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FINANCIAL FREEDOM ON $5 A DAY
 Digitized by the Internet Archive
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FINANCIAL FREEDOM ON $5 A DAY
A step-by-step strategy for small investors

Chuck Chakrapani, M.Sc, Ph.D., C.I.M.

Self-Counsel Press
(a division of)
International Self-Counsel Press Ltd.
Copyright ©
1983, 1994 by Standard Research Systems Inc.
380-26 Soho Street, Toronto, Ontario M5T 1Z7
All rights reserved.

No part of this book may be reproduced or transmitted in any form by

any means —
graphic, electronic, or mechanical —
without permission
in writing from the publisher, except by a reviewer who may quote brief
passages in a review.

Printed in Canada

First edition: March, 1983

Second edition: February, 1994
Third edition: January, 1986; Reprinted: September, 1986
Fourth edition: March, 1989
Fifth edition: April, 1991; Reprinted: July, 1991; May, 1992;
September, 1993
Sixth edition: December, 1994

Canadian Cataloguing in Publication Data

Chakrapani, Chuck
Financial freedom on $5 a day

(Self-counsel business series)

ISBN 0-88908-794-6
ISSN 0827-2522
1. Investments — Periodicals. 2. Speculation — Periodicals.
I. Title. II. Series.
HG4527.C428 332.678 C84-031650-X

Cover photography by Lonnie Duka/Tony Stone Images

Self-Counsel Press
{a division of)
International Self-Counsel Press Ltd.
Head Office
1481 Charlotte Road
North Vancouver, British Columbia V7J 1H1
U.S. Address
1704 N. State Street
Bellingham, Washington 98225
 CONTENTS

PREFACE xiii

PART I: YOU CAN ACHIEVE

FINANCIAL FREEDOM 1

FINANCIAL FREEDOM:
YOU CAN ACHIEVE IT 3

a. Even small investors can achieve

freedom
financial 3

b. Why aren't most people

financially independent? 5

c. What it takes to achieve financial freedom 6

d. Dream merchants: do you want to pay them? 7

e. Getting rich slowly but surely 9

f. Is it still $5 a day? 10

g. Five dollars a day gets you started 11

WHAT MAKES YOU WEALTHY? 12

a. What is financial freedom anyway? 12

b. How do I get there from here? 13
c. Three powerful principles 13
1. The magic of compounding 13
2. Dollar cost averaging 14
3. Diversification 16
d. Use the program to monitor your investments 16

PART II: HOW TO GET MONEY TO INVEST 17

HOW TO GET MONEY TO INVEST 19

a. Pay yourself first 19
 .

b. Three simple ways to save 20

1. The Minus Ten technique 20
2. The Plus Ten technique 21
3. Day's Due technique 21
c. Aim to save at least 10% of your income 22
d. Six ways to raise additional money
for investing 23
1. Liberate the lemons 23
2. Slash your major expenses 23
3. Squeeze your budget 24
4. Reduce your taxes 24
5. Increase your return without risk 24
6. Adopt friction-free investing 24
7. Watch those windfalls 25
e. Building an investment pyramid 25
f Rules of success for the small investor 27
1. Save regularly 27
2. Invest for maximum return 28
3. Minimize your commissions 29

PART HI: HOW TO INVEST: PROFIT 31

4 GETTING STARTED 33
a. Double jeopardy 33
b. Investments with clout 34

c. Taking responsibility 34
d. A note on specific information 35

1. Names and addresses 35

2. Tax implications 35

3. Canada and the United States 36

e. How to start investing 36

VI
 .

HOW TO GET HIGH INTEREST 38

a. How large investors get

higher interest rates 38

b. How to get high interest rates 39

c. How to join a money market fund 40

d. No-load mutual funds 40

e. U.S. money market funds 40

f Canadian money market funds 41

g. When to use money market funds 41

h. How to evaluate the performance

of your fund 42

HOW TO INVEST IN STOCKS 43

a. What are shares? 43
b. How are shares traded? 44
c. How to buy and sell shares 44
d. How to find a stockbroker 44
e. How to place orders with your broker 45
f What else you should know 45

g. What are OTC stocks? 46

h. How to read the financial page 46
i. What is a stop-loss order? 47
j. How to minimize the risk 47
1. Buy stocks with low price earnings
(PE) ratio 47
2. Buy stocks with high book values 47
k. Commissions: how to reduce them 48
1. Why direct investment may not be suitable
for the small investor 49
m. How you can participate in the stock market 50
n. How to choose a fund 53

vn
 .

7 HOW TO BUY STOCKS AT A DISCOUNT 55

a. Dividend reinvestment investment plans
(DRIPs) 55
b. The advantages of joining a DRIP 55
c. Information on DRIP companies 56
1. Canada 56
2. United States 56
d. How to join a DRIP 57
e. What else should you know? 57

8 HOW TO INVEST IN BONDS 58

a. What are bonds? 58
b. Bond prices 58
c. When to buy bonds 59
d. Bonds and debentures 60
e. How to buy 60
f Bond and mortgage funds 60

g. Strips and zeros 61

h. Convertible bonds 63
1. What to look for in convertible bonds 64
2. When to buy convertible bonds 64
3. How is the gain taxed? 65

9 HOW TO INVEST IN PREFERRED STOCKS 66

a. What is a preferred stock? 66
b. Why invest in a preferred stock? 66
c. Different kinds of preferred stocks 67
d. Preferred stock prices 68

e. When to buy preferred stocks 68

f. How to buy /sell preferred stocks 68

g. Using mutual funds to buy preferred stocks 68

Vlll
10 HOW TO INVEST INTERNATIONALLY 70

a. Why invest abroad? 70

b. How to invest in foreign securities 72

c. Global funds 72

d. Regional funds 74

e. Before you start 75

11 HOW TO INVEST IN GOLD 76

a. Why invest in gold? 76

b. Some common ways to participate in

the gold market 77
1. Gold bullion 78

2. Gold coins 78

3. Gold certificates 79

4. Gold stocks 80
5. Gold options 80
6. Gold futures 80
c. How you can invest in gold 81

1. Gold bullion for the small investor 81

2. Gold coins for the small investor 81

3. Gold bullion accounts 85

4. Gold funds 85

12 HOW TO INVEST IN SILVER 87

a. Why invest in silver? 87
b. Some common ways to participate
in the silver market 87
c. How you can invest in silver 88
1. Silver bullion 88
2. Silver coins 88
3. Silver bullion accounts 89

IX
 .

13 HOW TO INVEST IN REAL ESTATE 90

a. Real estate and the small investor 90
b. Real estate investment trusts (REITs) 91

c. Why invest in REITs? 92

d. What you should know 92
e. How to buy and sell REIT units 92
f Real estate mutual funds 92

14 EVEN MORE WAYS TO MAKE MONEY 94

a. How to make money in options 94
1. Call option 94
2. Put option 95
3. The advantages of options 95
b. How to make money in commodities 97
1. Disadvantages of commodity trading 98
2. Advantages of commodity trading 99

c. How to make money in art and collectibles 100

1. What to do 100

2.How to get started 101

d. How to make money in tax shelters 102

e. How to make money with Swiss bank accounts 104

1. Security 104
2. Privacy 104

3. Services 104

4. Swiss bank account 104

15 LOW-RISK STRATEGIES FOR

HIGHER PROFITS 105

a. Strategy 1: Dollar cost averaging 105

b. Strategy 2: The RIGS strategy 108

16 TWO HIGHER-RISK STRATEGIES FOR
HIGHER PROFITS 111

a. Strategy Stock market

1: —
money market switch 111

b. Strategy 2: Gold — silver switch 113

17 HOW TO GET INFORMATION

AT LOW OR NO COST 117

a. U.S.-based mutual funds 118

b. Canadian mutual funds 119

c. Other publications 119

d. How to get even more free publications 121

PART IV:
REALIZING YOUR DREAM:
FINANCIAL FREEDOM 123

18 FUNDAMENTALS OF FINANCIAL GROWTH 125

a. Compound interest 125

b. Diversified investments 125

c. Economic changes 126

d. Cycles 126

e. Fads, panics, and mass hysteria 126

19 A BLUEPRINT FOR FINANCIAL FREEDOM 129

a. Phase 1: years one to three 129

b. Phase 2: years four to six 131

c. Phase 3: years seven to ten 132

PART V:
KEEPING TRACK OF YOUR PROGRESS 135

20 HOW TO START AND STAY ON COURSE 137

a. Watching your progress 137
b. Your financial freedom workbook 138

XI
PART VI: RESOURCE DIRECTORY 143

How to keep yourself informed 145

Canadian and U.S. mutual funds 148

CHARTS
#1 Future value — $150 saved monthly 15

#2 International investments 71

#3 Future value — $150 saved monthly 127

SAMPLES

#1 Financial Freedom Worksheet 140

#2 Financial Freedom Year-End Worksheet 141

Xll
 PREFACE

This book describes a safe, long-term investment strategy.

Even you have no savings at the moment, even if you can
if

save no more than $5 a day, you can achieve financial free-

dom using the techniques described in this book.
Most books on investing assume that you have several
thousand dollars to invest. Unfortunately, this is not always
true. Many of us do not have large savings. It is not easy to
get investment advice when you do not have several thou-
sand dollars to invest. Many investment advisers will not
take the time to explain what you should do with your $300.
There are no books on the market that will explain the options
open to you.

This book is different. It tells you how you can invest,

starting with as little as $100. The information is very specific.

The book gives you the addresses and phone numbers of
companies you can contact. It explains specific investments
and tells you how you can get a piece of the action.
I have updated information,
In this edition of the book,
rewritten most chapters, and added a few new chapters. I
hope you find it even more useful than the earlier editions.
Inevitably, there is a gap between the time the informa-
tion is and the time it eventually reaches you.
collected
Therefore, no matter how much I have tried to make the book
up-to-date, there will be some addresses and phone numbers
that are out of date. If you are unsuccessful with a few
addresses or phone numbers, don't be discouraged. There is
enough information in this book to create your investment
plan —a plan that will make you financially independent,
slowly but surely.

Xlll
 This book does not distinguish between the Canadian
and the U.S. dollar. Items that refer to the U.S. market are in
U.S. dollars and items that refer to the Canadian market are
in Canadian dollars. If you need $100 to join a U.S. mutual
fund you need U.S. $100; if you need $100 to join a Canadian
mutual fund you need Cdn. $100. Prices of gold and silver
are, by tradition, in U.S. dollars.

The first edition of this book came out in 1983. Since then
I have received literally hundreds of letters from readers

telling me how useful they have found it. The information in

this book takes a long time to compile and such letters make
me feel that this project is worthwhile. Thank you.
The amount of research that goes into a book of this
nature requires the help of several people. It is impossible to
thank everyone individually. However, one person deserves
special thanks: Christine Mole, who assisted me in every way
in putting together this edition of the book.

A Personal Statement
I have written over ten books. But Financial Freedom on $5 a
Day gives me the greatest satisfaction. Basic books on invest-
ing have a notoriously short life. So it pleases me to note that,
with your support, this book has been continuously in print
for more than ten years.

Most authors look for endorsement of their work from

celebrities and famous people. To me, the most meaningful
endorsement comes from my readers. They have read it, used
it, and found that it delivers what it claims. I would like to

quote just two letters out of the hundreds in our files. (These
are unsolicited testimonials written by readers; the originals
can be viewed at the Standard Research Systems offices by
prior appointment.)

At 45, after 20 years of marriage, we had no

savings, no investments... Sixty days after
buying your book I have $700 split between

xiv
 1

two investments and $1,000 in savings. The

"Ten Plus Principle" alone was worth the
cash of the book many times over. Thank you!
Thank you!
Mrs. N.K., West Palm Beach, Florida

Ibought your book in the early eighties when

Iwas broke. Then I started saving $5 a day
from your ideas in the book. I saved enough
to buy a duplex for $35,000. We put $10,000
. .

into the property, now it is worth $150,000.

paid my mortgage off in 1989 and bought my
second home on the St. Lawrence River for
$90,000. Now after two years of hard work, it
is worth $175,000... I have just bought your

new book for myself and my son and am

looking for new ways of investing. Thanks!
Your book was a great help to me and other
people I have helped with saving money.
Mr. /.£. Brockville, Ontario

do not want to pretend that I wrote this book for purely

I

altruistic reasons.Among other things, I am an author by

profession. But one of my motives for writing this book is to
help small investors who cannot get such help elsewhere. It

pleases me a great deal to know that it made a difference in

a few people's lives and they cared to share it with me.
I hope it makes a difference in your life and I wish you
the very best.

xv
 PARTI
FINANCIAL FREEDOM:
YOU CAN ACHIEVE IT
 YOU CAN ACHIEVE
FINANCIAL FREEDOM

a. EVEN SMALL INVESTORS CAN ACHIEVE

FINANCIAL FREEDOM
What if I told you that within a year from today you could
have:

• investments in the stock market

• investments in bonds
• international investments

• some gold and silver

• equity in real estate

and much more? Would you believe it?

Whether you believe it or not, you can have all these and
even more. All you need is to put the ideas described in this
book into practice. Many people have already done it. I have
had many letters from people who read earlier editions of this
book and put into practice what they read. Many of them
started with practically no savings. Yet, by now, they are
financially independent. Or they are on their way to becom-
ing so.

The ideas presented are simple but powerful. There are

no gimmicks in this book. Instead, you will find many no-
nonsense ideas regarding investments that have high profit
potential.

You have probably always suspected that there are

highly profitable investments open to the small investor. But
how can you find out about them? After all, most investment
advisers are after big money. They are not interested in telling
you how to wisely invest your first $100.

The result? Most small investors remain in the dark about

the opportunities open to them. Small investors continue to
be small investors, while large investors continue to increase
their wealth.

Help is on the way! This book is written to show you how

to build wealth, even if you don't have any savings now.
North America is still a land of opportunities. If you ever
dream about becoming financially free, your dream can be-
come reality.

Several years ago when I started investing, no one told

me that wonderful opportunities existed for the small inves-
wasted many years pursuing useless advice. Investment
tor. I

books provided little usable advice for the small investor.

you are in the same position as I was several years ago,

If

let me assure you, you are much better off than I was. You

hold in your hands a book that tells you:

• how to set up an investment program that does not

require mountains of cash to start

• how to begin today — not

you have saved
after
enough money to invest. A book that takes the mys-
tery out of investing and makes investing under-
standable and fun!

• how to set up a successful investment program that

works automatically and with little or no risk

• how be your own financial consultant so you

to
understand and manage your money

know that the principles contained in this book, simple

I

as they may be, work. They have worked for me and they
have worked for many people over the years.
b. WHY AREN'T MOST PEOPLE
FINANCIALLY INDEPENDENT?
Most people in our society would like to be financially inde-
pendent, but unfortunately most of us are not. If, as I believe,
North America is still a land of opportunities, why aren't
most of us financially independent?
I know we can all be financially independent. I will prove
it to you by the time you finish reading this book. For the time
being, just assume that anyone who wants to be financially
free can be. Then why aren't most people financially inde-
pendent? Why can't about 95% of North Americans fully
support themselves when they retire?
The reason is simple. We all want the good life. But we
are not prepared to do what it takes to achieve it. Doing
whatever it takes to get there is the secret of success, in investing
as in life. It is unfortunate that most people do not do what it

takes to achieve financial freedom. Most people don't realize

this, but what you need to do is simple and straightforward.
As this book suggests, start today with $5, put aside $5 every
day, add to it as time goes on, and invest wisely. That is all it
takes.

Yet most of us do not do what it takes to get to financial

independence. We hope. We procrastinate. We hesitate. We
wait for the magic day when we will have the "money to
invest." When we invest, we do so on the spur of the moment
with no rhyme or reason. We do not start with a plan.
To achieve freedom you need a plan. You are
financial
unlikely to achieve financial freedom by random investments
or by daydreaming. Even hard work may not get you there.
Just as you cannot hope to end up with a house by building
walls without a plan, so you cannot hope to achieve financial
freedom without a plan. Many investors do not achieve
financial freedom because they work without a plan they —
are simply building walls hoping that somehow they will end
up with a house!
c. WHAT IT TAKES TO ACHIEVE FINANCIAL
FREEDOM
Achieving financial freedom is not difficult. As I said earlier,
anyone who wants it can achieve it. There are, in fact, four
ingredients to financial success. They are the following:

(a) Regular savings, however small

(b) Patience and avoidance of greed

(c) A well-conceived plan of action

(d) Knowing where and how to invest

you can look after the first two items, this book will
If

assistyou with the last two items: a plan of action and

information on where and how to invest your money for
healthy profits.

Investments should have a purpose. They should be

made regularly. You need patience and you should avoid
greed. Why are these things important? Without a purpose,
you cannot make logical investment choices. Without pa-
tience, you may abandon your program halfway through.
With greed, you are likely to lose all your money in some
absurd scheme to get rich quickly. Avoid these traps. In fact,
if you simply follow this book faithfully, you will automat-

ically avoid these traps.

Will reading this book make you financially inde-

pendent? Reading this book, or any other book for that
matter, will not make you financially independent unless —
you act upon its suggestions. It is not knowledge but action
that makes people successful. To succeed, you should be
prepared to put the principles described in this book into
practice.

I have tried to make it easier for you to act on my

suggestions. When I ask you to save, I discuss how to save.
When I suggest that you consider a particular investment, I
have included contact addresses and phone numbers. When
Isay you should find out more, I have listed what you should
read. In fact, this book contains practically everything you
need to know. I hope that this book will take you from
wherever you are now to financial freedom.

But —
and I cannot emphasize this strongly enough —
whether you become financially independent or not will
depend not on whether you read this book, but on your
motivation to act on the suggestions it contains.

The program explained in this book requires your in-

volvement and commitment for you to succeed. With your
involvement and commitment, you are on your way to finan-
cial freedom. Can you pay yourself $5 a day to start and spend
30 minutes a month reviewing your investments? If you can,
it is virtually certain that you will achieve financial freedom

in the next few years.

d. DREAM MERCHANTS: DO YOU WANT TO

PAY THEM?
The world of investing is full of dream merchants. Out in the
world are many people who are desperate to help you for —
a small consideration of just a few (or a few hundred) dollars.
Their message is the same: "give me some money now and I
will tell you how to get rich later." In various forms, here are
their messages:

• Start a mail order business with no capital.

• Buy real estate with no money down.

• Buy the stocks I suggest and multiply your money.

• Buy gold futures, pork bellies or whatever.

• Use pyramid schemes and get rich in 30 days.

These are the conservative ones! The more extreme ones
tell you how to pick the winning number in a lottery, buy
coins and paintings (that they sell), play blackjack, use a
"surefire" betting system, think rich, or get involved in a
chain letter scheme.

Do they work?
I don't anyone who got rich by using a system
know of
to pick winning numbers in a lottery. If indeed there were
such a system, why are they trying to sell it to us instead of
using it themselves so they can spend the rest of their lives
getting tanned under the sun by the sea?

Chain letters (which are generally illegal) can make you

money if you start them and have the good fortune to find a
number of gullible people to go along with the scheme. I hope
you don't get arrested before you get rich!

In general,you shouldn't be learning the secrets of get-

ting rich from someone who is desperate to let you in on the
secret for $10. It is more likely that the money you pay will
pay someone else's grocery bills rather than make you rich.
How about the more respectable schemes?
You can indeed make money in the mail order business.
But it is hard work and success is by no means guaranteed.
Besides, despite claims to the contrary, you need some
will
capital. While the mail order business has several advan-
tages, it can be tough. It is unrealistic to expect it to be easy
to make money in the mail order business. I know —
I have

sold several items through the mail.

—
You can also make money in real estate but not neces-
sarily with ease. Perhaps you know of people who got hurt
speculating in real estate. I do.

There are many people in both the mail order and the real
estate business who never got rich and probably never will. In
any case, despite the extravagant claims of the advertisements,
these businesses are not really "get-rich-quick" schemes. They
are legitimate businesses with high profit potential. The quali-
ties to succeed in these ventures are similar to the ones you

8
would need to succeed in any other business — hard work,
sufficient capital, perseverance, etc.

So what's left?

One could speculate on gold or oil (for example by buy-

ing gold in the futures market). Such schemes can work. But
what happens to your money will depend on what the
gnomes of Zurich and the Saddam Husseins of this world
decide to do. For example, if you bought gold futures in early
1979 (and pyramided the profits), you would have become a
millionaire by 1980. But if you had bought gold futures in
1980 and pyramided the profits, you would have probably
gone bankrupt. Again, you would have made virtually no
money by speculating in oil prices in 1989, but you could have
made spectacular profits if you had started speculating (in
the right direction) in 1990, just before Iraq invaded Kuwait.

Some get-rich-quick schemes work and some don't.

Those that do,do not work consistently. Many schemes carry
a high level of risk. It is my view that get-rich schemes are
simply not suitable for most investors —
whether large or
small, beginning, or sophisticated. It is better to get rich
slowly than to get poor in a hurry.

e. GETTING RICH SLOWLY BUT SURELY

Now that we have dismissed get-rich schemes, can a small
investor, starting with no capital, really get rich? The answer
is yes. Any investor can make enough money to become

financially free. It takes discipline, patience, and a little effort.

And it takes time. But it can be done. If you have enough
money to buy this book and if you are sincerely willing to put
what is described into practice, you probably have all it takes
to achieve financial freedom!

The techniques described book will not make you

in this
rich overnight. But they will leadyou to financial freedom in
the next few years. As I said earlier, you need a certain
amount of patience, discipline, and effort. This does not mean
that you have to sacrifice your present happiness to achieve
future financial freedom. Slightly rewording Alice in Wonder-
land, what we need is jam today and jam tomorrow!
meaningless to suffer today so you can be happy
It is

sometime in the future. Today is as important as any other

day of your life. The program in this book is designed in such
a way that you can carry it out without feeling that you have
to forego the essential things you need now.

You need some discipline, but let me assure you, it

will
will not cramp your style! After all, you are not likely to
achieve financial freedom if you do not plan and if you are
unwilling to change your habits a bit. Getting rich does not
demand that we make ourselves miserable now. It does
mean, however, that we make some gentle changes in the
way we spend and save.
Although the program described here will work for all
types of investors, I have designed it specially for investors
who —
• do not want to start and run a business,
• believe that there is no such thing as a free lunch,

• do not want to take undue risks with his or her

money, and
• would rather invest $10 wisely than pay hundreds of
dollars for a get-rich-quick scheme.

f. IS IT STILL $5 A DAY?
over ten years since this book first came out. With all the
It is

inflation since then, are we still talking about $5 a day?

Should we increase it to Financial Freedom on $10 a Day? Here
is the good news: it is still $5 a day!

What stops most people from achieving financial freedom

is the idea that they have to have a lot of money to get started.

So start with any amount. Five dollars a day is good enough.

10
If you can't afford even with even less. See for
that, start
yourself how easy it is to build an investment plan and how
well your money grows. Once you have done that, you will
find ways to increase your daily investment to the extent you
can afford. If you stick with the plan even for a couple of
years, you will begin to see the results you like. By then, you
will be thinking of new ways to save and invest. You will not
be finding excuses to avoid investing.

g. FIVE DOLLARS A DAY GETS YOU STARTED

Financial freedom on $5 a day! Is it possible? The answer is

yes and I will show you how.

