. Clements does not write for the Journal anymore but he has a book out called The Little Book of Main Street Money: 21 Simple Truths that Help Real People Make Real Money. The book isn't exactly new (published in June 2009) but I've been meaning to read and review it - Mr. Clements is a terrific writer and anything from his oeuvre is worth reading. I dropped into a Chapters store near my home hoping to pick up a copy of the book but instead I stumbled on a new book by Derek Foster "Stop Working too: You Still Can!"

Regular readers might wonder why I would waste any more time or pixels on Mr. Foster but I confess to the same morbid curiosity displayed by drivers slowing down to rubber neck at a crash site.

I was surprised to learn that this book by Jeffrey Little and Lucien Rhodes was first published over 30 years ago, is now in its fifth edition and has sold over one million copies. I say surprised because I hadn't even heard of the book in all these years of writing the blog and reading (or at least being aware of) pretty much every popular book on personal finance and investing out there. After reading the book, I don't find its popularity and longevity surprising at all - it is an excellent primer on stocks, bonds, options, exchange-traded funds, precious metals etc.

The authors have packed a vast range of topics ranging from financial manias to the history of Wall Street to its many colourful personalities in the book's 350 odd pages. The result is a valuable reference book that you can turn to whenever you want a quick explanation for an investment concept.

TD Canada Trust, which used to attract new customers by offering iPods, is now offering hard, cold cash of up to $250 to customers opening a new bank account. The promotion was initially limited to a few locations but TD Bank has now extended it to all its branches. There are three tiers of cash bonuses on offer:

1. $100 for opening any chequing account and signing up for direct deposit plus two pre-authorized debits or signing up for TD Bank's Simply Save.
2. $150 for opening up an Infinity Account or Select Service Account and fulfilling the above conditions.
3. $250 for opening up an Infinity or Select Service Account, fulfilling the conditions in (1) and signing up for an approved TD Visa credit card and making ten purchases with it.

It may not make much sense to jump through hoops just to snag the cash offer but if you've considered switching to TD Canada Trust for their all-you-can-eat Select

Among the many injustices surrounding Nortel's bankruptcy - and there are many - the one that is the most heart-wrenching is the uncertainty faced by former employees who are currently disabled and are receiving benefits from the company's long-term disability (LTD) plan. These unfortunate people made regular contributions to Nortel's LTD plan - in fact, some employees even made optional contributions to top up their benefits - to secure their financial future in the unlikely event that were to become disabled. Now, they are finding that instead of insuring the LTD plan through a third-party, Nortel decided to "self-insure" and fund the liability through its general revenues. With the company in bankruptcy proceedings, Nortel's disabled former employees face the prospect of being left with nothing.

It is too easy to simply blame Nortel's past management for cutting corners with disability benefits. The fact remains that regulations...

[Note: Today's post is an excerpt from a recent new book titled "You Can't Eat Your Furniture: A Simple Plan For a Well-Fed Retirement". The author, Robert Chown, is an investment advisor with one of Canada's leading investment firms. In the first chapter, part of which is excerpted below, Mr. Chown argues that only two factors matter when it comes to retirement planning: the rate of savings and the rate of returns. It may just be common sense but the basics are often forgotten in personal finance discussions. Enjoy...]

My clients are mostly well-educated, intelligent, high-earning professionals who have everything going for them from a financial standpoint. But before they sought my advice, many were not on track to reaching their financial goals. As often as not, they didn't even have clearly defined financial goals.

1. Ten years back Nortel looked invincible. Today, it is in bankruptcy protection and its business units are being sold off piece by piece. The Ottawa Citizen's James Bagnall is writing an eight-part series on the fall of an once-proud telecommunications giant.
2. There is a widespread belief among investors that 1970s style inflation is inevitable. Money manager Leith Wheeler reckons that inflation is unlikely to be as high or as prolonged as it was back in the 70s.
3. Charles Schwab announced a slew of low-cost, broad-market ETFs this week that could be bought and sold commission-free through a Schwab account. Larry MacDonald speculates if other ETF vendors would be forced to cut MERs or even reimburse trading commissions.
4. It may sound harsh but it must be asked: Do Canadians deserve the MERs they get? Jon Chevreau writes that Canadians are apathetic about investing costs and mutual funds rarely pass on the savings from economies of scale to unit holders.

For the fourth year running, Qtrade finished first in the Globe and Mail's ranking of online discount brokers. Credential Direct, BMO InvestorLine, Scotia iTrade and RBC Direct Investing round out the top five. TD Waterhouse missed a spot in the top five in a photo finish.

I've held accounts at TD Waterhouse, RBC Direct Investing, Scotia iTrade and Questrade and would rank them in that order. I wouldn't read too much into a broker's rank and would instead pick one that offers the features I'm looking for (or at least a nice fat bonus).

Some interesting tidbits from the Globe and Mail column:

• Qtrade is now offering US dollar RRSP accounts. Either Qtrade has been keeping it quiet or I missed any media coverage on this.
• Discount brokers are doing roaring business. Rob Carrick, who assembled the rankings, notes that account openings, excluding TFSAs are up in the range of 19 to 26 percent.

Note: Today's post takes a look at the the performance of the top 10 Canadian mutual funds (by assets) of 2004 over the next five years. The results simply confirm yesterday's conclusions about the performance of top 10 global equity funds over the next five years, so feel free to skim over the results.

In yesterday's post, we saw Ted disheartened with his results when he invested $10,000 each in the top 10 global equity mutual funds (by assets) of 2004. It so happens that Ted had also invested $10,000 each in the top 10 Canadian Equity Mutual Funds (by assets) of 2004. He had read news reports on Mackenzie Financial's research that showed seven out of 10 beating the index. Even more impressive, every one of those funds beat the iUnits S&P/TSX 60, as XIU was called then.

Fast forward five years and Ted is curious to find out how his picks have fared against the benchmark.