Let's say that you are now 30 years old and that you plan
to retire at 65. If you can save just $5 a day and invest for a
13% return, you will have well over $1,200,000 by the time
you retire — even if you have no other savings and no other
investment plan.

But of course you want to be financially independent

long before you retire — unless you are already close to
retirement.And it can be done. The point of the example is
simply to show that you do not have to start with a lot of
money to retire financially independent.
you are willing to set aside a small amount each day,
If

and if you are willing to be patient, you can achieve financial

freedom. This book will show you how.

The program described in this book will work for you

even if you do not know anything about investments, and
even if you do not have a lot of savings now. I am assuming,
however, that you are willing to be systematic and patient
with your investments and will take the initiative to imple-
ment the program. Let's get busy! Five dollars a day gets you
started. Today is the day to begin.

11
 2
WHAT MAKES YOU WEALTHY?
a. WHAT IS FINANCIAL FREEDOM ANYWAY?
Financial freedom means different things to different people.
For me, it means maintaining my current lifestyle through
my investments without having to depend on other sources
of income. Suppose you make $40,000 a year. Financial free-
dom is when you can make about $40,000 a year solely
through your investments. If you can accumulate a capital of
about $333,000 and invest it for an average return of 12%, then
you will get $40,000 a year.

Ifyou are sufficiently interested in putting the principles

in this book into practice, chances are that you will be able to
achieve financial freedom. The basic premise of the book is
this: most people, regardless of their current situation, can

achieve financial freedom. There might be obvious excep-

tions. If you and have no savings but would
are already 63
like to achieve financialfreedom by 65, it is unlikely that this
book will make it happen. On the other hand, if you are in
your early forties or even your fifties, and you are willing to
make up for lost time there is no reason why you cannot
achieve financial freedom or something close to it.

Financial freedom is not a "yes" or "no" condition. If you

need $40,000 of investment income, but can make only
$35,000 a year through your investments, you are still much
someone who is entirely
better off than at the mercy of
government and private pensions.
So here it is. The principles laid out in this book will help most
people achieve financial freedom, regardless of their current situation.

12
You may be tempted to say that you are too close to retire-
ment, or that you are already retired, or that you have heavy
personal debts. Even in these cases, I believe that putting the
principles described in this book into practice will make your
financial situation better than it would be otherwise.

b. HOW DO I GET THERE FROM HERE?

Maybe you are still skeptical. You are probably wondering
how, starting from scratch, you can go from zero wealth to
financial freedom. After all, dismissed all
in the first chapter I

"get-rich-quick" schemes as being unsuitable for small inves-

tors. In fact, I even suggested that you should avoid risking
your money in your search for a higher return. If I say there
and if I don't promise you the moon,
are no magical solutions
you may wonder how you are ever going to achieve financial
freedom. Especially when I say that all you need to begin with
is just $5 a day.

You have a right to be skeptical, and I hope you are.

Skepticism is the best protection an investor has against the
sharks that infest the sea of investment.

c. THREE POWERFUL PRINCIPLES

The program am
about to describe incorporates three
that I

powerful principles of investing. These principles are pow-

erful, though they may look deceptively simple.

1. The magic of compounding

If you invest $1,000 at 12% interest per year, you will have
$2,000 in six years. But if you leave it for about 30 years,

you have $30,000, if you don't add a penny during all

will
that time. During the first six years, your investment made
only $1,000. But between the years 24 and 30, your invest-
ment made $15,000. When you invest, your money will
grow faster and faster as time goes on. This is because
money makes money, and the money that money makes,
makes even more money. This is called "the magic of

13
compounding." The Financial Freedom on $5 a Day strategy
(3FD strategy for short) is a long-term strategy that takes full
advantage of the principle of compounding.

One of the major mistakes in investing is made by young

people. Nobody told them about the power of compound
interest. So they postpone investing to some future date. This
is a major mistake.

Let me illustrate. Joe invests $2,000 a year between the

ages of 18 and 23 and does not invest any further. Jane starts
atage 25 and invests $2,000 every year until her retirement
atage 65. (Assume a return of 10% in both cases.) Who will
have more money when they retire? Jane? Guess again.

Believe it or not, Joe's $10,000 investment would be worth

$735,600 at retirement while Jane's $42,000 would be worth
$531,111. Just because Joe had a few more years' compound
return than Jane.

You are never too young to start investing. In fact, you

can achieve spectacular returns if you start early, and the
earlier the better.

But neither are you too old to start investing. Our strategy
will work for anybody who wants to invest to build a secure
future. Chart #1 shows how $5 a day would grow over an
extended period of time.

2. Dollar cost averaging

Suppose you decide to buy an investment that goes up and

down in price. Further, you decide to invest $100 every
month on this investment. If the price of this investment for
a given month is $10, you will buy ten units ($100/$10). If the
price for the following month is $12.50, you will buy only
eight units ($100/$12.50). If the price drops to $5, then you
will buy 20 units ($100/$5). In other words, by investing the
same amount every month, you buy more when the price is
low and less when the price is high. In most situations, your

14
 CHART #1
FUTURE VALUE — $150 SAVED MONTHLY
(13% interest compounded monthly)

15
average price will turn out to be lower than what it would
have been if you had not used this method.
This technique is called dollar cost averaging. The strategy
described in this book incorporates the dollar cost averaging
technique.

3. Diversification
Many investors lose because they fail to diversify. For exam-
ple, they may put all their money in the stock market. If the
market crashes, they lose money. By diversifying, you
their
make sure that you do not put all your eggs in one basket.
Even if one of your investments goes down, you will have
other investments that will work for you.

d. USE THE PROGRAM TO MONITOR YOUR

INVESTMENTS
This program based on powerful principles, yet you don't
is

have to spend a time setting it up or monitoring it. It is

lot of
simple. You may have come across automatic programs be-
fore that are mindless. This program is different. It is based
on sound investment principles. It is automatic only in the
sense that as long as you follow the program as laid out, you
are automatically using sound investment principles.

There is nothing in this program that you cannot under-

stand. There are no black boxes. You need accept nothing on
faith or authority. You will see how it works and why it

works.

16
 PART II
GETTING MONEY TO INVEST
 3
HOW TO GET MONEY TO INVEST
a. PAY YOURSELF FIRST
Do you tell yourself that you will start saving and investing
when you earn more? Many people do. Years go by, but the
day never arrives. Their income has increased over the years,
but so have their expenditures. They say to themselves that
they will start saving when they earn even more! When they
are about to retire, they wonder what they did with all their
money over the years!
Simply put, if you wait for your income to increase before
you start saving, you will probably never make it. You have
to start saving now.

Today.
But how? How can you possibly save when you have no
money left by the end of the month?
Wait a minute. You work hard for your money. You take
care of all your bills —
telephone, hydro, rent, household
expenses, gifts. The list goes on. But did you pay yourself?
When you have paid all your bills, what have you got left for
yourself? Nothing? You have nothing to show for all your
hard work? Are you saying that money simply passes
through your hands and you have no control over it?
How can this be? I know how. Most people tend to plan
backwards. Instead of paying themselves first, they pay oth-
ers first. Then they find that there is nothing left.

This way of thinking has to change. Now. As Northcote

Parkinson said, expenditure rises to meet income. This is why

19
you find that although your income has risen over the years,
you have no significant savings. That is what is wrong in
believing that at some future time you will be able save, but
not now.

If you want to achieve financial independence, the first

commandment is PAY YOURSELF FIRST. The amount you
pay yourself may be small (like $5 a day), but you have to
pay yourself first. When you pay yourself, you will automat-
ically begin to adjust your other expenses.

"Easier said than done!" you may say. But think of the
alternative. You have a choice. You can pay yourself first and
look forward to a secure future or you can find excuses to
avoid paying yourself and look forward to being strapped in
your old age.

Let me assure you that there are simple and painless

ways of saving. I describe them in the next section.

b. THREE SIMPLE WAYS TO SAVE

Different people save differently. In my opinion, there are
three ways to save that are particularly simple. You can save
by using any one of these three techniques:

(a) The Minus Ten technique

(b) The Plus Ten technique

(c) The Day's Due technique

You can use any method that appeals to you.

1. The Minus Ten technique

When you use this method, you arrange to have 10% of your
salary deducted before it reaches you. For example, you can
instruct your bank or trust company to
10% of your
transfer
salary every month to a (different) savings account. As far as
you are concerned, the remaining 90% left in your regular
account is all that is available for spending.

20
 The 10% that is transferred to a different account is not
your spending money, it is not your emergency money, it is

not your holiday money — it is your investment money, the

money that will make you financially independent.

2. The Plus Ten technique

This is my favorite technique. Whenever you spend money,
set aside 10% of the money spent. For example, if you spend
$500 on rent, set aside $50 toward saving. If you spend $1 on
coffee, set aside a dime. Do this no matter how small or how
large the expenditure is. Develop your "Plus Ten" thinking.
This way, you'll automatically add 10% to all items; it is like
adding your own tax so that you can be financially inde-
pendent. If buy an item that costs $100, think of
you want to
it is the amount you need to buy the
as costing you $110. That
item. If you don't have it, you can't afford it! This is an easy
way to save, because you are forced to save whenever you
spend. If you don't want to save, don't spend!

There is another advantage to this method. Because you

have to save every time you spend, you have to pay attention
to your spending. Paying attention to spending can make you
aware of unnecessary and mechanical spending.

Each week you should deposit all the money you saved
using the "Plus Ten" method into a separate savings account.

3. Day's Due technique

Decide on an amount that you can comfortably save each day.
Although in this book I suggest a minimum of $5 a day, if you
can start with only $3 a day even $1 a day — start with that —
amount. Consistency is important. You have to save every-
day —Saturdays, Sundays, holidays no exceptions. —
What is the ideal amount to save everyday? As I said, it

depends on your personal situation. You can start with $5 a

day or even $1 a day. But the ideal minimum amount you
should save is:

21
 Your Annual Salary / 3,500

For example, your annual salary is $35,000, you should

if

aim to save: $35,000/3,500 = $10 a day.

If your annual salary is $70,000, you should aim to save

$20 a day. To begin with, it does not matter what the exact
amount is. But once you decide on an amount, make sure that
you save that amount each day.

No matter which of the three methods you use, make sure

that your savings are deposited in a separate savings account
until it is time to invest. This money should not be used for
any other purpose —
not even in an emergency. It has been
repeatedly observed that when we use this money for an
emergency, soon another emergency will arise and then an-
other emergency and then another emergency. Besides, how
are we going to replace the money once we take it out? Make
sure that the money you need for holidays, emergencies, and
other contingencies is kept separate from your investment
account.

c. AIM TO SAVE AT LEAST 10% OF YOUR

INCOME
Each of the three methods described in the previous section
will help you to save a miriimum of 10% of your income. In
my view, anyone who is seriously interested in becoming
financially free should aim to save at least this much. While
you can start with a smaller amount, if your savings fall
below 10%, it will take you longer to achieve financial inde-
pendence.

Some people may feel that they cannot possibly save 10%
of their income. They should ask themselves the following
question: If you cannot live on 90% of your income today,

how will you get by when you retire, when your income is
likely to be just one-half or one-third of your current income?

22
 Startwith $1 a day. Or $5 a day. But always aim to save
at least 10% of your income. Once you make it a habit, you
won't find it hard at all.
very important that you do not attempt to start with an
It is

amount that is too high. You must be absolutely certain that you
can keep saving at this level. This is your first priority. Your next
priority is to increase your savings to 10% of your income or
higher over a period of time, even if you cannot do it right
away.

d. SIX WAYS TO RAISE ADDITIONAL MONEY

FOR INVESTING
Ifyou don't have any savings now (or even if you do) you
may still raise additional money for investing. My long-time
friend and best-selling author, William E. Donoghue, de-
scribes six methods in his interesting book, Guide to Finding
Money to Invest:

1. Liberate the lemons

Perhaps you have cash in various forms that is not working

for you. For example, you may have some traveler's checks
and foreign currency left over from your previous holiday.
You may have more money in a low interest paying account
than you need right now. Consolidate all such cash.

Next, go through your house room by room. Collect

every item you don't like or you have not used for several
months (including your clothes). Be ruthless. Organize a
garage sale and sell everything you no longer use.

2. Slash your major expenses

You can cut your payments in many ways. You can cut your
insurance payments by choosing the right type of insurance
that will fit your needs rather than the most expensive one
available. You can cut your total mortgage payments sub-
stantially by using techniques such as prepaying part of the
principal or increasing the frequency of payments. You can

23
discontinue subscriptions to magazines you hardly ever
read. In fact, if you analyze your lifestyle, you may find
various ways of slashing your major expenses.

3. Squeeze your budget

The trick is to squeeze your budget without getting squashed.
You need to learn the art of creative scrimping. Like banking
at an institution whose service charges are lower. Like buying
seasonal vegetables which are likely to be fresh and less
expensive than out of season produce. Don't just buy your
usual choices out of habit.

4. Reduce your taxes

Or as Donoghue puts it, "reduce the thighs of your tax bill with
accounting aerobics/' For example, your employer may be
deducting a larger than necessary amount towards taxes.
Have your employer reduce your tax deduction so you have
the use of your money now, rather than when you get it back
from the government. Are you sure that you are claiming all
the deductions you are eligible for? If not, read a good book
on the subject to find out what deductions you are eligible for.

5. Increase your return without risk

Take another look at the money you have in your savings

account. Can you earn a higher rate of interest at another
financial institution? After all, your money is up to a
insured
certain amount in most institutions. As long is no
as there
higher risk, why not get a higher rate of return on your
savings?

6. Adopt friction-free investing

Friction costs are those that you pay as commissions and

loads. If you are a small investor, it is particularly important
that your money supports only your investments and not
someone else's lifestyle. Wherever possible, adopt friction-
free investing —
use discount brokers and mutual funds that
charge no commission. More on this topic later.

24
 you cannot find any extra money even using these
If

techniques, remember that saving $5 a day will give you $100

in three weeks' time.

7. Watch those windfalls

From time to time we all get extra money — often unexpect-
edly. could be your bonus, or a tax refund or inheritance of
It

some type, or even a small lottery winning. You should

always save something out of every windfall. I suggest that
you attempt to save at least 50% out of every windfall. If you
keep adding unexpected gains to your investment program,
you will reach your goal of financial freedom much sooner.

e. BUILDING AN INVESTMENT PYRAMID

All investments are not equally powerful. Some investments
carry high returns and others carry low returns. Generally
speaking, investments that carry high rewards tend to be
risky; investments that carry low rewards tend to be less
risky.

What should a small investor do? If you choose a high

return investment, it is likely to carry a higher degree of risk
so that you could lose a part or all of your capital. If you choose
a low risk investment, your return will be low and you may
have to wait a long time to become financially free.

To know what you should do, you should first list your
objectives. I suggest that your objectives at this stage should
be the following:
• Very important — Safety of your capital
• Important — High return
• Highly Desirable — Potentially very high return

For a conservative investor, safety of capital is of para-

mount importance. Why? To win the investment game, you
need to be in the game. Once you lose your capital, you are not
in the game any more. That is why preserving your capital is

25
so important. It is so important that, to have this security, you
must be willing to accept a lower rate of return at the initial
stages of investing. However, as you invest more and more
actively, you may want to risk a small part of your capital for
a chance to win big. Sooner or later, all investors have to take
some risks if they are to win big. As you start investing
wisely, you will learn the difference between calculated risks
and wishful thinking. Until you develop a feel for calculated
risks, you should err on the cautious side.

A standard technique to achieve balance in your invest-

ments is known as the investment pyramid (see figure).

STAGE 3 INVESTMENTS
HIGH PROFIT POTENTIAL

STAGE 2 INVESTMENTS
HIGH RETURNS

STAGE 1INVESTMENTS
SAFETY

As you need to protect your invest-

a small investor,
ments. Therefore, the bulk of your investments should be in
low-risk, above-average return investments. This forms the
base for your investment pyramid. Once the base is secure,
you may want to add investments that carry average risk but
above-average return. Once you have both of these types of
investments, you may venture into the top of the pyramid
with high-risk investments that give you an opportunity to
make very high returns —
if you are successful.

How much should you invest in each of the three types

of investments? It depends on several factors. If you are
young, you can afford to take more risks than if you are near
retirement. If you are a risk-taker by nature, you may want

26
to invest more on risky investments than if you are risk-
averse by nature. A small investor is less likely to be in a
position to take risks compared to a large investor.

No matter what level of risk you prefer, please remember

the concept of the pyramid. Put more money in safe invest-
ments and less money in risky investments. This rule applies
to all investors.

A broad guideline for building an investment pyramid is

as follows:

• Low-risk investments: 50% to 70%

• Average-risk investments: 30% to 40%
• High-risk investments: 0% to 10%
You can change the guideline to suit your needs, but
make sure that you start with a philosophy of investing. In
other words, decide beforehand what is best for you. Buy
only those investments that are in line with your objectives.

f. RULES OF SUCCESS FOR THE SMALL

INVESTOR
The game of investing has rules. However, the rules are not
the same for everyone. A small investor will have a different
set of rules than a large investor. A young investor will have
a different set of rules than an older investor. If you are in a
high tax bracket, you will have a different set of rules than if
you are in a low tax bracket. We will consider here only those
rules that are useful for the small investor. Three rules are
particularly useful.

1. Save regularly
If you are a small investor, you cannot afford to be irregular
in your savings. Discipline is an essential part of successful
investing. Once you commit yourself to save a particular
amount you should stick to it. You should not make any
exceptions. From time to time an unforeseen expenditure

27
may come up which you need money. You might be
for
tempted to skip saving that day (or month). Don't. Why?
Because it has been repeatedly observed that:

If, at any time, an unexpected expenditure comes up and you

fail to savebecause of it, another unexpected expenditure will arise
in the near future. Such unexpected expenditures will keep arising
over and over again until your savings program falls apart.

make no exceptions to
Therefore, small investors should
their savings routine. Weekends, holidays, days when you
are not well —
none of these should make any difference.
Because you shouldn't make exceptions, you should set up a
realistic program. Do not be over-ambitious and commit
yourself to saving 25% if you cannot realisti-
of your salary,
cally carry on the program any length of time. Let me
for
emphasize again: it is very important that you be consistent
with your program; the amount you save is important, but
not nearly as important as consistency and discipline.

2. Invest for maximum return

You might have heard — or even noticed — that the rich get
richer and the poor get poorer. There is some truth to this
maxim. Not only are the rich better off to begin with, they get
better deals compared to the poor. Let us compare a small
and a large investor:

(a) A small investor is likely to pay a higher commission

compared For example, if you buy
to a large investor.

$500 worth of shares, you could be charged the maxi-

mum commission which could be 10% of your invest-
ment. A large investor who buys $10,000 worth of
shares (of the same stock) will probably pay a com-
mission of about 2%.

(b) A small investor is likely to get a lower return compared

For instance, if you invest your
to a large investor.

money in Guaranteed Investment Certificates (GICs),

your return will be higher if you invest a large

28
 amount, and lower if you invest a small amount.
Some high-return investments (such as commercial
papers) are not even open to small investors.

(c) A small investor's investments are either vulnerable or not

highly profitable. Because small investors have fewer
options compared to large investors, small investors
are often forced to choose between low-return and
high-risk investments.

Such a system which rewards the rich and penalizes the

not-so-rich may be unfair, but it is the only system we have.
It is not about to change, but take heart. This book will show

how a small investor can invest nearly as profitably as a rich

investor.There are many opportunities open to small inves-
tors.YouTl find out about these opportunities in this book. If
you act on these opportunities you will move into the world
of high finance, no matter how little you have to invest.

3. Minimize your commissions

I have nothing against commissions. But small investors
should be careful as to how they spend their capital. When
you pay a large commission on an investment, you have less
money to invest.

Suppose you invest $1,000 at 15% a year. If you do not

have to pay any commission, you will have $4,045 at the end
of ten years. On the other hand, if you have to pay a commis-
sion of 6%, you will have only $3,802 at the end of ten years.
This is a difference of $243 over the investment period, one
quarter of your original investment!

There is also another issue. When you pay a large com-

mission to get into an investment, the sales person is keenly
interested in selling that investment to you. It is in his or her
interest to glorify the investment. I am not suggesting all sales
people are unscrupulous. They are not. But it is only human
nature to maximize one's personal interests. So it is up to you
to look after your own interests.

29
 Of the three requirements, —
you look after the first one
save regularly and I will show you how to invest for high
returns and how to minimize commissions.
Now that we have finished with the preliminaries, let's
go straight to discovering how you can invest to achieve
financial freedom. The next part of the book describes some
specific investments that are available to the small investor.
Most of these investments can be bought for $100 or even less.

30
 PART III
HOW TO INVEST:
PROFIT OPPORTUNITIES FOR THE
SMALL INVESTOR
 4
GETTING STARTED

a. DOUBLE JEOPARDY
Money talks. When you have a lot of money to begin with,
you can get better advice which will help you make even
more money. For example, here's what you get for your
money if you leave it with your bank for one year:
Amount One year interest rate
$100 0.25%

$5,000 2.10%

$10,000 2.52%

This is what Canadian banks were paying their custom-

ers in mid-1994.

If you buy one ounce of gold bullion, you probably will

pay a small premium — maybe between 3% to 6%. If you buy

one gram of bullion, you will pay a minimum premium of

25%. If you buy one bond, the commission costs will be
proportionately higher than if you buy ten bonds. Mutual
funds that charge a commission ("load") usually reduce it for
larger investors —
sometimes by nearly 90%.

This is true of practically all investments.

There you have it. Double jeopardy. Small investors

don't have much money to begin with and they have to pay
out proportionately more of their money as commissions and
premiums.

33
 Besides, you walked into an investment com-
I'll bet if

pany with $100,000 to invest they would take the time to sit
with you and explain the options. But if you walked in with
$100...

Sounds rather unfair, but that's the way it is.

b. INVESTMENTS WITH CLOUT

There is good news, however. There are investments suited
to the small investor that have nearly as much clout as large
investments.

Why is it that many small investors don't know much

about these investments? The reason is simple. Suppose you
have only $100 to invest. Even if you pay a hefty commission
of 10%, your adviser receives only $10. It is simply not worth
the adviser's time. The result is that small investors continue
to be small —
often they get even smaller.

c. TAKING RESPONSIBILITY
Let me share a secret with you. You have all you need to succeed
in investing. I call it a secret only because so few seem to be
aware of this fact. This book will support you by providing
specific information. However, the final responsibility for
investing is always yours. Do not invest in anything because

I (or anyone else) say so. Your investment decision must

make sense to you.
To be successful, you must take responsibility for your
investment decisions. When you understand an investment
and take responsibility for investing in it, if it fails to work
out, you'll know why. You can make a better decision next
time. Butif you do something blindly because someone else

toldyou so, you will learn nothing —

whether your invest-
ment does well or not.
From have received from readers of earlier
the letters I

editions of this book, I know that thousands of people have

benefited from the suggestions given. I hope the book will

34
help you too. No matter how helpful the book is, always
remember, it is your money and it is your decision.

d. A NOTE ON SPECIFIC INFORMATION

I have tried to put together all the information a small inves-
tor needs to know to invest wisely and for the highest return.
I have even included the addresses and phone numbers you

will need to get started.

1. Names and addresses

I have names and addresses of those

tried to exclude the
institutions that have an undesirable reputation. But I have
no way of checking the hundreds of institutions which are
listed here. Please always try to get more information before
committing your money to any institution. The purpose of
this book is make your search easier. You and only you are
responsible for your final decision.

You should also be aware that quite often institutions

move to a different address, companies merge or change their
names. There is a gap between the time the book is written
and the time you eventually read it. There may also be an
occasional error. So if some phone numbers or addresses turn
out to be incorrect, don't let that stop you. If you are serious
about investing there is enough information here to get you
going for the next few years!

2. Tax implications
The second thing you should be aware of is that different
investment gains and losses are taxed differently. These rules
can be different in the United States and Canada. Because these
rules keep changing and depend on your personal situation, I
do not discuss them in this book. Tax implications of your
investments are important. I don't believe that they can be dealt
with in a satisfactory manner in a short book on investing like
this one. But that is not our concern just now. Once your
program is established and you start making a sizable amount

35
ofmoney, you should make adjustments to your portfolio
and seek the advice of a professional if necessary.

3. Canada and the United States

This book intended for both American and Canadian in-

is

vestors. I refer to Canadian investments in Canadian dollars,

and U.S. or international investments (including gold) in U.S.
dollars.

e. HOW TO START INVESTING

Your objective is to build an investment pyramid. An invest-
ment pyramid consists of several "bricks." Each brick repre-
sents $100. If you save $5 a day, you will have $1,825 or about
18 bricks at the end of the year. Your objective is to save as
many "bricks" (or units of $100) as possible each year and use
them to build an investment pyramid.

Suppose you decided to save $2,100 over the next 12

months. This is equal to 21 "bricks."

First, build an imaginary pyramid of 21 bricks as shown:

AN INVESTMENT PYRAMID WITH 21 BRICKS

36
 Second, read through the rest of the book and decide how
much you want to invest in each type of investment de-
scribed.As soon as you save $100, immediately invest it
according to your plan. Continue to follow your plan as you
save more money. If you get some additional money unex-
pectedly (such as a tax refund or bonus), you may be able to
build your pyramid faster than you had anticipated.

Once you have finished building one pyramid, review

what you have. If you are happy with what you have, you
can building another pyramid. Repeat the procedure
start
until you achieve financial freedom. In a later chapter I will
discuss how this approach can lead you to financial freedom.

37
 5
HOW TO GET HIGH INTEREST
Your first priority is to protect your capital and make it grow.
You have started your program of saving $5 a day. After less
than three weeks you will have $100. What should you do
with your first $100?

You can leave it in a bank account. But this is not a very

smart idea. You are unlikely to get a high interest rate.
Therefore, you should seek ways of getting a higher rate of
interest than you would if you just left your money in an
account with your bank (or trust company, or Savings &
Loan).

a. HOW LARGE INVESTORS GET

HIGHER INTEREST RATES
As you might have guessed, large investors do not invest
their money to get the same rate as a savings account earns.
They look for much higher returns and get them.

How do large investors get a higher rate of interest? They

invest in Treasury bills (T-bills). T-bills are a way of lending
money to governments for a short period of time.

Or they buy Certificates of Deposit or CDs. When you

buy CDs, you lend your money to banks for a fixed period.
Or they buy commercial papers. Commercial papers are
a way of lending money to businesses.
The interest rate large investors earn on these invest-
ments is much higher than what they would get on a savings
account in a bank —
usually 2% to 5% higher. Should interest

38
 moving, the interest rate on the above investments
rates start
will move up immediately. The interest rate you get on a
bank account may or may not move up.

Then why shouldn't we all invest in T-bills, commercial

papers, and CDs? Well, there is a snag. Generally speaking,
you need $5,000 to $10,000 or even more to take advantage
of these opportunities. There is no way a small investor could
accumulate such a large amount —
at least for a few years.
However, there is a way to participate in these investments
with only a small amount of money. But one needs to know
how.

b. HOW TO GET HIGH INTEREST RATES

To get high interest rates, you may want to join a money market
mutual fund. What is a money market mutual fund? A money
market fund is a pool of money collected from many inves-
tors —
large and small —
and invested in high-yielding
T-bills, CDs, and commercial papers. Some of these funds
will let you invest $100 or even less! Your small investment
will earn an interest rate that is normally available only to
large investors.

There are several advantages to investing in money mar-

ket funds:

• The interest rates are higher (compared to banks,

trust companies, or S&Ls)

• Interest rates are compounded daily

• Most funds charge no commission to join

• There is no penalty for withdrawal — at any time

• You can obtain your cash on any working day

• Some funds — especially in the United States — even

let you write checks on your account.

39
c. HOW TO JOIN A MONEY MARKET FUND
Joining a money market fund is very simple. Just call or write
to amoney market fund and ask them to send you the details.
The information package they send will contain all you need
to know to open an account. Pay particular attention to:

• Minimum investment requirement

• Management fee
• Whether they charge a commission (load) to join

• Recent performance

At this stage, you should probably avoid funds that

charge a commission to join. Make sure their current return
is higher than what you are currently getting on your savings

account.

d. NO-LOAD MUTUAL FUNDS

Throughout this book you will hear a lot about "no-load
mutual funds." As explained earlier, a mutual fund collects
money from a number of small and large investors and
invests it on behalf of the investors. Some of these funds
charge a commission that is paid out to the salespeople. Such
funds are called "load" funds. Other funds do not have
salespeople; they sell the fund units directly to the public.
Because they do not have salespeople, they do not charge a
commission to invest with them. Such funds are called "no-
load funds." Whenever possible, small investors should buy
"no-load" funds, thereby avoiding commission costs. Most
of the funds mentioned in this book are "no-load."

e. U.S. MONEY MARKET FUNDS

There are literally hundreds of money market funds in the
United States. Mutual fund companies as well as several
financial institutions offer money market funds. Here are
some money market funds based in the United States:

40
 Benham CA Tax-Free

CMA Municipal Money Fund

Dreyfus Municipal MMF

Franklin Money Market Fund

INVESCO Money Market Fund
Mariner Tax-Free MMF
Rodney Square: Money Market Portfolio

Scudder Managed Tax-Free Fund

USAA Money Market Fund
f. CANADIAN MONEY MARKET FUNDS
In Canada, there are over 100 money market funds. Most of
them are new. A majority of these funds require an initial
investment of at least $1,000 or more. Some funds will accept
$500. The funds listed below require only a $100 minimum.
Once you join the fund, they may even accept a lower amount
when you add to your initial investment. None of these funds
charge a commission to join.

• CDA RSP Money Market Fund

• Great West Life Money Market Inv. Fund
• Montreal Trust: Money Market Section (10 Units)

• Montreal Trust RRSP/RRIF: Montreal Market (10

Units)

For more details of all funds listed in this chapter, please

refer to theResource Directory at the end.

g. WHEN TO USE MONEY MARKET FUNDS

Money market funds will give you a better rate of return
compared to a savings account. But putting your money in a
money market fund is not the best way to get rich. This is
because the interest you receive through money market

41
funds is fully taxed. Unless the interest rates are high (as, for
example, they were during most of the 1980s), taxes and
inflation will cancel out most of your gains. Some of your
money can be in money market funds. However, the main
use of money market funds is to park your money when you
have not yet decided what to do with it.

h. HOW TO EVALUATE THE PERFORMANCE OF

YOUR FUND
Before you start investing, you may want to compare the
performance of different funds. You may also want to moni-
tor how your fund is doing. Part V, Keeping Track of Your
Progress, will show you how.

42
 6
HOW TO INVEST IN STOCKS
Perhaps you have never invested in the stock market. Maybe
you wonder what the stock market is, and wonder how you
can make money investing in stocks. Even if you are an
absolute beginner, you will find this chapter helpful.

a. WHAT ARE SHARES?

Shares indicate ownership of a corporation. If a corporation
issues 100,000 shares and if you buy 1,000 of these, you own
1% of the company.
Corporations issue shares to raise money. Let us as-
sume that you have a great idea for manufacturing widgets
that will generate large profits. But you need start-up
capital of $1 million. So you start a corporation and issue
200,000 shares at $10 each. You keep 100,000 shares or 50%
of the company for yourself and sell the remaining 100,000
shares at $10 each. This gives you the $1 million you need
to manufacture widgets.
Once these shares are issued, investors who bought these
shares will not normally be able to sell them back to the

corporation. But they can sell them to other investors. The

price of these shares on any given day is determined by
market forces — supply and demand. If there are more
buyers than sellers, the price will go up; if there are more
sellers than buyers, the price will come down. If the corpora-
tion makes large profits, the price of the shares will go up. If
it makes large losses, the price will come down.

43
 Within a single day the price may go up or down several
times, depending on supply and demand for that stock on
that day.

b. HOW ARE SHARES TRADED?

Generally, stocks are bought and sold from a few central
New York Stock
locations called stock exchanges (such as the
Exchange and the Toronto Stock Exchange). Shares are
traded at the exchanges through auction.

c. HOW TO BUY AND SELL SHARES

If you want to buy or sell shares, you need to go through a
stockbroker who will arrange for the transaction to take
place.The normal procedure is to simply call your broker on
the telephone and place an order to buy or sell a certain
number of shares of a stock.

d. HOW TO FIND A STOCKBROKER

There are two kinds of stockbrokers: Full service and dis-
count. Full service brokers charge a higher commission, but
they are likely to provide the information you need about
your stock. They also make recommendations regarding
what stock to buy. A good full service stockbroker will try to
understand your objectives, how much risk you want to take
with your money, and whether a given investment is suitable
for you or not. Discount brokers, on the other hand, simply take
your order and execute it. Because they don't provide any
additional service, their commission charges are lower.
//
Many people choose brokers by word-of-mouth on
,,
—
the recommendation of friends and acquaintances. The other
way to choose a broker is to look through the Yellow Pages
of yourphone book and pick a firm that is a member in all
major exchanges. Call the firm and ask to talk to a broker.
"broker of the day." He or
You will be put in touch with the
she will probably arrange to have a personal meeting with
you and take down all the required information to open an

44
account. Once the account is opened, you can carry out all the
transactions over the telephone.

e. HOW TO PLACE ORDERS WITH YOUR

BROKER
Once you decide what stock to buy, you can simply call your
broker to buy "100 shares of XYZ company at $ per
share." If you do not specify a price that you are willing to
pay, your broker will buy shares at the market price (the price
at which the stock is available when your order reaches the
stock exchange).

you specify a price at which the stock should be bought,

If

you have placed what is known as a GTC (Good Till Can-

celed) order. A GTC order will remain with the broker until
the order isexecuted or you cancel the order. Suppose XYZ
stock is trading at $10.25 and you do not want to pay more
than $10 for it. You may place an order to buy 100 shares of
XYZ at $10. Your order will be active for about 30 days.
During this time, if XYZ sells for $10, it will be bought at that
price for you.

f. WHAT ELSE YOU SHOULD KNOW?

Stocks are usually sold in multiples of 100. One hundred
shares are called a board lotlot. You can of course
or a round
buy than 100 shares. When you buy less that 100 shares,
less
you are said to be dealing in odd lots. However, commission
charges are higher for odd lots.

The price of a stock usually goes up or down by a mini-

mum of one-eighth of a dollar, e.g., lV%, 7 A, 73/s, etc. Lower
l

priced stocks go up and down in steps of one-sixteenth or one

thirty-second of a dollar. Penny stocks (very low-priced
stocks) go up or down in steps of one cent.

45
g. WHAT ARE OTC STOCKS?
Some stocks are not traded through stock exchanges. Instead,
they are traded through an electronic network of dealers. The
stocks traded this way are called OTC (over-the-counter)
stocks. While there may be exciting opportunities in this
sector of the market, you should be aware of certain disad-
vantages:

• Less information is readily available about OTC

stocks.

• You may few newspapers carry complete

find that
listings of these stocks. Every time you want to
know the price at which these stocks trading, you
have to call your broker.

h. HOW TO READ THE FINANCIAL PAGE

Each day, major newspapers list the stocks that are traded in
the main stock exchanges. They are usually listed as follows:

12 Month PE
High Low Stock Volume Ratio High Low Clo se Change

16 12 NSFBank 20,000 20 15 13 14V2 -V2

The third column (Stock) indicates the name of the com-

pany whose stocks are under consideration. The first two
columns (12 Month High-Low) indicates that in the past 12
months, NSF Bank shares were sold as high as $16 a share, and
as low as $12 a share. The Volume column indicates how many
shares changed hands during the day. PE ratio (price earnings
ratio) is explained in section j. below. In general, the lower the
PE ratio, the better it is from an investment point of view.

The next three columns summarize the previous day's

and as low as
transactions: the stock sold for as high as $15
$13, and the last trade occurred at $14^. The last column
shows the difference between yesterday's closing and the
previous day's closing. In the example, yesterday's closing

46
pricewas $14V2. The change is % l/i, that is, the previous day's
closing price was $15.

i. WHAT IS A STOP-LOSS ORDER?

Suppose you buy a stock at $10, hoping that it will increase
in value. Since you can never be certain of this, you may want
to limit your losses should the price fall. You may decide to
take a loss of 15%, but not much more. In this case, you may
enter a stop-loss order with your broker at $8.50. If the price
of the stock reaches $8.50, your broker will automatically sell
your shares at the best possible price available at that time.

j. HOW TO MINIMIZE THE RISK

The stock you buy can either go up or go down. Although we
all hope that the stocks we buy will go up, there is no

guarantee. To minimize the risk of losing money on a stock,

you may want to follow these guidelines.

1. Buy stocks with low price earnings (PE) ratio

Suppose a share and the company earns $2 per

costs $10
share. That is, the company makes $2 for each $10 you invest.
The price earnings is simply

™„Ratio = —Price Per-Share

PE
..
—^ :
$10 -
= -^— = 5-

Earnmgs Per Share $2

The higher the earnings, the lower the PE ratio. Therefore,

if the PE ratio is low, say six or lower, the price of the stock
is less likely to go down compared to another stock with a

much higher PE ratio (all things being equal). Financial pages

report the PE ratios of most major stocks daily.

2. Buy stocks with high book values

Book value us how much a company is worth. For
tells

example, if a company had net assets of $100 million with 10

million shares outstanding, its book value is $100 million
divided by 10 million = $10 per share.

47
 If the company ceased to operate, each share would still

be worth $10. Therefore, it is safer to buy stocks that trade

close to and lower than their book value. Book values are not
usually reported in the financial pages of the newspapers.
Perhaps the simplest way to find out the book value of any
given stock is to ask your broker.

k. COMMISSIONS: HOW TO REDUCE THEM

Whenever you buy or sell shares, you have to pay a commis-
sion to the broker. This could be as high as 3% when you buy,
and 3% when you sell. Many brokerage houses have a mini-
mum commission of $40 to $60. In return for this commission,
a full-service brokerage house will provide research informa-
tion and advice on stocks.

However, many small investors may find the commis-

sion costs rather high.If you are sure of what you want to

buy, then you can save on commissions by going to discount

brokerage houses. Discount brokerage houses generally will
not offer you any advice. They will simply execute your
orders.

If you want to use a discount broker, make sure that the

discounts offered are meaningful. If you write to them, they

will send you a schedule of their charges for different trans-

actions. You can then compare and decide.

Many discount brokers advertise their services in news-

papers such as the Wall Street Journal, the New York Times (for
the United States) or the Globe and Mail Report on Business (for
Canada).

Here is a partial list of some discount brokers in the

United States and Canada. (For full addresses and telephone
numbers, see the Resources Directory at the end of this book.)
United States
• Bidwell

• Burke Christensen & Lewis

48
 • Fidelity Brokerage Services Inc.

• Heartland Securities

• Lombard Institutional Brokerage

• National Discount Brokers

• Pacific Brokerage Services

• Quick and Reilly Inc.

• Charles Schwab and Co.

• Muriel Siebert and Co.

• York Securities

Canada
• Toronto Dominion Greenline 1-800-268-8209
• Bank of Montreal Investor Services (416) 867-4000

• Desjardins Securities 1-800-268-8471

• Scotia Discount Brokerage (416) 863-7411

1. WHY DIRECT INVESTMENT MAY NOT BE

SUITABLE FOR THE SMALL INVESTOR
Although I have discussed stock market investments at con-
siderable length, direct stock market investments may not be
suitable for the small investor for the following reasons:

(a) Individual stock can be expensive. For example, in

early 1994, Microsoft shares were selling at $96.50 per
share. To buy 100 shares, an investor would need as
much as $9,650.
(b) The commission can be high. For example, for the
above transaction you may have to pay more than
$290 in commission charges. When you sell you may
have to pay another $290.
(c) You cannot spread the risk. Even after spending
$10,230, you hold only one stock, you are totally

49
 dependent on this company thriving for you to make
money.

Obviously, it would be preferable for the small investor

to find a stock market investment medium that is less expen-
sive, involves little commission, and is less risky.

Is there such a medium?

Yes, there is! In fact, you can start with as low as $100,
pay no commission, and spread the risk.

m. HOW YOU CAN PARTICIPATE IN

THE STOCK MARKET
The investment medium I am talking about is mutual funds.
As mentioned earlier, a mutual fund is an investment com-
pany whose main purpose is the investment and manage-
ment of investors' money. When you invest your money in a
mutual fund, it is pooled with that of other investors and is
invested in a wide variety of stocks. This minirnizes your cost
as well as your risk.

Some mutual funds charge a commission; others do

not. Those that do not charge a commission are called
no-load mutual funds. There is no evidence to show that

funds that charge a commission perform better than those

that do not. Hence, a new investor is better off investing in
a no-load fund.

No-load mutual funds have the following advantages:

• No sales commissions.

• No high-pressure salespeople: No-load funds have no

salespeople; that's the reason you do not pay any
commission.

• Greater safety: Since the fund invests in a variety of

companies, the investment is diversified. This usu-
ally minimizes your risk.

50
 • Ease of operation: Obviously it is easier to buy and sell a
single fund than a wide variety of stocks. Some funds
allow you to buy and sell over the telephone.

• Variety: There are several types of funds. There are

funds that specialize in high dividend yielding stocks
(income funds); funds that invest in stocks that are
likely to appreciate greatly in value (growth stocks);
funds that invest in stocks that relate to natural re-
sources; funds that invest in foreign securities (inter-
national funds); funds that invest in bonds (bond
funds) and so on. Depending on your requirements,
you can choose a fund that is right for you.

Given all these advantages, the no-load mutual fund is

perhaps the best way for a beginner to get started in the stock
market.

For further information on selecting a mutual fund, you

can obtain the Investment Company Institute's Guide to Mutual
Funds. It costs $8.50. The 1994 edition of this guide contains
information on over 3,000 U.S. mutual funds.

The Investment Company Institute

1401 H Street N.W.
Washington, DC 20005
(202) 326-5800

For an extensive list of no-load or low-load mutual funds

(including the minimum required and the nature of each
fund), you may want to consult Investor's Guide to Low-Cost
Mutual Funds. published by the Mutual Fund Education
It is

Alliance and The guide has detailed information on

costs $5.
750 funds, including their one-, five-, and ten-year perform-
ances.

Mutual Fund Education Alliance

1900 Erie Street, Suite 120
Kansas City, MO64116
(816) 471-1454

51
 If you are a small investor, the following no-load mutual
funds may be suitable for you since no minimum amount is

required to join.

United States

• Twentieth Century Growth

• Twentieth Century Select

• Twentieth Century Heritage

• Twentieth Century International Equity

• Twentieth Century Long Term Bond

• Twentieth Century Ultra

• Twentieth Century Vista

• Beacon Hill Mutual Fund

(The addresses and phone numbers for the above funds

are in the Resource Directory.)

Canada

Of no-load funds have been gaining in popularity in

late,

Canada. Consequently there are many more no-load mutual

funds today than there were about ten years ago. Most funds,
however, require a minimum —
usually between $100 and
$1,000. Here are some funds that require $150 or less to join:

• Associate Investors Limited

• Great West Life Equity Index

• Foresters Growth Fund ($50 minimum)

• RoyFund Equity Ltd. ($100 minimum)
• Montreal Trust Excelsior Funds: Equity Fund

If you need additional information, contact:

52
 The Investment Fund Institute of Canada
151 Yonge Street, Suite 503
Toronto, Ontario
M5C 2W7
(416) 363-2158

Ask for their membership list. The list gives the addresses
and phone numbers of several mutual funds. Examine the
performance of these funds with other funds as well. Per-
formance of all Canadian funds are published monthly by the
Financial Post, the Globe and Mail Report on Business, and the
Financial Times of Canada monthly survey. (The Financial Times
of Canada, for example, compares the performance of several
Canadian funds on ten-year, five-year, three-year, one-year,
and quarterly and monthly bases. This survey is usually
published in the third week of every month). Contact those
funds that have performed well over the years to find out
their terms and conditions.

n. HOW TO CHOOSE A FUND

Choosing a fund among the several that are available de-
pends on several factors.

(a) The amount of money you have: Different funds have

different miiiimum investment requirements. You
are obviously restricted by the amount of money you
have to invest.

(b) Your investment needs: As mentioned earlier, different

funds are geared to different needs. For example, if
you want high current yield, an income fund is a
If you are not interested in high current
better choice.
income but would rather invest in stocks that are
likely to increase substantially in value, you would
choose a growth fund. Or you may prefer to invest in
different types of funds as money becomes available
to you.

53
 (c) Funds' past performance: A fund that has done consis-
tently well in the past is likely to do well in the future.
The performance of a fund should be judged over a
period of time (at least the five previous years) and
not just on the past 12 months. Any fund can do well
or badly in a given year. Consistently good perform-
ance, on the other hand, seldom happens by chance.
To give you sufficient flexibility, I have listed a wide

variety of funds in the United States and in Canada in the

Resource Directory at the end of this book. Before subscribing
to any of the funds, obtain prospectuses from different funds
and compare their differences and long-term performances.

54
 7
HOW TO BUY STOCKS AT A DISCOUNT
When you go to a discount broker, you pay a lower commis-
sion. But there is a way to avoid commissions completely. In
fact, you can even buy stocks at a discount! This may sound

too good to be true, but you can do it by taking advantage of

a less-widely known program called DRIPs.

a. DIVIDEND REINVESTMENT INVESTMENT

PLANS (DRIPs)
DRIPs stands for "Dividend Reinvestment Investment
Plans." As you know, many stocks pay regular dividends.
Some stocks that pay regular dividends have set up DRIPs
that let you reinvest your dividends without commissions.

All you have to do to join the DRIP program of a given

stock is own just one share in the company. Once you buy the
share, you should register the stock in your name. The trans-
fer agent for the company will send you the necessary forms.
Indicate that you want to be in the DRIP program. You will
then receive all the necessary details.

b. THE ADVANTAGES OF JOINING A DRIP

DRIPs offer you an opportunity to reinvest the dividends
you receive in additional stocks automatically. In most cases,
no commission is involved. Many companies will let you buy
additional shares, and others will let you buy shares at a 5%
discount.

you add this 5% discount to the 2% commission which

If

you would normally pay, you see that you pay $100 for what

55
would cost most people $107. A 7% return on your invest-
ment before you even start is not a bad deal!
Dividend paying companies tend to be established, sta-
ble companies. Therefore, we have a degree of safety built in
when we join the DRIP program offered by a company.
Here are the advantages of joining a DRIP program:

• Your dividends are automatically reinvested.

• You may be allowed to buy more shares with no

commission.

• In some cases, you may buy shares at a discount.

• Your investment is relatively safe.

c. INFORMATION ON DRIP COMPANIES

You can obtain information on companies that participate in
the DRIP program from stock exchanges.

1. Canada
For example, in Canada, the Toronto Stock Exchange pro-
vides a listing of DRIP companies along with the terms and
conditions. This can be purchased for about $12. (For the
addresses of the Toronto and other stock exchanges, see the
Resource Directory and the end of the book.) If you are
interested in DRIPs, you should contact stock exchanges for
more details.

2. United States

In the United States, there are also newsletters that specialize

in DRIP investing. An example of such a newsletter would
be:

DRIP Investor
7412 Calumet Avenue
Hammond, IN 46324-2692

56
d. HOW TO JOIN A DRIP
If you are interested in a DRIP program this is what you
should do.

(a) Get a list of companies that offer a DRIP program by

contacting the stock exchanges.

(b) Go through the list by choosing those companies that

seem attractive to you.

(c) Of these companies, see which ones have more favor-

able terms.

(d) Buy some stocks in each company you are interested

in by going through a stockbroker. (There also other
methods: you can buy DRIP stock in some financial
trade shows or through some organizations. These
methods are beyond the scope of this book.)
(e) Get the forms from the "transfer agent" for the com-
pany.

(f) Fill out the form indicating that you would like to be
in the DRIP program.

(g) Once you have done this, you will automatically

receive information which will enable you take ad-
vantage of the DRIP program.

e. WHAT ELSE SHOULD YOU KNOW?

While DRIP investing is attractive, please bear in mind that
only a handful of companies offer this program. Many com-
panies that are attractive from an investment point of view
may not offer a DRIP program. You should definitely con-
sider a DRIP program, but you should also consider that
avoiding commissions and buying a stock at a discount is
only one aspect of investing. The real meat of investing is in
making your money grow. If you find a stock that makes your
money grow faster, don't let go of the opportunity just be-
cause it does not offer a DRIP program.

57
 8
HOW TO INVEST IN BONDS
a. WHAT ARE BONDS?
Governments and corporations need to borrow money from
time to time. To do this, they issue bonds to the public. Thus,
when you buy a bond, you are lending your money to the
government or to the corporation for a specified period of
time. In return for this, you are paid regular interest.

Every bond has three features:

(a) A face value or the loan amount (usually $1,000).

(b) A specified rate of interest (called the coupon rate).
(c) A maturity date. (This is the date on which the com-
pany or government will buy the bond back from you
at the face value.)

Suppose you buy a bond that matures after ten years.

What happens if you need the money after five years? The
company or the government will not normally buy it back
from you until the maturity (or redemption) date. However,
you can sell it to some other investor in the bond market.
When you sell your bond to another investor in the open
market, the price you get will depend on supply and demand
factors. You may get less than what you paid for it or you
may get more.

b. BOND PRICES
What determines how much you will get for your bond
before the maturity date? It depends on interest rates. If
interest rates are higher when you want to sell than when you

58
bought the bonds, you will get a lower price for your
bonds. If the interest rates are lower when you want to sell
than when you bought the bonds, you will get a higher
price for your bonds. In short, when interest rates go up,
the prices come down; when the interest rates come down,
the prices go up.

Suppose you buy a bond for $1,000 and the interest rate
is 10%. If by financial institutions such
the interest rate paid
as banks, 12% then investors will not be willing
moves up to
to pay $1,000 for your bond, because your bond pays only
10% interest and they can get 12% buying newly issued
bonds. But you sell your bonds at a discount, say for $850,
if

investors willbuy it from you. When this happens, your

bonds are said to be "trading at a discount/' Although you
sold your bond at $850, when the maturity date arrives, the
person holding the bond will get the full $1,000. The differ-
ence between what you got ($1,000) and what you paid ($850)
is known as "capital gains." Capital gains are taxed at a lower
rate in the United States and in Canada.

On the other hand, suppose bond for $1,000

you buy a
and the interest rate is 10%. If the interest rate moves down
to 8%, then investors may be willing to pay more than $1,000
for your bond, because new bonds pay only 8% interest while
yours pays 10%. You may be able to sell your bond, for
example, for $1,150. When this happens, your bonds are said
to be trading at a premium. Although you sold your bond at
$1,150, when the maturity date arrives, the person holding
the bond will get only $1,000.

c. WHEN TO BUY BONDS

Because the value of bonds goes up when the interest rate
goes down, you should buy bonds when you expect the interest
rate to go down. When the price of the bond you bought goes
up and you sell, you make a profit and this profit will be
treated as capital gains. Capital gains usually get better tax

59
treatment in the United States and Canada. You should be
careful when buying a bond that trades at a premium. Unless
the interest rate comes down before the maturity date, you
will get back lessthan the amount you paid for it.

d. BONDS AND DEBENTURES

Bonds are generally issued with collateral. The company
issuing a bond backs it up with specific assets. Debentures,
on the other hand, are issued without any collateral. You
buy debentures based on the reputation of the company
issuing it. All government "bonds" are really debentures
— you cannot force the government to sell off the parlia-
ment building to repay your bond. How do you know how
safe your bond is? There are independent bond rating
services that rate all bonds. Your broker should be able to
tell you the rating of any major bond. Safer bonds tend to

have slightly lower interest rates compared to bonds that

are less safe.

e. HOW TO BUY
Bonds can be bought and sold through a stockbroker. The
commission costs for bonds are much lower than for stocks.

f. BOND AND MORTGAGE FUNDS

Since most bonds cost around $1,000, a small investor may
not be able to diversify properly. Besides, many investors
may not want to be bothered about selecting suitable bonds
Bond funds overcome these problems by
for their portfolios.
pooling the money received from many investors and invest-
ing it in a portfolio of bonds, mortgages, or both. Interest rates
influence bond funds in the same way that interest rates
influence bonds.

The following bond funds require $100 or less to join (for

addresses and phone numbers see the Resource Directory):

60
United States
• Franklin Short-Intermediate U.S. Government Secu-
rities ($100 minimum)
• Twentieth Century Long-Term Bond (No minimum)

Canada
• Barreau du Quebec Fonds Placement — Obligations
(No minimum)
• RoyFund Bond Fund ($100 minimum)
• Montreal Trust Excelsior Funds: Income Fund

There are over 125 bond and mortgage funds in Canada.

There are even more in the United States. See the Resource
Directory for a listing of some of these funds.

g. STRIPS AND ZEROS

Stripped bonds are likeany other bearer bond in that they are
issued with coupons attached to them so bond holders can
exchange the "coupons" for interest payments. To "strip" a
bond, an investment dealer buys a block of these bonds and
removes all the coupons. The bond is then called the "residue."
You can buy either the "coupon" part or the "residue" part. If
you buy the coupon part, you get the regular interest rate, but
you will not benefit if the price of the bond goes up.
you buy the residue part, you will get no interest at all,
If

but you will pay a much lower price to buy the bond. For
instance, if you can find a strip bond that matures in 25 years
with a 12% coupon, you need to invest only $5,825 today to
receive $100,000 at the end of the term. Strip bonds also rise
sharply when the interest rate goes down.

Zero coupon bonds are similar to stripped bonds in that you

can buy a $1,000 bond for a fraction of its face value. You will
not be paid any interest, but when the bond matures you will
be able to redeem it for its full face value.

61
 The main attraction of these bonds is that they enable you
to lock in at ahigh yield for a long time. This is particularly
advantageous if interest rates go down in the future. On the
other hand, if interest rates go up, you will be locked into a
lower yield. If you want to sell your bond at that time, you
will get a much lower price than you paid for it. Even small
fluctuations in interest rates will make the market price of
these bonds go up and down.

One main disadvantage of these strips in Canada is that

you pay taxes regularly even though you do
are expected to
not receive any interest. The interest is deemed to have been
received by you on a regular basis for tax purposes. (Cana-
dian investors may buy stripped bonds for their RRSPs where
it is not taxed until the plan is closed).

You can use strips and zeros to your advantage by

buying a few bonds each year with different maturity
dates. These may be used to supplement your income in
later years.

There are also mutual funds that invest in zero coupon

bonds. (These funds are U.S.-based). You may want to con-
sider the following zero coupon funds:

• Benham Target Maturities Trust series 2000

• Benham Target Maturities Trust series 2005

• Benham Target Maturities Trust series 2010

• Benham Target Maturities Trust series 2015

• Benham Target Maturities Trust series 2020

All these funds are no-load and require a minimum

investment of $1,000. To get the prospectus for any or all of
these funds please contact:

62
 Benham Management Corp.
1665 Charleston Road
Mountain View, C A 94043
1-800-321-8321 / (415) 965-4222

h. CONVERTIBLE BONDS
Convertible bonds are like any other bond except for one
special feature: they give you the privilege of exchanging the
bonds for a specified number of shares of the company before
a certain date. Because of this attractive feature, the interest
rate is usually lower.

For example, Labatts has a convertible bond which

pays a fixed interest rate of 5%. You can also exchange this
bond for 37 shares of Labatts. Labatts was trading at $21
(in early May, Suppose the price of these shares
1994).
moves up to $25. Since you can convert your bond into 37
shares, it will now be worth at least $925 (37 x $25). In fact
it will be worth more because the bond pays interest as

well. Thus, when share prices rise, convertible bonds auto-

matically benefit.

On the down to $15

other hand, suppose the stock goes
per share. Then the share value of your bond will be only
$555 (37 x $15). But the price of the bond will not decline that
much because, unlike the shares, convertible bonds pay in-
terest. Thus, when share prices decline, convertible bonds
will not decline to the same extent.

In other words, when the share prices increase, convert-

bonds behave like shares with unlimited profit potential.
ible
When share prices go down, convertible bonds are partially
protected against corresponding declines because of their
interest yielding feature.

1. What to look for in convertible bonds

The convertible feature no great benefit if the total
is of
value of the share per bond is too low relative to the cost
of the bond. This would mean that the shares have to move

63
up you can make a profit. Therefore,
significantly before
when you buy a convertible bond, you should make sure that
the premium is not too high. (Higher premiums will be asked
for when the underlying stock is expected to move up and
when the bond has a high coupon.) Premium is calculated as
follows:

Percent premium =
Current bond price)]
[(100 x
(No. of shares per bond x Current stock price)]

You also have to look for the actual rate of interest. This
is calculated as follows:

Percent current interest = (100 x Interest specified on the

bond) * Current bond price

You should look for convertible bonds with low premi-

ums and high current yield. Bonds trading close to (or below)
their par value are more desirable than bonds that trade at a
price that is much higher.

2. When to buy convertible bonds

A convertible bond is a good buy when —
• the current interest on the bond is not too low com-
pared to regular bonds,

• the conversion is relatively low (under 20%),

• there are reasons to believe that the underlying
stock will rise,

• interest rates are falling, but the stock is rising, and

• the bond is not trading above its par value (usually
$1,000).

The last feature is particularly important because many

convertible bonds have a "call feature" which gives the cor-
poration the right to buy the bond back at a specified price
on or after a specified date. Once a bond is called, you will

64
get only the specified price, no matter how much you paid to
get it.

You have to be careful when —

• the bond is selling much above its face value,

• the conversion premium is high but the current

yield is low,

• the call features are due soon,

• the interest rates are rising but the share prices are
falling,

• the share price is not likely to go up, and

• the underlying company is not sound.

There are not many convertible bond funds in Canada.
Even in the United States there are only a few. These funds
either charge a commission or have lackluster performance,
or both.

Convertible bonds can be very profitable, provided you

choose the right ones at the right time. You might be better
off investing directly in them (if you find good convertible
bonds) rather than through a mutual fund.

3. How is the gain taxed?

The interest paid on the bond is fully taxed as interest income.
If the bond goes up in price and you sell it, the profit will be

treated as capital gains and taxed (or not taxed) accordingly.

65
 HOW TO INVEST IN
PREFERRED STOCKS

a. WHAT IS A PREFERRED STOCK?

A preferred stock, like a common stock, represents shares of
ownership in a company. A preferred stock carries a fixed
must be paid before any
rate of dividend. This dividend
dividend on common stocks. However, preferred shares do
not carry voting rights.

Although a preferred stock technically represents own-

ership, it works like a bond. There are some differences:

• Bonds pay an indicated rate of interest while pre-

ferred stocks pay an indicated rate of dividend.

• you receive from bonds is

In general, the interest
some exceptions to this rule),
fully taxed (there are
while dividends received on preferred stocks will
be taxed at a favorable rate.

• Bonds in general have a maturity date, the day on

which you will receive the face value of the bond;
preferred shares do not have maturity dates.

• Most bonds have a face value of $1,000. Interest is

calculated on this face value, no matter what price
you paid to buy the bond. Most preferred shares
have a face value of $25.

b. WHY INVEST IN A PREFERRED STOCK?

In spite of their differences, both bonds and preferred shares
are bought for steady income. Preferred stocks are bought for

66
exactly the same reasons as bonds. Whether you buy bonds
or preferred stocks depends on your tax situation and the
level of security you want with your income.

c. DIFFERENT KINDS OF PREFERRED STOCKS

Some corporations issue Class A preferred shares, Class B
preferred shares, and so on. In such cases, Class A share
dividends must be paid prior to Class B share dividends,
Class B before Class C, and so on. Class A preferred shares
would then be called prior preferred.

Certain types of preferred shares are known as participat-

ing preferreds. Holders of these preferreds are entitled to
additional dividends if the common stock dividends exceed
a certain amount.

Cumulative preferreds guarantee that the accumulated

dividend will be paid later if it cannot be paid when it is due.
Such payments will take precedence over common stock
dividends.

Convertible preferreds are similar to convertible bonds in

that they can be exchanged for a specified number of common
shares at the holder's option. This feature is attractive if the
common stock is on its way up.
Retractable preferreds give the holder the right to redeem
his or her shares after a specific date at a specific price. This
feature may be useful should the value of the preferred stock
decline.

Except in the case of convertible preferreds, preferred

shares are generally bought for high current yields. Preferred
shares do not have the same potential for appreciation, except
when interest rates are on the decline. Newer issues, how-
ever, have some innovative features (like variable interest
make them attractive as a conservative investment
rates) that
medium. You should look into these features before you
invest.

67
d. PREFERRED STOCK PRICES
Once issued to the public, preferred stock trades on stock
exchanges. The price of a preferred stock will depend on
prevailing interest rates. If the interest rates are higher when
you want to sell than when you bought the preferred stock,
you will get a lower price than what you paid for it. If the
interest rates are lower when you want to sell than when you
bought the preferred stock, you will get a higher price for
your preferred stock. In short, when the interest rates go up,
the prices come down; when the interest ratescome down,
the prices go up. Preferred share prices go up and down with
interest rates, but in the opposite direction. This is exactly
how bonds behave as well.

e. WHEN TO BUY PREFERRED STOCKS

Because the value of preferred stocks goes up when the
interest rate goes down, you should buy preferred stocks
when you expect the interest rate to go down. When the price
of the preferred stock you bought goes up and you sell, you
make a profit and this profit will be treated as capital gains.
Capital gains usually get better tax treatment in the United
States and Canada.

f. HOW TO BUY/SELL PREFERRED STOCKS

Because preferred shares trade on stock exchanges, you
would buy preferred shares in the same way you would buy
bonds: through your stockbroker.

g. USING MUTUAL FUNDS TO BUY PREFERRED

STOCKS
There are mutual funds that specialize in dividend income.
Most of these mutual funds are heavily invested in preferred
stocks. (They also invest in dividend-paying common
stocks.) Here are some no-load, dividend-income mutual
funds:

68
Canada
• Montreal Trust Excelsior Funds: Dividend Fund
• National Trust Dividend Fund ($500 minimum)
• Royfund Dividend Fund ($100 minimum)
• Royal Trust Growth & Income Fund ($500 mini-
mum)
United States
In the United States,mutual funds are not generally identi-
fied as preferred income funds. If you are interested in divi-
dend oriented stocks, you should look under the category
"Growth and Income Funds." I recommend that you consult
Low-Load Mutual Funds published each year by the American
Association of Individual Investors.

69
 10
HOW TO INVEST INTERNATIONALLY
a. WHY INVEST ABROAD?
Many investors think that only the rich should invest in
foreign countries. But there is money to be made in foreign
countries, and foreign investing is not difficult. You do not
need a lot of money either.
Between October 1, 1992, and September 30, 1993, the
U.S. stock market gained 11% and the Canadian stock market
gained just 4%. For the same period, the Singapore stock
market gained 59%, the Malaysian stock market gained 57%,
the New Zealand stock market gained 49%, the Italian stock
market gained 44%, and the Japanese stock market gained
41%.

Why shouldn't you have a piece of the action? Different

countries grow at different rates. By investing only in Canada
or in the United States,you can miss the growth that is taking
place elsewhere. The world is becoming smaller and smaller.
If you arbitrarily decide to invest in only one country, it is

unlikely that you will do as well as you would if you invested

abroad. If you had started with about $500 in 1960 and shifted
the money into different markets at the right time, you would
have well over $1 million by now! (See Chart #2.) Yet, you
would have moved your money only 16 times in 25 years!
Since the chart was produced about five years ago, you
could have increased your investment by another 50%
(another $500,000) by simply moving your investments
three more times!

70
 CHART #2
INTERNATIONAL INVESTMENTS
Turning $500 into $1,000,000

- $1,000, (XX)

•
$500,000

$200,000

$80,000

- $40,000

$10,000

$5,000

$2,500

$500

Concept and data: International Bank Credit Analyst and Capital Inter-
national Perspective (brought to the author's attention by Adrian Day).

71
 I am not
suggesting that you could have predicted pre-
cisely which country would do well. I don't think anybody
can do that. But even ifyou could achieve a fraction of the
extraordinary results shown above, you would be far ahead
of other investors.

b. HOW TO INVEST IN FOREIGN SECURITIES

If you live in Canada or in the United States, you can very easily
invest in foreign securities. You do not have to spend time
following foreign stocks; there are several mutual funds in the
United States and in Canada that invest in foreign securities.

There are two kinds of funds that invest in foreign coun-

tries. Global funds invest their money anywhere in the world.
Regional funds invest their money in specific regions such as
Japan or Hong Kong. If you believe that a particular country,
such as Japan, will do well in the future, you can buy into a
regional fund that invests in Japanese stocks. On the other
hand, if you feel that you should invest in good stocks,
wherever they may be, then you may want to buy into a
global fund.

c. GLOBAL FUNDS
Ifyou had invested $30,000 in the Templeton Growth Fund
30 years ago, you would be a millionaire today. John Tem-
pleton is a pioneer in global investing. Templeton looks for
value and buys stocks that are undervalued. No one has done
better than he has. Templeton and his fund are both still
around. You have to pay a commission (6%) to join this fund.
The minimum required to join is only $500. If you are inter-
ested, you should contact:

Templeton Growth Fund

700 Central Avenue
P.O. Box 33030
St. Petersburg, FL 33701
(813) 823-8712
1-800-237-0738 (toll-free)

72
 In Canada, contact:

Templeton Growth Fund

4 King Street West
19th Floor
Toronto, Ontario
M5W 1N3
(416) 364-4672
1-800-387-0830 (toll-free)

Currently there are several mutual funds that invest

internationally. Here are a few funds that charge no commis-
sions. Their addresses and phone numbers can be found in
the Resource Directory at the end of the book.

United States
• Harbor International Fund
• Scudder Global Fund

• Vanguard International Gr. Fund

• T. Rose international Bond Fund
• USAA International Fund
Canada
• Altamira Asia Pacific Fund

• Altamira New Asia Fund

• CIBC Global Equity Fund
• Capstone International Investment Trust

• Cornerstone Global Fund

• Everest EuroGrowth Fund

• First Canadian International Growth Fund
• Hong Kong Bank Asian Growth
• Montreal Trust Excelsior Funds: International Section

• Royal Trust Asian Growth Fund

73
d. REGIONAL FUNDS
If you are interested in investing in a specific country, you
can do so through a closed-end fund. A closed-end fund is a
company whose sole business is to invest its capital for its
shareholders. Once a closed-end fund starts operating, it will
not accept new money from investors. But you can buy and
sell shares in a closed-end fund just like you would buy and

sell the shares of any publicly traded company —

on a stock
exchange. Some of these funds can trade at a premium or at
a discount from their net asset value. If you want to invest in
any of these funds, you may want to ask your broker whether
the fund is trading at a discount or at a premium. You should
avoid funds that are trading at a premium, especially if the
premium is large. Here a few funds that invest in different
countries:

European Investment Concept Fund (New York

Stock Exchange)

Asia Pacific Fund (New York Stock Exchange)

Brazil Fund (New York Stock Exchange)
Emerging Mexico Fund (New York Stock Ex-
change)

First Australia Fund (American Stock Exchange)

France Growth Fund (New York Stock Exchange)
New Germany Fund (Toronto Stock Exchange)
India Growth Fund (New York Stock Exchange)
First Israel Fund (OTC)
Italy Fund (New York Stock Exchange)
Japan Equity Fund (Toronto Stock Exchange)
Korea Fund (New York Stock Exchange)
Malaysia Fund (New York Stock Exchange)
Growth of Spain Fund (New York Stock Exchange)

74
 • Swiss Helvetica Fund (Toronto Stock Exchange)
• Taiwan Fund (New York Stock Exchange)
• Thai Capital Fund (New York Stock Exchange)
• United Kingdom Fund (New York Stock Exchange)

e. BEFORE YOU START

If you want to invest in foreign securities, I suggest that you
write to different funds and compare their track records
before investing. You may also want to read good book on
a
international investing. There are several books on the mar-
ket. Buy a recent one. The market is changing fast.

75
 11
HOW TO INVEST IN GOLD
a. WHY INVEST IN GOLD?
Ifyou keep your money in the bank, you get interest on your
savings. If you buy stocks, you may be paid dividends. If you

invest in a business, you may get a share of profits. Gold, on

the other hand, does not provide any return on a regular basis
on your investment.
Why, then, are we talking about gold as an investment?
Why should small investors even bother to consider gold as
part of an investment program?

To understand the importance of gold as a form of invest-

ment, you need to understand the price history of gold:
Year Average Price Per Ounce % Increase
1968 $39 —
1973 $98 151%
1978 $193 395%
1982 $376 865%
1987 $447 1046%
1994 $381 877%
People buy gold for capital gains! They expect the gold
price to move up with inflation.
You need more than $200 today to buy the same goods
and services that could have been bought for less than $100
in 1977. One ounce of gold today will buy more goods and
services than it probably did in 1977. In other words, when

76
inflation hits, currencies are devalued, but gold increases in
value. In recent years, the price of gold has increased at a
much higher rate compared to the rate of inflation. Gold is

considered to be the unofficial universal money. Since gold

has an enormous potential to move ahead of inflation, any
investment program should probably include gold.

One caution — gold has kept pace with inflation over a

period of time, but don't forget that gold prices are volatile.
This means the price of gold could go down in the short run
and stay at that level for quite some time. A small investor
must make sure not to invest any money in gold that might
be needed in an emergency.

Until recently, an investor needed a substantial amount

of money to invest in gold. However, currently there are
opportunities for investors with just $100.

b. SOME COMMON WAYS TO PARTICIPATE IN

THE GOLD MARKET
There are several ways in which an investor can participate
in the gold market. Not all methods are suitable for the small
investor. I will first discuss some of the common methods
used, and then identify those that are suitable for the small
investor.

There are basically six ways in which an investor can

participate in the gold market. These are:

(a) Gold bullion (gold bars)

(b) Gold coins

(c) Gold certificates

(d) Gold stocks

(e) Gold options

(f) Gold futures

77
 1. Gold bullion
Gold bullion is simply a gold bar. Gold bars are produced in
a wide variety of sizes, ranging from five grams to 400 ounces.
The gold prices quoted in the newspapers refer to the price
per ounce for a standard 400-ounce gold bar. If you buy
smaller bars, costs will be higher, since a bar charge is added
to the standard price quoted. Bar charges can be in excess of
10% of the standard price.

2. Gold coins
There are two types of gold coins — bullion type and numis-
matic type.

Bullion coins are gold coins that have a value determined,

to a large extent, by their gold content. These coins trade at a
very small premium over their actual price in relation to their
gold content. Here are some of the more popular bullion coins:

Country of Origin Name of Coin Gold Content

Canada Maple Leaf 1 Ounce
United States American Eagle 1 Ounce
United States Double Eagle 1 Ounce
Australia Golden Nugget Koala 1 Ounce
Austria Corona .96 Ounce
China Panda 1 Ounce
France Britannia Napoleon 1 Ounce
Mexico Centenario 1.2056 Ounce
South Africa Krugerrand 1 Ounce
Other bullion coins include the British sovereign (which
has a higher premium), the Mexican 20, 10, 5 and 2 Vi peso
coins, the Russian chevronetz and the South African l/i, lA,
and Vio rand coins. Maple Leaf, Golden Nugget Koala, Bri-
tannia Napoleon, and American Eagle also have V2-, lA-, and
Vio-ounce versions.

78
 Numismatic gold coins are those minted at a certain point
in time and are currently available in limited quantities. They
sell at a premium that may be considerably higher compared
to their gold content.

The price of these coins is determined by several factors.

Some of the major factors are the following:

(a) Number of coins originally minted

(b) Number of coins still in circulation
(c) Age of the coin

(d) Condition of the coin

Coins minted in limited quantities with limited current

circulation and older coins in better condition will, in general,
have a greater value than coins minted in large quantities
with a large number still in circulation, or more recently
minted coins in poor condition.

While this may sound logical, it can be difficult to evaluate

these factors. How do you know the number of coins currently
in circulation? How is good condition defined? A simple
blemish in a numismatic coin, which may not be apparent to
the buyer, may lower the value of a numismatic coin consid-
erably.

3. Gold certificates

Gold certificates are issued by some banks and dealers. When

you buy gold certificates you are, in effect, buying gold
bullion. The company that sells you these certificates stores
the gold on your behalf. The bullion is registered in your
name. The commission charges could be as low as lA% or as
high as 5%. In addition, the issuing company will charge you
a modest storage fee. You can buy and sell gold this way
without ever taking delivery. In many cases, you will avoid
bar charges which you are expected to pay when you actually
take delivery. You can also buy gold certificates through

79
stock exchanges. For example, gold is traded on the Montreal
Exchange like stocks and can be bought through your broker.

4. Gold stocks
Buying shares in gold mining companies is another way you
can participate in the gold market. There are several South
African and Canadian mining companies whose shares are
commonly traded. Some investors prefer not to buy South
African gold stocks because of the current political situation
there. Some of the factors that affect the stock prices are the
current price of gold, the cost of production per ounce, the
life of the mine, and management competence.

5. Gold options
A gold option is a contract that gives you the right to buy (or
sell) gold at a certain price before a certain date. You do not,

however, have an obligation to buy or sell. For example,

suppose the price of gold today is $400. You may buy an
option contract that gives you the right to buy 100 ounces of
gold within the next nine months (you can buy options with
different lifespans) at, say, $425. This contract may cost you
about $2,000 or a premium of about $20 per ounce. In the next
nine months, if the price of gold rises much above $445 ($425
+ $20 premium), your option will be worth a lot more than
$2,000. For example, gold moves up to $500, your option
if

could be worth $7,500. You can realize the gain by selling the
option back. The risk is that if the gold price remains below
$545 for the next nine months, you will lose all your invest-
ment ($2,000).

6. Gold futures
A futures contract obligates you to buy (or sell) a certain
amount some specific time in the future at a price
of gold at
specified now. You may, however, liquidate the contract
before that date. Gold futures are usually for 100 troy ounces.
You may buy a futures contract if you expect the price of gold
to rise before a specified date.

80
 . The main you pay only
attraction of gold futures is that
about 10% to 20% of the total value when you buy the
contract. The rest is due when you take delivery. This gives
you high leverage if the market moves according to your
predictions. Since you are obligated to buy (or sell) at a given
price, you could end up losing a lot more than your original
investment if the market moves against you.

c. HOW YOU CAN INVEST IN GOLD

Of the six basic ways of owning gold, two are completely
unsuited for the small investor: gold futures and gold op-
tions. Both these methods can be very profitable. However,
the small investor should avoid the temptation. When you
buy options, you can lose all your investment capital; when
you buy futures, you can lose all your investment capital plus
a lot more. Since the small investor's priority is to preserve
the capital, options and futures are unsuitable.

The following methods are better suited for the small

investor.

1. Gold bullion for the small investor

Until recently, the smallest gold bullion bar that could be pur-
chased was a one-ounce bar. Such bars carry a premium of 10%,
in addition to an assaying fee. They are also difficult to trade.

Some brokerage houses in the United States offer ac-

counts thatwork like mutual funds. For example, you may
want Your investment is pooled with
to invest $100 in gold.
that of other investors. Gold bullion is bought in bulk each
day. The commission can be about 6% (or less if you invest
more). Such plans do not carry a storage fee, assaying fee,
insurance fee, or sales tax. The gold is retained by the broker-
age house and you can sell it whenever you want.

2. Gold coins for the small investor

As discussed earlier, there are two types of gold coins —

bullion type and numismatic type. Bullion coins are traded

81
solely for their gold content. Numismatic coins are traded not
only for their gold content but also for qualities such as rarity,
age, condition, appearance, etc. The premium on numismatic
coins can far exceed their gold value. The value of numis-
matic coins may often be unrelated to their gold content.
Therefore, numismatic gold coins cannot be truly considered
as gold investments.

There are several bullion coins. The most popular of these

are the South African Krugerrand, the Canadian Maple Leaf,
the U.S. Eagle, and, to a lesser extent, the Chinese Panda and
the Mexican Onza.

(a) The Krugerrand

The Krugerrand contains exactly one troy ounce of gold. It

has a fineness of .9167 or 22 karats. It is widely traded and

carries a premium of 2% to 6% over the gold price. Kruger-
rands are traded throughout the world. The Krugerrand is
legal tender in South Africa.

Smaller investors may be interested to know that Kruger-

rands are also available in fractional units. You can buy Vi
oz., V4 oz., or V10 oz. Krugerrands. However, these fractional
units carry a much higher premium, as shown here:
Unit Typical Premium

1 oz. Krugerrand 4%
V2 oz. Krugerrand 8%
V4 oz. Krugerrand 12%

V10 oz. Krugerrand 18%

Thus, if gold is selling at $400, buying ten Vio oz. Kruger-

rand will cost you about $60 more than buying a 1 oz.
Krugerrand. For this reason, you should not buy fractional
units unless you cannot afford to buy the 1 oz. Krugerrand.

82
 (b) The Maple Leaf

The Canadian Maple Leaf also contains exactly one troy

ounce of gold. It has a fineness of .999 or 24 karats. Although
a late-comer to the scene, it is now widely accepted around
the world. It carries a premium similar to that of the Kruger-
rand.

The 1 oz. Maple Leaf has a face value of $50 and is

available in fractional units: A oz.
l
($10 face value), and Vio
oz. ($5 face value). The fractional units, as discussed before,
carry a higher premium and hence are not recommended for
the very small investor.

(c) The U.S. Eagle

The U.S. Eagle contains exactly one ounce of gold. It is very

popular in the United States. The Eagle is available in smaller
denominations as well: Vi oz., lA oz., and Vio oz. The pre-
mium is slightly higher compared to that of the Maple Leaf.

(d) The Mexican Onza

This coin is similar to those described above. It contains one
troy ounce of gold. Although less widely traded, the Mexican
Onza carries a premium similar to that of the Krugerrand or
the Maple Leaf.

(e) The Austrian and the Hungarian Crown

The 100 crown (Corona) coins produced by Austria and
Hungary are much more popular than their other gold coins.
The 100 Corona contains .9802 ounces of fine gold, making it
slightly less valuable as bullion than the Krugerrand or the
Maple Leaf. Corona coins are not legal tender. They are
copies of coins issued by the former Austro-Hungarian Em-
pire. The Austrian and the Hungarian Coronas are usually
considered to be the same coin, and trade at the same price.
The dealer premium for these coins is relatively low.

83
 (f) Austrian ducats

These coins contain less gold and claim a much smaller share
of the market. The premium on these coins could be about
8% over their gold value.

(g) The Mexican peso

Of all gold coins issued by Mexico, the 50-peso coin is the
most popular. It contains 1.2057 ounces of fine gold. It was
originally issued in 1921 to commemorate Mexico's 100th
anniversary and therefore is also called the Centenario. In
South America, the Centenario is the most popular gold coin.
The coin is also traded in North America and in Europe. All
Centenarios are dated copies of the original issue.

The Mexican 20-peso, which contains .48 ounces of gold,

is somewhat less popular.

(h) The British Sovereign

This coin contains .2354 ounces of fine gold. has been It

minted continuously since 1817. These are semi-numismatic

coins, especially those minted in earlier years. Some coins
carry premiums of up to 50% over their gold bullion value.
The British Sovereign bears the image of the reigning Queen
or King on one side and a scene of St. George slaying the
dragon on the other. It is also legal tender in Britain. The
sovereign is popular with both investors and numismatists.

(i) U.S. $20 Gold Double Eagles

These coins were stuck between 1950 and 1933. Two types of
Double Eagles are now in circulation — St. Gaudens and
Liberty Head. These coins contain .97 troy ounces of gold and
carry premiums up to 100%. These coins should be purchased
However, even minted-
in strictly uncirculated condition.
state coins may bear "bag marks" (scratches) from being
handled in bags.

84
 3. Gold bullion accounts
A gold bullion account is exactly like a savings account,
except that deposits are converted into ounces of gold at the
time of deposit. The value of your "savings" is determined
by the daily prices of gold. (Please note these savings do not
pay any interest; your gain or loss is solely determined by the
price of the gold on the day you decide to sell.)

4. Gold funds
Another way to participate in the gold market is to buy shares
in gold mining companies. For a beginning investor, this has
several disadvantages:

(a) Relatively high cost of quality mining stocks

(b) Commission for both buying and selling

(c) Possibility of a particular company being misman-

aged

(d) Political climate affecting a particular company

A beginning investor needs an alternative that offers
diversification, is cheaper, is safe, and carriesno commis-
such an alternative.
sions. In fact, there is These are mutual
funds that specialize in gold. These funds invest in gold (and
other metals). Here are some such funds:

United States
• Benham Gold Equities Index

• Blanchard Precious Metals

• Bull & Bear Gold Investors Limited
• Fidelity Select American Gold / Precious Metals
• INVESCO Strategic Portfolio — Gold
• Lexington Goldfund
• Scudder Gold
• USAA Gold

85
 • U.S. Gold Shares
• U.S. World Gold
• Vanguard Specialized Portfolio — Gold and Precious
Metals

All the above are no-load funds.

Canada
In Canada, there are two no-load gold mutual funds:
Royal Trust Precious Metals
Royal Trust Investment Services Inc.
Mutual Funds
1st Floor,
630 Rene Levesque Boulevard West
Montreal, Quebec
H3B 1S6
1-800-463-3863

(Minimum Investment: Initial: $500; Subsequent: $25)

Scotia Precious Metals Fund

c/o Scotia Investments
1 Richmond Street West
7th Floor
Toronto, Ontario
M5H 3W2
(416) 866-4574

(Minimum Investment: Initial $500; Subsequent: $50)

86
 12
HOW TO INVEST IN SILVER
a. WHY INVEST IN SILVER?
There are several reasons why a beginning investor should
consider silver.

(a) poor man's gold. In the spring of 1994, you

Silver is
could have bought 70 ounces of silver for the price of
1 ounce of gold.
(b) Silver often rises in price when gold goes up.

(c) Silver is an industrial metal. There is always a de-

mand for silver.
(d) Unlike gold, silver is used in many industries. So the
price of silver should rise in the long term.

b. SOME COMMON WAYS TO PARTICIPATE IN

THE SILVER MARKET
As with gold, there are six basic ways to participate in the
silver market. These are:

(a) Silver bullion

(b) Silver coins

(c) Silver certificates

(d) Silver stocks

(e) Silver options

(f) Silver futures

87
 These ways of buying silver are exactly the same as their
gold counterparts. For an explanation of the above methods,
please refer to the chapter on gold.

c. HOW YOU CAN INVEST IN SILVER

Investing in silver is similar to investing in gold. Most dealers
who deal in gold deal in silver.
1. Silver bullion

You can pay cash and accept delivery of silver bullion. Com-
mon sizes of silver bars are 10 (troy) ounces, 100 ounces, and
1,000 ounces. Since there are several charges when you take
delivery, you may be better off leaving the silver you pur-
chase with your dealer until you decide to sell. One large
dealer of silver is:

Thomas Cooke Currency Services Inc.

630 Fifth Avenue
New York, NY 10111
(212) 757-6915

Thomas Cooke Group Canada Limited

10 King Street East
Toronto, Ontario
M5C 1C3
(416) 863-1611

2. Silver coins

Silver coins are perhaps the best starting point for small
investors interested in precious metals. Until 1965, the United
States produced silver coins in several denominations: dol-
lars, half dollars, quarters, and dimes. Such coins are referred
to as junk silver and are now bought and sold mainly for their
silver content.

Junk can be bought as bags or as rolls. A bag

silver
contains silver coins whose face value is $1,000. The silver
contents of pre-1965 coins is approximately 720 ounces per
bag. Each bag will cost approximately 720 x the current silver
price per ounce. The high price makes it difficult for small

88
investors to invest in bags. Rolls are a lower cost alternative.
Dimes come in rolls of 50, and quarters come in rolls of 40.
The approximate cost is:
Dime rolls = 3.6 x the price per oz. of silver
Quarter rolls = 7.2 x the price per oz. of silver

There are also numismatic silver coins. For the beginning

investor, however, junk silver still offers the best value. There
are far too many silver coins from around the world that
qualify for the title numismatic and are best left out of your
portfolio until you become familiar with this market.

Junk silver can be bought from most of the coin dealers

listed in the Resource Directory.

3. Silver bullion accounts

A silver bullion account works exactly like a gold bullion

account (see chapter 11).

89
 13
HOW TO INVEST IN REAL ESTATE
a. REAL ESTATE AND THE SMALL INVESTOR
You can make a fortune in real estate. But you need to be
knowledgeable in buying a property and willing to spend the
time to understand the market. I assume you do not want to
spend a lot of time and that you do not want to get seriously
involved in the real estate business. Even so, you can make
money in a small way in real estate.
Get into by all means, but only if you have
real estate
some special knowledge. The reason for this is that real estate
is highly leveraged. This means that you borrow a lot more

than you currently have. If you buy a property for $100,000

and put down $10,000, you have borrowed $90,000. The only
way you can make money is for the value of the property to
go up. If it does not, you are paying interest on $90,000 year
after year. This is not a position you want to be in if you are
a small investor. So, I believe that small investors should not
get into direct real estate investment unless they have some
special knowledge in this area or know how to buy an under-
valued property, add value to it by renovating, and then
resell it. Since I don't expect most small investors to possess
such special knowledge, I recommend you explore ways to
profit from real estate.

If at all you should own your own home. Own-

possible,
ing your home commits you to paying the mortgage, but you
save on rent. If the value of your house goes up, you can make
a tidy profit. In Canada, you do not pay capital gains tax
when you sell your home. This makes owning your home

90
very attractive. It is an investment you can keep using for
your benefit until there is profit to be made.

b. REAL ESTATE INVESTMENT TRUSTS (REITs)

REITs are companies that invest in apartment complexes,

shopping malls, and other commercial and residential prop-
erties. When you buy shares (units) in these companies, you
become a part-owner of this property.

Here are some REITs currently operating in Canada:

• RealFund

• Counsel

• CREIT
• Lantower

two types of REITs: REITs

In the United States, there are
that actually own and REITs that lend money to
properties
real estate developers. REITs that own properties (equity-
type) have tax advantages and therefore should be preferred
to the mortgage-type REITs. (In Canada there are hardly any
REITs.)

Shares in REITs can generally be bought or sold like

shares in any corporation. If you are interested in this form
of investment, write to:

National Association of REITs

1129, 20th Street N.W.
Suite 305
Washington, DC 20036
(202) 785-8717

If you want to receive a list of REITs and would like to

know more, request their REIT Fact Book and a current REIT
list from the Association. (There may be a small charge for

this.)

91
c. WHY INVEST IN REITs?
REITs normally aim to hold high quality real estate. REITs
pass on all income (untaxed) to unit holders. While you need
to pay tax on the income you receive, you may also be eligible
for preferential tax treatment (such as capital cost allowance
and REITs provide instant
interest deductions). diversifica-
tion and professional management.

d. WHAT YOU SHOULD KNOW

You should remember that investing in REITs does not auto-
matically mean that you will make money. Much depends on
the experience of management and economic conditions
when you invest. Another thing you should know is that not
all REITs are equally liquid, especially if the properties held
by an REIT are not of good value. So do your homework and
find out what is in their portfolio before you invest. If you are
not sure, don't invest. Look for other options.

e. HOW TO BUY AND SELL REIT UNITS

REIT units are like stocks. To buy them, you should go
through your stockbroker.

f. REAL ESTATE MUTUAL FUNDS

There are also mutual funds that invest in real estate (mostly
commercial). They work exactly the same way as many other
mutual funds. There are some differences though:
• The value of a real estate mutual fund is decided by
an evaluation of the properties owned by the mutual
fund. Evaluations and what one actually would get
for a property are often two different things.

• Many real estate mutual funds evaluate their net

asset value only once in three months. This makes
buying and selling less immediate.

92
 • Real estate funds can impose a moratorium on re-
demptions if they feel redemptions will harm the
fund even further when the market is down.
If you are still interested, here are some no-load real estate
mutual funds:
United States
• Fidelity Real Estate Investment

• PRA Real Estate Securities

• US Real Estate (Load 0.1% redemption fee)
Canada
• MD Realty A
• MD Realty B
• Royal Lepage Commercial

93
 14
EVEN MORE WAYS TO MAKE MONEY

So far, we have discussed different types of investments

that are safe for a small investor. There are, however,
several other forms of investments that are highly profit-
able. These investments share one or more of the following
characteristics:

(a) You need a larger amount of money to participate.

(b) You need greater knowledge or experience to partici-
pate.

(c) There are several pitfalls for the unwary investor.

Some of these investments are presented here. Because
these investments can be quite complex, please consult other
sources before investing your money.

a. HOW TO MAKE MONEY IN OPTIONS

1. Call option

A call option is the right to buy 100 shares of a specified stock,

at a specified price before a specified date. The stock specified
is the underlying stock; the price at which you have a right to
buy is the strike price; the particular date on which your right
to buy expires is the expiration date.

For example, IBM shares traded at $57.50 on May 18.

Suppose you expect the price to move up to at least $65 before
July 22. Since it is too expensive to buy 100 shares of IBM
($57.50 x 100 = $5,750), you may buy a call option for about a
$175 premium which gives you the right to buy 100 shares
before July at $60 per share.

94
 you have already paid a premium of $1.75 per share
Since
($175 + 100), IBM has to move up to at least $61.75 before July
22 for you to make a profit (strike price + premium: $60 + $1 .75
= $61.75). Beyond this break-even point, every dollar move-
up results in a profit of $100 to you. Thus, on the expiration
day, if IBM sells at $65, your profit will be $600 on an
investment of just $175. This is a profit of nearly 200% in just
four months! You may sell your option at the current market
price at any time you wish.

What happens if IBM trades at or below $61.75 on the

expiration date? You simply lose all money you paid for
the
the option — $175 plus commission. You cannot, however,
lose more than this amount.

2. Put option
You can also buy a put option. A put option gives you the
right to sell 100 shares of a particular stock at a specified price
before a specified date. In the above example, if you predicted
that IBM would go down by July, you would buy a put
option. You would make money if the stock went down
below the strike price. Otherwise, you would lose the pre-
mium paid.
3. The advantages of options

Options are attractive for these reasons:

• You can participate in the growth of high price
stocks with very little capital.

• Your maximum loss is pre-determined.

The main disadvantage of options is that if your predic-

tion does not materialize before the expiration date, you
stand to lose all your investment plus commission.
However, there are several ways in which an option can
be used effectively. For example, suppose on May 14 you buy
100 shares of IBM which trade at $55. You can sell a call option
which expires next July for, let's say, $275. This gives the

95
buyer of the option the right to buy from you 100 IBM
call
shares at $55 before July 22. Between September and January,
one of the following will happen.

(a) IBM will go up steeply. Should this happen, you will

be asked to sell your shares at $55 per share. You get
to keep $275 paid to you as a premium. Your profit
for four months is equal to:

Premium received 275 _

0/
Your investment during the period 5,500

A return of 5% (or approximately 20% a year) is

thus guaranteed.

(b) IBM will neither move up or down. If the price of IBM

remains more or less the same, you will not be asked
to sell your shares. You keep the $275 you received
and, upon expiry of the option, you can sell another
option on the same stock for a future date. You can
repeat the process and get steady income peri-
odically. In addition, any dividend you receive is also
yours to keep.

(c) IBM will go down steeply. Should this happen, you

will not be asked to deliver the shares. However,
should you wish to sell the shares and cut your
losses before the expiration date, it would be safer

to repurchase the option you sold before selling

your shares.
Thus, the above strategy assumes a pre-determined rate
of return on your investment in a steady or a rising market
and slightly lowers your losses in a declining market. (Please
note that this strategy also limits your maximum profits in a
sharply rising market.)

The strategy is both simple and conservative. There are

several interesting ways to make money in options while
at the same time limiting your risk. If this investment
interests you, you should read at least one good book on

96
the subject. You may want to start with a primer such as
Getting Started in Options by Michael C. Thomsett (published
by John Wiley Ltd., Second edition: 1993).

Options are traded like stocks. Your stockbroker will

be able to buy and sell options for you according to your
requirements.

b. HOW TO MAKE MONEY IN COMMODITIES

Commodity futures are simply a way of betting. Suppose in
May wheat is selling
of 1994, at $3 a bushel. You are con-
vinced that by September, the price of wheat will be at least
$3.50 a bushel. There is someone else in the marketplace who
believes that the price will go down by September, probably
to $2.50 a bushel. So you bet against each other —
you agree
to buy 5,000 bushels of wheat from the other person in
September for $3; the other person agrees to sell it to you at
that price.

You figure that if your prediction is correct, you stand

to make a profit of 50<2 a bushel or $2,500 in all; the other
person similarly figures that if the price goes down to
$2.50, he will make a profit of 50t per bushel or $2,500 in
all. If the price moves in either direction, one of you will

gain and the other will lose a corresponding amount. In

either case, the losing player just pays the winning player
the difference, instead of actually buying or selling the
wheat in question.

Although that is not the only use of commodity futures,

most commodity futures are traded as described above. In
actual practice, commodity trading has the following fea-
tures:

• You do not directly bet with another player, you

bet through a commodity broker. The broker, in
turn, goes through a commodity exchange which is

a central clearing house.

97
 • Commodity trading is available only for certain
grain, currencies, metals, food products, etc. When
you bet (buy or sell a contract), you may do so only
for a standard quantity (e.g., 5,000 bushels of
wheat).

• When you bet, you have to put down a margin

amount (a certain percentage of the total value of the
contract). If the market moves against you, you may
be asked to put down more money.

You may get out of the contract before the due date. Your
profit or loss at this point will be determined by the market
price of the contract.

You may, if you wish, take delivery of the commodity

after the due date.

Obviously, just as you can buy a contract when you think

you can also sell a contract. In this case,
the price will go up,
you agree to deliver the commodity (or pay the difference
between the market price and the contract price) at a specified
date. When you sell a contract, you assume that the price of
the commodity will go down and you can profit by purchas-
ing the contract at a lower price.

1. Disadvantages of commodity trading

Commodity trading requires considerable discipline. Many

beginners lose all their capital during the first year of trading.
At a minimum, you should —
(a) be able to control your greed when things go your way,

(b) be able to sleep soundly when you lose a few hundred

dollars in a matter of hours, and

(c) resist over-trading.

98
 2. Advantages of commodity trading
Because of the low margin requirement in commodity trad-
ing, it is possible to make large sums of money with a small
amount of investment capital.

Commodities are a lot more volatile than other forms of

investments. It is possible to make a quick fortune in com-
modities.

The rewards of commodity trading are high. While

devastating losses are possible, for a disciplined trader it

need be no more risky than trading in stocks and bonds. If

you want to fully understand how this market works, Todd
Lofton's Getting Started in Futures is a good book on the
subject (published by John Wiley Ltd., Second edition:
1993).

There are several commodity exchanges. In most ex-

changes, the contract sizes are large. There are, however, two
exchanges that sell smaller contracts:

The MidAmerica Commodity Exchange

141 West Jackson Boulevard
Chicago, IL 60604
(312) 341-3000

The Winnipeg Commodity Exchange

500 Commodity Exchange Tower
360 Main Street
Winnipeg, Manitoba
R3C 3Z4
(204) 949-0495

Just as you need a stockbroker to trade in stocks, you need

a commodity broker to trade in commodities. Most large
brokerage houses also deal in commodities. It is unwise to
deal in commodities if you have less than $5,000 to $10,000 as
risk capital. Many commodity brokerage firms will not even
deal with small investors.

99
 One final piece of advice: if you are a small investor, start
with grain futures where the losses are smaller. Avoid trad-
ing in metals, currencies, etc., until you have a sufficiently
large amount of capital.

c. HOW TO MAKE MONEY IN ART AND

COLLECTIBLES
Works of art and collectibles are risky as investments. They
may decline in value drastically, you may not find a ready
market when you want to sell them, and, unless you are
careful, you may end up paying inflated prices when you
buy.

On the positive side, art and collectibles are pleasurable

to own. They may appreciate in value more than any of your
other investments, and, if you invest wisely, it is unlikely that
you will incur any great loss over a long period of time.

1. What to do
If you are interested in investing in art and collectibles, you
should follow these guidelines:

(a) Specialize: Collectibles include art, antiques, Chinese

ceramics, diamonds, books, stamps, and a variety of
other items. Choose an area you feel comfortable with
and get to know as much as possible about the field.
(b) Buy what you like to own: Since most collectibles tend

to be long-term investments, you may have to live

with what you bought. You might as well buy some-
thing that gives you pleasure while you have it.

(c) Avoid fads: Fads, by definition, change. Do not rush to

buy fad items. Fads change quickly and you may be
stuck with something that is worthless from an in-
vestment point of view.

(d) Buy quality: Quality items keep their value while

non-quality items are unpredictable. Concentrate on
quality.

100
 (e) Buy collectibles that have large markets: Some collect-
ibles are highly specialized and only a handful of
investors are interested. This type of investment is

highly illiquid. Avoid such collectibles.

(f) Get a certificate of authenticity: When you buy a collect-

ible, get a dealer's certificate of title, guarantee of
authenticity, and registration.

(g) Know the current market price before buying: To avoid

costly impulse purchases, you should investigate the
current price range for the collectible you want to
buy. You should also decide in advance the maxi-
mum price you are willing to pay.

(h) Buy through reputable dealers: Because fakes and

worthless collectibles abound in the marketplace, try
to buy only through reputable dealers.

2. How to get started

Sotheby's and Christie's are two of the most reputable auc-
tion houses for collectibles. Both of these firms publish cata-
logues through the year, giving detailed descriptions of the
items that will be available at forthcoming auctions. These
catalogues give the estimated prices of the items. You may
send in your bid for any item you like. At the time of auction,

the company on your behalf so that, if you are

will bid
successful, you will get the best possible price. You may wish
to contact:

Sotheby's
1334 York Avenue
New York, NY 10021
(212) 606-7000

Sotheby's (Canada) Inc.

9 Hazelton Avenue
Toronto, Ontario
M5R 2E1
(416) 926-1774

101
 Christie's Fine Art Auctioneers
170 Bloor Street West
Toronto, Ontario
M5S 1T9
(416) 960-2063

Christie's Fine Art Auctioneers

502 Park Avenue
New York, NY 10022

d. HOW TO MAKE MONEY IN TAX SHELTERS

We pay taxes on a graduated scale. As your income increases,
you keep less and money you earn.
less of the additional
Although, overall, you may pay only 25% or 30% of your
income as taxes, the marginal tax rate could be 40% or higher.
This means that, at your level of income, you have to pay at
least $40 in taxes for every extra $100 you earn.

For an investor this above fact is very important. Suppose

you can save $3,000 a year. If you do not have to pay taxes on
this, then you have $3,000 to invest. If you could get an 18%
return on this amount, your savings would be worth more
than $1 million in 25 years.

On the other hand, if you were to pay taxes at 40% on

your savings of $3,000 a year, the total value of your invest-
ment at the end of 25 years would be $400,000 less. By
planning your finances properly, you can reduce your tax
bill, thus making more money available for your invest-

ments. Legal ways of avoiding taxes are usually referred to

as tax shelters.

Tax shelters are usually of two and

types: tax deferred
tax-free.Tax deferred investments enable you to postpone the
taxes to a future date, while tax-free investments enable you
to avoid taxes completely. Both these types of investments
should be considered seriously. If they apply to you, you
should take advantage of them.

102
 Several readers have written to me with their comments
and suggestions since the first edition of this book. I have
tried torespond to their suggestions in this edition. I have
been unable to respond as fully as I would like to requests
from readers for information on tax shelters. I am unable to
include much information on taxes because tax rules can
change very rapidly. What I write may become outdated by
the time you read the book.

My general suggestion is to make use of tax shelters and

retirement plans such as RRSP (Canada), IRA and Keogh
(United States) whenever you can. My only caution is that
you should not invest in just anything because it is a tax shelter. If
it is not a sound investment, it is not a good buy just because

it shelters your money from taxes.

Because taxes can affect the value of your investments,

make sure you read some good books on the subject. Be sure
that the books you read are not outdated. I urge you to find
out as much as you can because this is a very important topic

for small investors.

How do you compare tax-free investments with taxable

investments? Let's say, for example, that a tax-free invest-
ment yields a 6% return and a taxable investment yields a
10% return. Which one should you choose? To compare the
two, do the following calculation:

im (Tax-Free Yield)
100 X 10°
"(Taxable Yield)

In our example:

100 -
^ x 100 = 40%
This means your marginal tax (the tax you pay on the last
dollar you earn) should be at least 40%, for it to be worth-
while.

103
e. HOW TO MAKE MONEY WITH SWISS BANK
ACCOUNTS
A Swiss bank account is not just for the rich. It offers so many
advantages that it is suitable even if you are a small investor.
Let us consider some of the advantages.

1. Security

Swiss currency one of the strongest in the world. In most

is

countries the rate of inflation is so high it erodes the purchase

power of the money you save. In Switzerland, on the other
hand, the rate of inflation has been traditionally low.

2. Privacy

There are laws governing the secrecy of your account.

strict

In Switzerland, it is illegal for a bank to divulge information

about your account to anyone, including the Swiss govern-
ment. (This, however, may not protect a customer when he
or she indulges in fraudulent activities).

3. Services

Swiss banks provide a wide variety of services to their cus-

tomers. Unlike our banks in North America, Swiss banks can
help you convert your currencies into Euro currency, buy
stocks and bonds on your behalf, store gold and silver, and
perform similar financial management services. The range of
services offered by Swiss banks is indeed impressive.

4. Swiss bank account

Although many Swiss banks require a large minimum

amount to open an account, some cater to small investors. To
get started, write to the banks listed in the Resource Directory
under Swiss Banks, and ask for an application to open a Swiss
franc savings account. Once you open an account, you can
mail checks drawn on a U.S. or Canadian bank. All corre-
spondence can be conducted in English.

104
 15
LOW-RISK STRATEGIES FOR
HIGHER PROFITS

Most investors look for two things —

• safety of their capital, and
• increased return on their investments.

You can use specific strategies to get what you want. A

strategy is a method that is well thought out in advance. You
follow the strategy, even when things don't seem rosy. A
strategy helps you avoid panic reactions when things don't
go your way.

a. STRATEGY 1: DOLLAR COST AVERAGING

Let us suppose that —
(a) you want to invest a specific amount on a regular
basis,

(b) you want to invest over a long period of time, and

(c) you are interested in high quality, dividend-paying
stock.

There is no guarantee that the stocks will increase in value

over any given period of time. For example, assume that in
1970 you bought $1,000 worth of stocks in each of the follow-
ing ten prominent companies. Their worth on January 2,
1980, was:

105
Name of company Stock value in 1970 Stock value in 1980
IBM $1,000 $ 883
Sears $1,000 $ 589
U.S. Steel $1,000 $ 778
Westinghouse $1,000 $ 692
General Motors $1,000 $ 723
General Foods $1,000 $ 809
Woolworth $1,000 $ 665
Texaco $1,000 $ 942
Eastman Kodak $1,000 $ 584
Goodyear $1,000 $ 419
$10,000 $7,084

Ignoring the dividends for the time being, the investment

is worth 30% less than it was ten years ago. (If you take
inflation into account, the investments are worth less than
50% of the 1970 value).

During the 1987 stock market crash, the value of many

stocks plummeted. Suppose you had bought blue chip
stocks immediately after the crash. After three years (Oc-
tober, 1990) would your investment have appreciated
sharply? The answer is no!

Thus, it is clear that even if you invest in blue chip

companies, you need a good strategy to protect your invest-
ments.

Dollar cost averaging is one of the most widely known

systems, and it achieves superior results under certain con-
ditions. This system works best when you invest in high
quality dividend-paying stocks on a regular basis.

Dollar cost averaging involves purchasing the same

dollar amount of stock at regular intervals, regardless of
the price of the stock at the time of each purchase. For
example, you may decide to buy $1,000 worth of TD Bank
shares each year. Suppose you had done this for ten years,
e.g., 1971 to 1980.

106
 AMOUNT INVESTED = $1,000 per year
Year Share Shares Total Estimated
price bought no. shares dividends

1971 $12.31 81 81 $30.00

1972 $15.92 63 144 $63.00

1973 $19.38 56 200 $100.00

1974 $17.38 58 258 $158.00

1975 $19.75 51 309 $216.00

1976 $18.63 54 363 $258.00

1977 $16.80 60 423 $321.00

1978 $21.25 47 470 $400.00

1979 $21.63 36 506 $614.00

1980 $32.00 31 537 $755.00

$1,95.05 $2,915.00

Average share price == $195.05 10 years = $19.50

Total dividend received = $2,915.00

By investing the same amount regularly, you were able

to buy more shares when the prices were low. At the end of
ten years, the average price paid per share was only $19.50
although the share price was $32 on October 31, 1980. In
addition, you also received nearly 30% of your capital
($2,915) back in dividends.

As time goes by, the dividends also become very important.

For example, by the end of the tenth year, the dividend received
from TD Bank is equal to 75% ($755) of the annual investment!
You can, of course, increase the profit by re-investing the divi-
dends in addition to making your regular investment.

• Dollar cost averaging is a system suitable for regular

investors over a long period of time. It works best
with dividend-paying, high quality stocks.

107
 • The system involves investing the same amount in
the same stock periodically.

• In general, it may be said that dollar cost averaging

is a simple system based on sound principles and is

suitable for regular long-term investing.

When you invest the same amount in mutual funds at

regular intervals, you are in fact using the dollar cost averag-
ing method indirectly.

b. STRATEGY 2: THE RIGS STRATEGY

RIGS is simply an automatic way of investing according to a
formula. RIGS is a conservative long-term strategy for invest-
ing. By using this strategy, you can expect to earn approxi-
mately 14% to 16% per year (on average) on your long-term
investments. (This is based on past experience with the strat-
egy; it is not a guarantee.)

RIGS stands for Recession, Inflation, Growth, and Safety

(or Speculation). The basis of this strategy is the observation
that economic conditions go in cycles and different invest-
ments do well under different economic conditions. During
inflationary times, real estate, gold and other tangibles do
well; during recessionary periods bonds, cash, and cash
equivalents do well, and during growth periods, stocks and
real estate do well. RIGS uses the following investments:

R-type investments

• Bonds
• Mortgage-backed securities

• Cash
• Cash equivalents
I-type investments

• Gold
• Real estate

108
 • Other tangibles

G-type investments

• Common stocks
• Real estate

Some investors try to predict what is likely to happen in

the future and invest accordingly. This can be risky when
predictions go wrong. The RIGS strategy tries to avoid the
risk by assuming that the future is not predictable, but even
so money can be made. The strategy works as follows:

(a) Divide your money into three equal parts. (Example:

You have $9,000 to invest. Divide it into three parts
of $3,000 each).

(b) Invest one-third of your money in R-type invest-

ments.

(Example: Invest $3,000 in bonds or income mutual

funds.)

(c) Invest one-third of your money in I-type investments.

(Example: Invest $3,000 in gold, silver, real estate or

in mutual funds that invest in any of these invest-
ments).

(d) Invest one-third of your money in G-type invest-

ments. (Example: Invest $3,000 in stocks or equity
mutual funds.)

(e) Whenever you have money to invest during the year,

invest an equal amount in each type of investment
(R,I, and G). If you save monthly, rotate your invest-

ment among the three types.

(f) At the end of the year, some of these investments
would have gone up; some would have gone down.
(Example: Let us assume that, by the year end, R-type
investments are worth $3,600, I-type investments

109
 $2,900, and G-type investments are worth $3,400, for
a total of $9,900.)

(g) Rearrange your investments so that each type is

worth the same dollar amount. (Example: Your in-
vestments are worth $9,900 by the year-end. You
rearrange your investments so that each type —
R, I,
and G —
has the same dollar value: $3,300. You do
this by selling some of the R- and G-type investments
and buying some I-type investments to bring every
investment to the same dollar value.)

Once set up, this strategy needs very little attention. It

works because it forces the investor to sell high and buy low
every year. This strategy works well in the long term. It will
not make money every single year, but when you take any
five years (approximately one business cycle), the RIGS strat-
egy has performed consistently well. By using this strategy,
you can expect to make around 14% to 16% per year over a
five-year period. This is not a guarantee, but a reasonable
expectation based on past experience. You may occasionally
find that all down. There is no
three investments have gone
need to panic. The investments will resume their growth soon
enough.
The Investors Association of Canada has a special report
called RIGS: The Strategy for Investing, which explains in
simple terms what the strategy is, how it works, and how you
can set up your own investment program. You can get a copy
of this brief report from IAC for $12.95 plus $2 for postage.
Write to:

Investors Association of Canada

26 Soho Street, Suite 380
Toronto, Ontario
M5T 1Z7

110
 16
TWO HIGHER-RISK STRATEGIES FOR
HIGHER PROFITS

The profitability of some of the investments already dis-

cussed can be further increased by using a variety of special
techniques. Although these techniques have the potential to
increase your profits quite considerably, they usually require
a large capital outlay to begin with. Hence, these systems
should be used only when you have sufficient capital. You
should also keep in mind that these are long-term strategies.

The two strategies discussed in this chapter are based on

switching between investments. They require some under-
standing of how financial markets work. You may find them
useful halfway through your investment program. They are
here only for your reference.

a. STRATEGY 1: STOCK MARKET — MONEY

MARKET SWITCH
This strategy is based on the observation that whenever

interest ratesgo down, the stock market goes up; conversely,

whenever interest rates go up, the stock market goes down.
While this relationship is not perfect, it is still strong enough
for us to benefit by it.
There are several systems that take advantage of this
relationship. One such system is described below:
(a) Calculate the 39-week moving average for a given
stock market fund. (A 39-week moving average is
simply the average price of the fund's share for the
previous 39 weeks).

Ill
 (b) If the current price of the fund is lower than the
moving average, switch your money from the stock
market fund to a money market fund.

(c) Continue plotting moving averages for the stock

fund. When the current price of the stock fund goes
above the moving average, switch all your invest-
ments back from the money market fund to the stock
fund.

Following such a system increases the probability of

being in the stock market when it is going up and being in
the money market when the stock market is going down.

If you do not
are interested in using such a system, but
want spend the time calculating
to moving averages, you
may want to subscribe to one of the following newsletters
which does the work for you and advises you when to switch.
(Always call or write first and ask for a complimentary copy
of the newsletter before subscribing.)

Fund Exchange
Paul A. Merriman and Associates
700-1200 Westlake Avenue North
Seattle, WA 98109-3530
(206) 285-8877

Telephone Switch Newsletter

P.O. Box 2538
Huntington Beach, CA
92647
(714) 536-2201

Switch Fund Timing

P.O. Box 25430
Rochester, NY
14625
(716) 385-3122

If you use this system, make sure that both your money

market and stock market funds are run by the same group,
that they are no-load funds, and that the funds offer tele-
phone switching privileges.

112
b. STRATEGY 2: GOLD — SILVER SWITCH
The price of gold and silver usually goes up and down at the
same time. Sometimes, however, the price of gold rises faster
than silver; at other times, the price of silver rises faster than
gold.The following table shows the price relationship be-
tween gold and silver over a four-year period.
Gold price Silver price Number of oz.
(per oz.) (per oz.) of silver per
one oz.
of gold

Yearl
Quarter 1 $240 $ 8.66 28

Quarter 2 $281 $10.07 28

Quarter 3 $399 $20.61 19

Quarter 4 $524 $40.41 13

Year 2
Quarter 1 $490 $14.50 34

Quarter 2 $662 $16.81 39

Quarter 3 $670 $20.70 32

Quarter 4 $589 $15.80 37

Year 3

Quarter 1 $514 $11.95 43

Quarter 2 $421 $ 8.58 49

Quarter 3 $432 $ 9.04 48

Quarter 4 $400 $ 8.20 49

Year 4
Quarter 1 $320 $ 7.07 45
Quarter 2 $314 $ 5.73 55

Quarter 3 $396 $ 8.20 48

Quarter 4 $442 $10.50 42

113
 Thus, at the end of the first quarter of the first year, 28
ounces of silver bought one ounce of gold; at the end of the
last quarter of the same year, as little as 13 ounces of silver
bought one ounce of gold. Yet by the second quarter of the
fourth year, one ounce of gold bought more than four times
as much silver!
Because the silver-gold ratio has fluctuated historically,
it is reasonable to expect that it will continue to do so in the
future.

To capitalize on this fact, you can set up a simple strategy.

Simply keep the dollar value of gold and silver equal. This is
best explained by an example. In this example, an investor
buys $10,000 worth of gold and $10,000 worth of silver. Every
three months the investor calculates the current values of
gold and silver and readjusts the dollar amounts such that
50% of the total amount is invested in gold and the remaining
50% in silver. This is how it works:
First Quarter

Price of gold — $500 an oz.

Price of silver — $20 an oz.
Invest $10,000 in gold (10,000 h- 500) = 20 oz. of gold.

Invest $10,000 in silver (10,000 - 20) = 500 oz. in silver.

Second Quarter
Price of gold — $600 an oz.

Price of silver — $15 an oz.

Now the value of the holdings is:

Gold — 20 oz. x $600 = $12,000

Silver — 500 oz. x $15 = $7.500

$19,500

The investor wants to keep 50% ($19,500 - 2 = $9,750) in

silver and 50% in gold. Accordingly, $2,250 worth of gold

114
($12,000 - $9,750) is exchanged for $2,250 worth of silver. At
this stage the investor has:

$9,750 - $600 = 16.25 oz. of gold

$9,750 * $15 = 650 oz. of silver

Third Quarter

Price of gold — $700

Price of silver — $20
Value of holdings:

Gold — $700 x 16.25 oz. = $11,375

Silver — $20 x 650 = $13.000
oz.

Total: $24,375

Once again the investments are re-arranged so that 50%

of the total amount is invested in silver and the other 50% in
gold.

By now should be obvious how the system works.

it

Because gold went up in price during the second month

and silver went down, silver was cheap in relation to gold.
Consequently, gold was exchanged for silver. Sub-
sequently, silver went back to its initial price while gold
continued to climb. The total profit is now $4,375. An
investor who did not follow this procedure would have
made a profit of $4,000 (i.e., $700 x 20 oz. + $20 x 500 oz. =
$24,000), which is about 2% less profit. Over a number of
years, that 2% difference would be substantial in terms of
dollar amount.

This is, of course, an artificial example. Ifyou apply the

principle to the actual data given earlier, it would look like
the chart on the next page:

115
Date Gold (oz.) Silver (oz.)

Yearl
Quarter 1 41.7 1,155
Quarter 2 41.71 155
Quarter 3 50.7 981
Quarter 4 63.2 819

Year 2
Quarter 1 43.7 1,477
Quarter 2 40.6 1,599
Quarter 3 45.0 1,457
Quarter 4 42.0 1,567

Year 3
Quarter 1 39.2 1,687
Quarter 2 36.8 1,818
Quarter 3 37.4 1,788
Quarter 4 37.0 1,806

Year 4
Quarter 1 38.5 1,740
Quarter 2 35.1 1,924
Quarter 3 37.5 1,809
Quarter 4 40.2 1,694

That is, over a period of four years, 1.5 ounces of gold

were parlayed into 539 ounces of silver without adding any
more money!

116
 17
HOW TO GET INFORMATION
AT LOW OR NO COST

Investment books can be expensive. But there are several

sources of free information. As a small investor, you should
make use of them whenever possible. But please remember,
if you write for information from people who want to sell you

something (such as stockbrokers and insurance companies),

you are likely to get telephone calls from them. If you do not
want to buy what they are trying to sell, be firm and say no.
They can be very persuasive!
Many financial writersand consumer columnists often
mention free booklets on investments. Such publications are
often advertised. Some of these are published by industry
associations to promote the industry, some by large compa-
nies for prestige and others by companies that hope you will
do business with them. They can be very useful but not
necessarily unbiased. Throughout this book, I have referred
to several publications. In this chapter, I would like to give
you the names of some useful publications that can be ob-
tained free of charge.

Not all free publications are good, but some of them are
excellent. In fact, some of the best information included in this
book came to my attention through free publications. How
do you tell a good publication from a bad one? It's not easy.
All I can say is, do not get carried away by what you read.
Do not feel that you will miss a golden opportunity unless
you act as these publications tell you. Opportunities will always

117
be therefor an intelligent investor. As you gain experience, you
will be able to discard bad advice.

In the meantime, use these publications to educate your-

no cost. Exposure to different publications
self at even — if

some of them are bad —

will make you a better investor.

a. U.S.-BASED MUTUAL FUNDS

You can get a number of free brochures on mutual funds
from:

The Investment Company Institute

1401 H Street N.W.
Washington, DC 20005
(202) 326-5800

Here are some of the free brochures offered:

• What is a Mutual Fund? 8 FUNDamentals

• Planning for College? (12 pages)

• A Close Look at Closed-End Mutual Funds (12 pages)

• Reading the Mutual Fund Prospectus (28 pages)

• A Translation: Turning Investment-ese into Investment

Ease (20 pages)

For $8.50, you can also get Guide to Mutual Funds, which
contains fund names, addresses, telephone numbers (many
toll-free), each fund's and subsequent mini-
assets, initial
mums, fees charged, where to buy, and other details. The
introductory text serves as a short course in mutual fund
investing.

The Mutual Fund Education Alliance (The Association of

No-Load Funds) publishes Investors Guide to Low-Cost Mutual
Funds, which costs $5. This directory includes 2,750 mutual
funds listed by category and includes (for each fund) invest-
ment objectives, assets, minimum investment requirements,
fees (if any), expense ratios and total return for one-, five-,
and ten-year total returns. You may contact:

118
 Mutual Fund Education Alliance
1900 Erie Street, Suite 120
Kansas City, MO 64116
(816) 471-1454

b. CANADIAN MUTUAL FUNDS

In Canada, The Investment Fund Institute of Canada has
several brochures available to the investing public free of
charge.

• Answers to the 10 Most Asked Questions About Mutual

Funds
• Capitalizing on Taxation

• Making Your RRSP Work Better For You

• Savings and Investments — There is a Difference

• Introducing Investment Funds

you can also receive, on a quarterly basis, the

In addition,
performance of most Canadian mutual funds. These Perform-
ance Tables show one-, three-, five-, and ten-year performance
figures for hundreds of Canadian mutual funds. Also free is
the Member Directory, which is actually the names, addresses,
and phone numbers of mutual fund companies that are
members of the Investment Funds Institute of Canada. If you
would like to receive an information package, please contact:
The Investment Funds Institute of Canada
151 Yonge Street, Suite 503
Toronto, Ontario
M5C 2W7
(416) 363-2158

c. OTHER PUBLICATIONS
The list given above is probably the most useful for the
beginning investor. But a number of useful publications are
available from other sources. A beginning investor should
obtain these publications and become familiar with different
aspects of investing.

119
 Almost all stock exchanges have publications that are
helpful to investors. Thenames and addresses of North
American exchanges are given in the Resource Directory.
You may want to write to them asking for any publication
that will help the individual investor.

Many brokerage houses also publish information that is

useful to individual investors. For example, Merrill Lynch in

the United States has about 150 free brochures and booklets.
The titles include:

• The Catalogue of Investments

• How to Read a Financial Report

• You and Your Money

• The Bond Book

You may want to contact:

MerrillLynch Pierce Fenner & Smith, Inc.

Marketing Communications
800 Scudder's Mill Road
Plainsboro, NJ 08540-9019
1-800-637-7455
(212) 637-7455

Several industry associations also offer useful publica-

tions. For example the Certified General Accountants of On-
tario offer free publications on taxation, executorship, and
You may want to contact them for more infor-
related topics.
mation about the booklets that they make available to the
general public:

CGA of Ontario
240 Eglinton Avenue East
Toronto, Ontario
M4P1K8
(416) 322-6520

120
d. HOW TO GET EVEN MORE FREE
PUBLICATIONS
The above list is by no means complete. There are literally
hundreds of publications on investments available abso-
lutely free. Not all of them are good. Some of them are very
self-serving. A beginner may have difficulty distinguishing
a good publication from a biased one. I would suggest that
you get as many free publications as possible and go through
them. But do not be in a hurry to act upon their suggestions.
Gradually, you will be able to tell the facts from a mere sales
pitch.

You can develop your own list of free publications

through several sources:
(a) Regularly go through consumer columns in your
daily newspaper; free publications are quite often
mentioned in them.
(b) Go through the advertisements in the business sec-
tion ofyour daily newspaper; free publications on
investments are advertised in this section from time
to time.

(c) Write to industry associations (e.g., No-load Mutual

Funds Association, The Gold Institute, etc.), stock
exchanges, etc. requesting information. You are
likely to receive several useful publications.

121
 PART IV
REALIZING YOUR DREAM:
FINANCIAL FREEDOM
 18
FUNDAMENTALS OF FINANCIAL
GROWTH
After reading this you might still be wondering how to
far,

achieve financial freedom on $5 a day. It is very well to list

the available opportunities, but how exactly should a be-
ginner go about devising a plan to achieve financial free-
dom? I will describe a typical plan to achieve financial
freedom in the following chapter; but, before that, you
need to understand some fundamentals of diversified
long-term investments.

a. COMPOUND INTEREST
Even a modest amount, like $5 a day, when invested regu-
larly over a long period of time, will gradually grow into a
modest fortune. For example, $5 a day, invested at 15%
return, will grow into $1 million in 35 years (see Chart #3).

Note how your savings grow slowly at the beginning and

Time is an important element in mak-
rapidly in later years.
ing your money grow.

b. DIVERSIFIED INVESTMENTS
When your investments are diversified, the maximum you
can lose on any one investment is 100%. The maximum gain,
on the other hand is theoretically unlimited.

For example, if all you have is $10,000 in stocks, your

stocks can go down in value and create losses for you. If, on
the other hand, you have some stocks, some bonds, some
gold, and some money market funds, it is very unlikely that

125
all your investments will go down and down. As a
stay
matter of fact, when some types of investments are down,
others tend to move up. For example, when interest rates go
up, the price of bonds goes down, but you get to make more
money in money market funds.
Another advantage of having diversified investments is
that one of these investments may go up dramatically in the
next ten to 15 years: for instance, gold quadrupled in value
in the late seventies and early eighties; oil prices doubled
during the Persian Gulf crisis in 1990. The stock market
soared during the years 1982-87. The same holds true for the
other investments that you build up. In a long-term diversi-
fied portfolio, the probability of growth is much greater than
the probability of decline.

c. ECONOMIC CHANGES
Over a economic conditions change.
ten- to 15-year period,
Stock markets, gold, silver, foreign currencies, art, and col-
lectibles go up and down. For example, during the 1984-85
year, bond prices went up by over 40%. By switching invest-
ments at appropriate times (see chapter 19), you can increase
the return on investments appreciably.

d. CYCLES
The value of investments follows recurring patterns. At dif-
ferent points in time, different investments are favored by
investors. These patterns are at times related to economic
changes. While some people believe that such cycles can be
predicted, long-term investors do not have to predict these.
It is enough know that
to cycles exist and to take advantage
of the cycles when they occur.

e. FADS, PANICS, AND MASS HYSTERIA

From time groups of people tend to act irrationally.
to time,
Such irrationality and panic tend to dramatically increase the
value of a specific investment to unreasonable levels for a

126
 CHART #3
FUTURE VALUE — $150 SAVED MONTHLY
Interest compounded monthly

-f_

127
short period of time. If we just watch for these moments we
can profit handsomely. For example, in 1979-1980, gold dou-
bled in price in six weeks; silver tripled in price in four
months! Oil prices tripled in one year during 1974-75. When-
ever these unusual events happen, you should cash in most
of your holdings and wait for prices to come down. This
strategy will increase the value of your investments consid-
erably.

Over a long period of time (about ten to 15 years), it is

almost certain that each one of these five factors will operate
in the marketplace, thereby making financial freedom a vir-
tual certainty. All you need to do is to arrange your invest-
ments in such a way as to take maximum advantage of these
factors when they materialize. This strategy is explained
further in the next chapter.

128
 19
A BLUEPRINT
FOR FINANCIAL FREEDOM

As mentioned earlier, if you invest just $5 a day in the

even
best possible way and do nothing else, you may be able to
achieve financial freedom. But this will take a long time. If
you wish to achieve financial freedom within a reasonable
length of time (e.g., ten to 15 years), I suggest that you follow
the example of Mr. Keen Investor given below.
Mr. Keen Investor has no savings but he is intelligent and
keen. He is willing to put the principles explained in this book
into practice. He is willing to increase his savings by 20% each
year whenever he can. This is how he goes about doing it.

a. PHASE 1: YEARS ONE TO THREE

Mr. Keen Investor is committed to saving $5 a day. In addi-
tion he is willing to add part of his annual salary increase,
bonus, windfall money, unexpected savings, etc. He decides
that every time his savings reach $100 he will invest it. This
is what his calculations look like:

Year 1: $5 a day to a total of

$1,825 or approximately 18 x $100

Year 2: $6 a day to a total of

$2,190 or approximately 22 x $100

Year 3: $7.20 a day to a total of

$2,628 or approximately 26 x $100
ft* $100

129
 (Mr. Keen Investor figures that even
he can save only
if

$5 a day during the second and third years, he can still add
about 20% by other means.)

Mr. Keen Investor is conservative in his strategy and

wants to diversify his investments without risking his capital.
This is how he invests:

First $100 Stock Funds (SF)

Second $100 Bond Funds (BF)

Third $100 Money Funds (MF)

Fourth $100 Foreign Funds (FF)

Fifth $100 Gold Funds (GF)

Sixth $100 Real Estate Funds (RF)

After one year of saving $5 a day and investing it in the

above program, his investments look like this:
SF BF MF FF GF RF
$300 $300 $300 $300 $300 $300

This constitutes one block in Mr. Keen Investor's pro-

gram. For the first three years, he decides to repeat investing
in the same way. Thus, at the end of three years he expects
his three blocks to look like the diagram below.

SF BF MF FF GF RF
$300 $300 $300 $300 $300 $300

SF BF MF FF GF RF
$360 $360 $360 $360 $360 $360

SF BF MF FF GF RF
$440 $440 $440 $440 $440 $440

Inotj ier words, lis investm snts are:

SF BF MF FF GF RF
$1,100 $1,100 $1,100 $1,100 $1,100 $1,100

130
 Although Mr. Keen Investor saved about $6,600 in the
first three years, his investments have grown in value be-

cause of interest he has received from money market funds,

dividends he has received from stock market and real estate
funds, and a modest appreciation on his other investments,
etc. He finds that some of these investments have appreciated

modestly, some have depreciated modestly, some have ap-

preciated considerably and so on. At the end of three years,
his investments are worth $8,800.

b. PHASE 2: YEARS FOUR TO SIX

Mr. Keen Investor is now satisfied that he has a sound base
from which to move to the second phase of the program. He
decides to redistribute the $8,800 he has at this stage as
follows:

Stock Funds $2,000

Bond Funds $2,000

Gold Funds $1,000

Real Estate Funds $1,000

Foreign Funds $1,000

Money Funds $1,000

He still has $800 left. He decides to invest this amount in

more potentially rewarding (and risky) investments like art,
collectibles, and call options.

In addition, Mr. Keen Investor continues his investment

program by regularly investing an amount that is about 20%
higher than the previous year. During the first three years,
his block consisted of six units. From now on, Mr. Keen
Investor decides to add one more unit to the block —
risky
investments (RI). riis investment blocks for this phase look
like this:

First $100 Stock Funds (SF)

Second $100 Bond Funds (BF)

131
Third $100 Money Funds (MF)
Fourth $100 Foreign Funds (FF)

Fifth $100 Gold Funds (GF)

Sixth $100 Real Estate Funds (RF)

Seventh $100 Risky Investments (RI)

While continuing the basic program. Mr. Keen Investor

decides that, by now, his investments are sufficiently diver-
sified and he could increase his profits even more by using
advanced techniques. The RIGS strategy (see chapter 15)
especially appeals to him. He likes the fact that it is a safe and
sensible strategy and very easy to use.

Regular savings, diversification, and the use of the RIGS

technique help Mr. Keen Investor to achieve high returns on
his investment. His total net worth at this point has increased
to about $35,000. With this solid foundation, Mr. Keen Inves-
tor is ready to start the third phase of his investment pro-
gram.

c. PHASE 3: YEARS SEVEN TO TEN

Mr. Keen Investor continues to save and invest regularly. He
decides at this stage to continue to invest in high risk areas
like commodity futures, art, collectibles, and options and sets
aside $5,000 for this purpose.

He continues with the program and continues with the

RIGS strategy. He speculates with some of his money, but has
the bulk of his capital in solid investments. Mr. Keen Investor
ignores day to day fluctuations in the value of his invest-
ments. He knows he is investing for the long haul and feels
comfortable about his strategy.

As years go by, Mr. Keen Investor is very pleased with the

results.Sometimes his investments are up, sometimes they are
down. But there is no doubt that his plan has been working. His
total average return on investment has exceeded 15% per year.

132
In addition, he has been able to take advantage of sudden
price surges in gold, silver, etc. By the tenth year, his net
worth has increased to more than $100,000.

He diligently continues investing while watching his sys-

tems make money for him. By the 15th year, Mr. Keen Investor
has well over $300,000. "Well, I am financially independent
now," he muses. "It is only a question of time —
maybe five or
six years —before I turn this into $1 million or more."

Not bad for someone who started with $5 a day 15 years

earlier.

Now back to reality. The scenario described above has

been constructed on the basis of historical rates of return on
investments, taking into account the factors that affect invest-
ments over a ten- to 15-year period. You may, in the next 15
years, do much better or you may do somewhat worse, than
he did. (It is unlikely that you will do much worse as long as
you are a disciplined investor.)
In discussing Mr. Keen Investor, we have made some
assumptions: he is able to increase his savings by 20% each year,
he is aided at times by economic cycles, etc. Suppose you cannot
increase your savings each year by 20%, or that you are hin-
dered rather than helped by economic conditions? The answer
simply is that these things do not matter in long-term disci-
plined investing. Economic conditions may delay the achieve-
ment of financial freedom by a few years, but they have no
power to stop you from reaching your goal. (Please note that
these comments do not apply to short-term investing).

Conversely, you may already have $7,000 or $8,000 to

invest. In this case, you will be able to achieve your goal sooner.
Depending on your individual requirements, you may
want to construct your investment blocks differently. No
matter what you do, as long as you are disciplined, regular,
and diversified in your investments, achieving financial free-
dom is a virtual certainty.

133
 PARTV
KEEPING TRACK OF YOUR PROGRESS

135
 20
HOW TO START AND STAY ON COURSE
a. WATCHING YOUR PROGRESS
When you begin investing, your progress may not look very
dramatic. For example, when you start investing $150 a
month at 12%, at the end of the yearyou will have only about
$100 more than you invested. If some investments go down

temporarily, your return may look even worse. You may be

tempted up your investment program. Don't. Re-
to give
member this: Your investments always work slowly at the
beginning. After a few years they gather momentum. It is
important not to give up your program simply because it
moves too slowly at the beginning.
As we saw earlier, money makes money and that money
makes even more money. Suppose you stick with your in-
vestment program for a few years and accumulate $100,000.
At this stage, the return on this amount would be $1,000 a
month. But you cannot get there unless you are patient. If you
follow the program outlined in this book, you will get there
sooner or later.

There another reason why your progress may seem

is

slow. because you are too close to the action. It is like

It is

watching a child grow. If you attempt to watch a child grow

everyday, it is difficult to know how fast that child is grow-
ing. The change is gradual and is not even noticeable on an
everyday basis.
In any case, it is important to keep track of your progress.
Keeping track forces you to make regular investments, and
shows where your program's strengths and weaknesses are.

137
b. YOUR FINANCIAL FREEDOM WORKBOOK
You may want to consider the following format for creating
your own "Financial Freedom Workbook":

(a) Buy a spiral notebook with ruled lines (8.5" x 11").

(b) On the first page, fill in the following information:

Your name: Mr. Keen Investor

Amount you can save

each day (or month): $150 per month

Number of investments: 8
Stock Funds
Bond Funds
Money Funds
Gold Funds
Foreign Funds
Real Estate Funds

(Please note that these are just examples. Feel free

to create your own investment programs and rules.
Whatever you do, you should feel comfortable about
your plan. For example, if you don't want to buy gold
bullion or put your money in a Swiss bank, don't.
Instead buy something you are more comfortable
with, such as stock market mutual funds. No matter
what you decide, you should be determined to im-
plement your plan.)

(c) Write down your investment plan.

Months Amount Investment

January/February $300 Stock Funds

March/April $300 Bond Funds
May/June $300 Money Market Funds
July/August $300 Gold Mutual Funds
September/October $300 Foreign Funds
November/December $300 Real Estate Funds

138
 (d) Write down any ideas you have that will help you
achieve financial freedom faster:

I will save at least 50% of all windfalls such as bonuses, tax

refunds, pay increases etc.

If, any given year, one of my investments rises in value by

in
more than 30%, I'll sell about 20% and buy investments that have
fallen in value.

(e) Use the Financial Freedom Worksheets (see Samples

#1 and #2 on the following pages) as a model and
create a worksheet for each of your investments. You
should have one worksheet for each type of invest-
ment. For example, Mr. Keen Investor puts $150 in
stock market funds twice a year. The "Total value"
column of your worksheet shows you how your in-
vestment is performing month after month. Keeping
such records serves two purposes: first, it shows how
your investment has been doing, and second, it will
come in handy during the tax season.
Over the years, you can create new worksheets to record
your progress. This will be your "Financial Freedom Work-
book."

In any case, you can start with the above and work
through it for the first year. Then, you can modify the records
to suit your purposes any way you like.

Ifyou don't want to go to the trouble of creating your

own record book, you can order your own "Financial Free-
dom Workbook" from the address below. This workbook
comes with ready-to-use blank worksheets, as well as de-
tailed instructions on how to record your program and a
concise review of basic investment principles. Write to:

Standard Research Systems Inc.

380-26 Soho Street
Toronto, Ontario
M5T 1Z7

139
 SAMPLE #1
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140
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141
 One workbook has enough space to record details of your
investments for several years. During this time I hope you
will achieve financial freedom — or at least be very close to
it!

142
 PART VI
RESOURCE DIRECTORY

143
 HOW TO KEEP YOURSELF INFORMED
This book has most of the information you need to start
be a successful investor, you should keep
investing. But, to
yourself informed at all times.

a. USEFUL PUBLICATIONS
1. Investors Association of Canada: Money Digest
If you are following the strategy outlined in this book, it is

necessary for you to be an informed investor. Investors As-

sociation of Canada publishes a newsletter 12 times a year.
Money Digest lists the best performing mutual funds, high-
quality dividend-paying stocks, best GIC rates etc., along
with informative articles written by experts. (You can get a
free copy of Money Digest by completing and sending in the
comment end of this book.) Money
sheet at the end of the
Digest is not available at newsstands and is distributed only
to the members of Investors Association of Canada (I AC). I
strongly recommend that you join the association. For more
information write to:

Money Digest
Investors Association of Canada
380-26 Soho Street
Toronto, Ontario
.
M5T 1Z7
(a) Daily publications (for serious investors)
United States
• the Wall Street Journal

• the business section of any major daily newspaper

such as the New York Times

145
Canada
• Report on Business (the Globe and Mail)

• Financial Post

(b) Weekly publications

United States
• Barron's

Canada
• Financial Times

• Financial Post Weekly

(c) Monthly publications

United States
• Money
Canada
• Money Saver (11 times a year)

b. BOOKS
1. Investing in general

(a) For Canadian investors

• Financial Pursuitby Graydon Watters (published by
FKI Financial Knowledge Inc., Toronto, revised
1994). An excellent book on financial planning.

• How to Invest in Canadian Securities (published by the

Canadian Securities Institute, Toronto). A good intro-
duction to investing in Canadian stock markets. Re-
vised from time to time.

(b) For U.S. investors

• Getting Started in Stocks by Alvin D. Hall (published
by John Wiley & Sons).

146
2. Mutual funds

(a) For Canadian investors

• Understanding Mutual Funds by Steven Kelman (pub-
lished by Penguin Books, Toronto, 1993). A concise
introduction to Canadian mutual funds. Revised
from time to time.

• The 1994 Buyer's Guide to Mutual Funds by Gordon

Pape (published by Prentice Hall, Toronto, 1993). A
fund-by-fund listing of all mutual funds offered in
Canada.

(b) For U.S. investors

• Getting Started in Mutual Funds by Alan Lavine (pub-
lished by John Wiley & Sons, 1994).
• Low-load Mutual Funds (published annually by The
Association of Individual Investors, Chicago).

3. Gold
• The Gold Book by Pierre Lassonde (published by Pen-
guin Books, Toronto, 1993). Deals with all aspects of
investing in gold. Also has a chapter on silver.

• by Ned Goodman, Steven Kelman,

Investing in Gold
and Johnathan Goodman (published by Key Porter
Books, 1992).

4. Options
• Option Strategies by Courtney Smith (published by
John Wiley, New York, 1987). One of the clearest
introductions to various option strategies.

• Getting Started with Options by Michael C. Thomsett

(published by John Wiley, 1993).

5. Real estate
• Nothing Down for the '90s by Robert G. Allen (publish-
ed by Simon & Schuster, New York, 1990).

147
 CANADIAN AND U.S. MUTUAL FUNDS
There are thousands of mutual funds in North America.
Many hundreds of these are no-load funds (i.e., they charge

no sales commission). Thefunds listed here are no-loadfunds that

require an initial minimum of no more than $500. Once you
become more familiar with mutual funds and increase your
capital, you may want to explore other no-load funds that
require a larger iniriimum. At that point,
I suggest that you

get informationon other no-load funds by contacting other

sources mentioned in this book.

In the following lists, "MEN" refers to the rriinimum invest-

ment required when you first join the fund; "SUB" refers to the
minimum amount required if you subsequently want to add to
your investment. All "1-800" numbers are toll-free.

a. CANADA-BASED FUNDS
1. Canadian equity funds (stock market funds)
• Associate Investors Limited
Leon Frazer & Associates Ltd.
8 King Street East, Suite 2001
Toronto, Ontario
M5C 1B6
Phone: (416) 864-1120
Fax: (416) 864-1491
MIN: $100 SUB: None
• Batirente — Section Actions
Batirente
c/o Laurent Financial Corp.
St.

425, boul. de Maisonneuve Ouest

Bureau 1740
Montreal, Quebec
H3A3G5
Phone: (514) 288-7545
Fax: (514) 288-4280
MIN: $500 SUB: $500

148
• CDA RSP Common Stock Fund
Canadian Dental Association
Retirement Savings Plan
Canadian Dental Service Plans Inc.
Suite 710 - 100 Consillium Place
Scarborough, Ontario
M1H 3G8
Phone: (800) 561-9401
Fax: (416) 296-8920
MEM: $50 SUB: $25

• Camaf
Canadian Anesthetists Mutual Fund Ltd.
94 Cumberland Street, Suite 503
Toronto, Ontario
M5R 1A3
Phone: (416) 925-7731
Fax: (416) 920-7843
MIN: $500 SUB: $10

• Canada Trust Investment Fund — Equity Part

CT Mutual Fund Services Inc.
Canada Trust Tower, BCE Place
161 Bay Street, 3rd Floor
Toronto, Ontario
M5J 2T2
Phone: (416) 361-8000
Fax: (416) 361-5333
MIN: None SUB: None

149
• Cornerstone Canadian Growth Fund
North American Trust Company
Yonge Richmond Centre
151 Yonge Street, 3rd Floor
Toronto, Ontario
M5C 2W7
Phone: (416) 362-7211
Fax: (416) 367-8483
MIN: $500 SUB: $100

• Fund
Everest Special Equity
Everest StockFund
CT Mutual Fund Services Inc.
Canada Trust Tower, BCE Place
161 Bay Street, 3rd Floor
Toronto, Ontario
M5J2T2
Phone: (416) 361-8000
Fax: (416) 361-5333
MIN: $500 SUB: NA
• First Canadian Equity Index Fund
First Canadian Growth Fund
First Canadian Special Growth Fund
Bank of Montreal Investment Management Ltd.
First Canadian Mutual Funds
302 Bay Street, 8th Floor
Toronto, Ontario
M5X 1A1
Phone: (416) 867-7670
Fax: (416) 867-4728
MIN: $500 SUB: $50

150
• Foresters Growth Fund — Equity
Independent Order of Foresters
789Don Mills Road
Don Mills, Ontario
M3C 1T9
Phone: (416) 429-3000
Fax: (416) 429-6054
MIN: $50 SUB: $50
• Great West Life Equity Index Inv. Fund
Great West Life Equity Investment Fund
Great- West Life Assurance Co.
P.O. Box 6000
Winnipeg, Manitoba
R3C3A5
Phone: (204) 946-1190
Fax: (204) 946-8622
MIN: $100 SUB: $100
• Gyro Equity Fund
Canadian Airline Pilots Association
c/o Altamira Investment Services Inc.
Suite 200 - 250 Bloor Street East
Toronto, Ontario
M4W 1E6
Phone: (416) 925-1623
Fax: (416) 925-5352
MIN: $500 SUB: $100
• Hongkong Bank Equity Fund
Hongkong Bank Securities Inc.
#500-885 West Georgia Street
Vancouver, B.C.
V6C 3E9
Phone: (604) 641-1999
Fax: (604) 641-3044
MIN: $500 SUB: $100

151
InvesNat Equity Fund
InvesNat Group of Funds
c/o National Bank Securities Ltd.
600 de la Gauchetiere Ouest
Montreal, Quebec
H3B 4L2
Phone: (514) 394-8671
Fax: (514) 394-8229
MIN: $500 SUB: $50
Montreal Trust Excelsior Funds: Equity Funds
Montreal Trust Group
Place Montreal Trust
1800 McGill College Avenue, 12th Floor
Montreal, Quebec
H3A 3K9
Phone: (514) 982-7000
Fax: (514) 982-7069
MIN: NA SUB: NA
Mutual Premier Blue Chip Fund
Mutual Premier Growth Fund
The Mutual Group
c/o Mutual Diversico Ltd.
227 King Street South
Waterloo, Ontario
N2J 4C5
Phone: (519) 888-3863
Fax: (519) 888-3646
MIN: $500 SUB: $50

152
National Trust Equity Fund
National Trust
1 Adelaide Street East, 7th Floor
Toronto, Ontario
M5C 2W8
Phone: (416) 361-4541
Fax: (416) 361-5563
MIN: $500 SUB: $50
O.I.Q. Ferique - Actions
O.I.Q. Ferique
c/o Ordre des Ingenieurs du Quebec
2020 University, 18th Floor
Montreal, Quebec
H3A2A5
Phone: (514) 845-6141
Fax: (514) 845-1833
MIN: $500 SUB: $50
OHA Canadian Equity Fund
OH A Investment Management Ltd.
150 Ferrand Drive
Don Mills, Ontario
M3C 1H6
Phone: (416) 429-2661
Fax: (416) 429-5945
MIN: $500 SUB: $100
OTG Investment Fund — Diversified Section
OTG Investment Fund — Growth Section
Ontario Teachers Group
57 Mobile Drive
Toronto, Ontario
M4A 1H5
Phone: (416) 752-9410
Fax: (416) 752-6649
MIN: $500 SUB: $50

153
Royfund Canadian Growth Fund
Royfund Equity Ltd.
Royal Bank Management Inc.
Royal Bank Plaza
North Tower, 4th Floor, Box 70
Toronto, Ontario
M5J 2J2
Phone: (416) 974-0616
Fax: (416) 974-4076
MIN: $100 SUB: $25
Royal Trust Canadian Special Growth Fund
Royal Trust Canadian Stock Fund
Royal Trust Investment Services Inc.
630 Rene Levesque Boulevard West
Mutual Funds
1st Floor,
Montreal, Quebec
H3B 1S6
Phone: (800) 463-3863
Fax: (514) 876-2762
MIN: $500 SUB: $25
Scotia Canadian Equity Growth Fund
Scotia Mutual Funds
c/o Scotia Securities Inc.
1 Richmond Street West, 7th Floor
Toronto, Ontario
M5H 3W4
Phone: (416) 866-4754
Fax: (416) 866-2018
MIN: $500 SUB: $50

154
Strata Canadian Fund
Strata Mutual Funds
101 Frederick Street, 5th Floor
P.O. Box 9032
Kitchener, Ontario
N2G 4R8
Phone: (519) 888-5021
Fax: (519) 888-5925
MIN: $500 SUB: $50

Tradex Equity Fund Limited

Tradex Management Inc.
Suite 504, 124 O'Connor Street
Ottawa, Ontario
K1P5M9
Phone: (613) 233-3394
Fax: (613) 233-8191
MIN: $500 SUB: $100

Trust Pret & Revenu — Fonds Canadien

Trust Pret et Revenu du Canada
850 Place d'Youville
Quebec City, Quebec
G1R3P6
Phone: (418) 692-1221
Fax: (418) 692-1675

U.S. Equity funds

Cornerstone U.S. Fund

See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $100

Everest AmeriGrowth Fund

Everest U.S. EquityFund
See address and phone number under
Canadian equity funds section
MIN: $500 SUB:NA

155
• FirstCanadian U.S. Growth Fund
See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50

• InvesNat American Equity Fund

See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50

• Mutual Premier American Fund

See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50

• National Trust American Equity Fund

See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $100

• Royal Trust American Stock Fund

Royal Trust Zweig Strategic Growth Fund
See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $25

• Scotia American Equity Growth Fund

Scotia CanAm Growth Fund
See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50

• Trust Pret et Revenu —Fonds Americain

See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $100

156
 International equity funds

Capstone International Investment Fund

See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50

Cornerstone Global Fund

See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $100

Everest AsiaGrowth Fund

Everest EuroGrowth Fund
Everest International Fund
Everest North American Fund
See address and phone number under
Canadian equity funds section
MIN:$500 SUB:NA
FirstCanadian International Growth Fund
See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50

Hongkong Bank Asian Growth Fund

See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $100
• InvesNat European Equity Fund
See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50

Montreal Trust Excelsior Funds: International

See address and phone number under
Canadian equity funds section
MEM: NA SUB: NA

157
• Mutual Premier International Fund
See address and phone number under
Canadian equity funds section
MINT: $500 SUB: $50

• OHA Foreign Equity Fund

See address and phone number under
Canadian equity funds section
MINT: $500 SUB: $100

• Royal Trust Asian Growth Fund

Royal Trust European Growth Fund
Royal Trust Japanese Stock Fund
See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $25

• Scotia GlobalGrowth Fund

See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50

4. Specialty equity funds

• First Canadian Resource Fund

See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50

• National Trust Special Equity Fund

See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50

• Royal Trust Energy Fund

Royal Trust Precious Metals Fund
See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $25

158
• Fund
Scotia Precious Metals
See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $25

5. Balanced funds
• Barreau du Quebec Fonds Placement - Equilibree
Barreau du Quebec
c/o Trust La Laurentienne
425, boul de Maisonneuve Ouest
Montreal, Quebec
H3A 3G5
Phone: (514) 284-7000
Fax: (514) 284-7586
MIN: None SUB: None
• Batirente — Section Diversifiee?
See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $500
• CDA RSP Balanced Fund
See address and phone number under
Canadian equity funds section
MIN: $50 SUB: $25
• Capstone Investment Trust
See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $50
• Cornerstone Balanced Fund
See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $100
• Everest Balanced Fund
See address and phone number under
Canadian equity funds section
MIN: $500 SUB:NA

159
• F.M.O.Q. Fonds de Placement
F.M.O.Q. Omnibus Balanced
Fed. des Medecins Omnipracticiens du Quebec
1440, rue Ste-Catherine Ouest, Suite 1100
Montreal, Quebec
H3G 1R8
Phone: (514) 878-1911
Fax: (514) 878-4455
MIN: $500 SUB: $100

• FirstCanadian Asset Allocation Fund

See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $50

• Great-West Life Diversified RS Inv. Fund

Great- West Life Equity /Bond Inv. Fund
See address and phone number under

• Canadian equity funds section

MIN: $100 SUB: $100

• Hongkong Bank Balanced Fund

See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $100

• InvesNat Retirement Balanced Fund

See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $50

• Montreal Trust Excelsior Funds: Balanced Fund

Montreal Trust Excelsior Funds: Total Return Fund
See address and phone number under
Canadian equity funds section
MIN: NA SUB: NA

160
• National Trust Balanced Fund
See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $100

• O.I.Q. Ferique - Equilibre

See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50

• OHA Balanced Fund

See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $100

• OTG Investment Fund

See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50

• Royfund Balanced Fund

See address and phone number under
Canadian equity funds section
MIN:$100 SUB: $25

• Royal Trust Advantage Balanced Fund

Royal Trust Advantage Growth Fund
See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $25

• Scotia Stock & Bond Fund

See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50

• Strata Tactical Fund

See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50

161
• Trust Pret et Revenu — Fonds de Retraite
See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $100

6. Preferred dividend funds

• Montreal Trust Excelsior Funds: Dividend Funds

See address and phone number under
Canadian equity funds section
MIN: NA SUB: NA

• National Trust Dividend Fund

See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $50

• Royfund Dividend Fund

See address and phone number under
Canadian equity funds section
MIN: $100 SUB: $25

• Royal Trust Growth and Income Fund

See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $25

7. Mortgage funds
• CIBC Mortgage Investment Fund
CIBC Securities Inc.
P.O. Box 51
Commerce Court Postal Station
Toronto, Ontario
M5L 1A2
Phone: (416) 980-3863
Fax: (416) 351-4438
MIN: $500 SUB: $100

162
 Everest Mortgage Fund
See address and phone number under
Canadian equity funds section
MIN: None SUB: None

First Canadian Mortgage Fund

See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $50

Great- West Life Mortgage Investment Fund

See address and phone number under
Canadian equity funds section
MIN: $100 SUB: $100

InvesNat Mortgage Fund

See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $50

Montreal Trust Excelsior Funds: Mortgage Fund

See address and phone number under
Canadian equity funds section
MIN: NA SUB: NA

Mutual Premier Mortgage Fund

See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $50

OTG Investment Fund - Mortgage Income Fund

See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $50
• Royfund Mortgage Fund
See address and phone number under
Canadian equity funds section
MIN: $100 SUB: $25

163
 • Royal Trust Mortgage Fund
See address and phone number under
Canadian equity funds section
MINT: $500 SUB: $25
• Scotia Mortgage Fund
See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50
• Trust Pret & RevenuFonds "H"
-

See address and phone number under

Canadian equity funds section
MIN:$500 SUB: $100

8. Bond/mortgage funds
• CDA RSP Bond & Mortgage Funds
See address and phone number under
Canadian equity funds section
MIN: $50 SUB: $25

• National Trust Mortgage Fund

See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $50

• ScotiaIncome Fund
See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $50

b. U.S.-BASED FUNDS
1. Aggressive growth funds
• Berger One Hundred
P.O. Box 5005
Denver, CO 80217
Phone: 1-800-333-1001, (303) 329-0200
MIN: $250 SUB: $50

164
• MIM Stock Appreciation
4500 Rickside Road, Suite 440
Cleveland, OH 44131
Phone: 1-800-233-1240, (216) 642-3000
MIN: $250 SUB: $50

• Prudent Speculator
P.O. Box 75231
Los Angeles, CA 90075
Phone: 1-800-444-4778, (213) 778-7732

• Twentieth Century Gifttrust

Twentieth Century Growth
Twentieth Century Ultra
Twentieth Century Vista
4500 Main Street
P.O. Box 419200
Kansas City, MO64141
Phone: 1-800-345-2021, (816) 531-5575
MIN: None SUB: $25

2. Growth funds
• AARP Capital Growth
P.O. Box 2540
Boston, MA 02208
Phone: 1-800-253-2277,(617) 439-4640
MIN: $500 SUB: None

• American Pension Investors — Growth

P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, VA 24501
Phone: 1-800-544-6060, (804) 846-1361
MIN: $500 SUB: $100

165
• Armstrong Associates
750 North St. Paul
Lock Box 13, Suite 300
Dallas, TX 75201
Phone: (214) 720-9101
MIN: $250 SUB: None

Beacon Hill Mutual

75 Federal Street
Boston, MA 02110
Phone: (617) 482-0795
MIN: None SUB: None

Century Shares Trust

One Liberty Square
Boston, MA 02109
Phone: 1-800-321-1928, (617) 482-3060
MIN: $500 SUB: $25

Fidelity Retirement Growth

82 Devonshire Street
Boston, MA 02109
Phone: 1-800-544-8888, (801) 534-1910
MIN: $500 SUB: $250

GE U.S. Equity
3003 Summer Street
Stamford, CT 06905
Phone: 1-800-242-0134
MIN: $500 SUB: $100

MIM Stock Growth

See address and phone number under aggressive
growth funds section
MIN: $250 SUB: $50

166
MSB Fund
330 Madison Avenue
New York, NY 10017
Phone: (212) 551-1920
MIN: $50 SUB: $25

National Industries
5990 Greenwood Plaza Boulevard
Englewood,CO 80111
Phone: (303) 220-8500
MIN: $250 SUB: $25

Nicholas
700 N. Water Street, #1010
Milwaukee, WI 53202
Phone: 1-800-227-5987, (414) 272-6133
MIN: $500 SUB: $100

Rainbow
255 Park Avenue, Suite 209
New York, NY 10169
Phone: (212) 983-2980
MIN: $300 SUB: $50

Schroder US Equity
787 Seventh Avenue
New York, NY 10019
Phone: 1-800-344-8332, (212) 841-3841
MIN: $500 SUB: $100

Sentry
1800 N. Point Drive.
Stevens Point, WI 54481
Phone: 1-800-533-7827, (715) 346-7048
MIN: $200 SUB: $50

167
• Twentieth Century Heritage
Twentieth Century Select
See address and phone number under aggressive
growth funds section
MINT: None SUB: $25

• Volumetric
87 Violet Drive
Pearl River,NY 10965
Phone: 1-800-541-3863, (914) 623-7637
MIN: $500 SUB: $200

3. Growth and income funds

• AARP Growth & Income
See address and phone number under growth
funds section
MIN: $500 SUB: None

• Amana Income
1300 N. State Street
Bellingham, WA98225
Phone: 1-800-728-8762
MIN: $100 SUB: $25

• Babson Growth
Three Crown Center
2440 Pershing Road, #G-15
Kansas City, MO 64108
Phone: 1-800-422-2766, (816) 471-5200
MIN: $500 SUB: $50

• Berger One Hundred & One

See address and phone number under aggressive
growth funds section
MIN: $250 SUB: $50

168
• Charter Capital Blue Chip Growth
4920 West Vilet Street
Milwaukee, WI 53208
Phone: (414) 257-1842
MIN: $50 SUB: $50

• MIM Stock Income

See address and phone number under aggressive
growth funds section
MIN: $250 SUB: $50

• Salomon Brothers Investors

7 World Trade Centre, 38th Floor
New York, NY 10048
Phone: 1-800-725-6666, (212) 783-1301
MIN: $500 SUB: $50

4. Balanced funds

• Evergreen Foundation
2500 Westchester Avenue
Purchase, NY 10577
Phone: 1-800-235-0064, (914) 694-2020
MIN: $500 SUB: None

• Lepercq-Istel
1675 Broadway, 16th Floor
New York, NY 10019
Phone: 1-800-338-1579, (212) 698-0749
MIN: $500 SUB: 1 share

• MIM Bond Income

See address and phone number under aggressive
growth funds section
MIN: $250 SUB: $50

• PAX World
224 State Street
Portsmouth, NH
03801
Phone: 1-800-767-1729, (603) 431-8022

169
 • Strong Investment
Strong Total Return
P.O. Box 2936
Milwaukee, WI 53201
Phone: 1-800-368-1030, (414) 359-1400
MIN: $250 SUB: $50

• Twentieth Century Balanced

See address and phone number under aggressive
growth funds section
NUN: None SUB: $25

• Vanguard Star
Vanguard Financial Center
P.O. Box 2600
Valley Forge,PA 19482
Phone: 1-800-662-7447, (215) 648-6000
MIN: $500 SUB: $100

5. International stock funds

• Twentieth Century International Equity

See address and phone number under aggressive
growth funds section
MIN: None SUB: $25

c. BOND FUNDS (CANADIAN)

• Barreau du Quebec Fonds Placement - Obligations
See address and phone number under balanced
funds section
MIN: None SUB: None

• Batirente - Section Obligations

See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $500

170
• Canada Trust Investment Fund - Income Part
See address and phone number under
Canadian equity funds section
MIN: NA SUB: NA

• Cornerstone Bond Fund

See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $100

• Everest Bond Fund

See address and phone number under

• First Canadian Bond Fund

First Canadian International Bond Fund
See address and phone number under
Canadian equity funds section
NUN: $500 SUB: $50

• Great- West LifeBond Investment Fund

See address and phone number under
Canadian equity funds section
MIN: $100 SUB: $100

Gyro Bond Fund

See address and phone number under
Canadian equity funds section
MIN: $500 SUB:NA

• InvesNat Short-Term Government Bond Fund

See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $50

• Montreal Trust Excelsior Funds: Income Fund

See address and phone number under
Canadian equity funds section
MIN: NA SUB: NA

171
• Mutual Premier Bond Fund
See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50
• National Trust Income Fund
See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50
• O.I.Q. Ferique - Obligations
See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50
• OHA Bond Fund
See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $100
• Royfund Bond Fund
Royfund International Income Fund
See address and phone number under
Canadian equity funds section
MIN:$100 SUB: $25
• Royal Trust Bond Fund
Royal Trust International Bond Fund
See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $25
• Scotia CanAm Income Fund
Scotia DefensiveIncome Fund
See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50

172
 • StrataGovernment Bond Fund
See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50

• Tradex Bond Fund

See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $100

• Trust Pret et Revenu — Fonds d'Obligations

See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $100

d. BOND FUNDS (U.S.)

1. Corporate bond funds

• Nicholas Income
See address and phone number under growth
funds section
MIN: $500 SUB: $100

2. Government bond funds

• Alliance Bond-U.S. Gov't "C"
P.O. Box 1520
Secaucus,NJ 07096
Phone: 1-800-221-5672
MIN: $250 SUB: $50

• Twentieth Century U.S. Gov'ts

See address and phone number under aggressive
growth funds section
MIN: None SUB: $25

173
3. Mortgage backed bond funds
• AARP GNMA & U.S. Treasury
See address and phone number under growth
funds section
MEN: $500 SUB: $0

• Alliance Mortgage Strategy "C"

See address and phone number under government
bond funds section
MIN: $250 SUB: $50

4. General bond funds

• AARP High Quality Bond
See address and phone number under growth
funds section
MIN: $500 SUB: $50

• Babson Bond Trust-Port L

See address and phone number under growth and
income funds
MIN: $500 SUB: $50

• Pacifica Asset Preservation

237 Park Avenue, Suite 910
New York, NY 10017
Phone: 1-800-662-8417, (212) 808-3937
MIN: $500 SUB: $50

• Twentieth Century Long-Term Bond

See address and phone number under aggressive
growth funds section
MIN: None SUB: $25

5. Tax-exempt bond funds

• AARP Insured Tax Free General Bond
See address and phone number under growth
funds section
MIN: $500 SUB: $0

174
 • Alliance Municipal Income — CA "C"
Alliance Municipal Income — National "C"
See address and phone number under government
bond funds section
MIN: $250 SUB: $50

• Dupree KY Tax-Free Income

Dupree KY Tax-Free Short to Medium
P.O. Box 1149
Lexington, KY 40589
Phone: 1-800-866-0614, (606) 254-7741
MIN: $100 SUB: $100

• Pacihca Short Term CA Tax-Free

See address and phone number under general
bond fund section
MIN: $500 SUB: $50

e. MONEY MARKET FUNDS (CANADIAN)

• Batirente — Section Marche Monetaire
See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $500

• CDA RSP Money Market Fund

See address and phone number under
Canadian equity funds section
MIN: $50 SUB: $25

• Capstone Cash Management Fund

See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $50

175
Colonia Money Market Fund
Colonial Life Insurance Company
2 St. Clair Avenue East
Toronto, Ontario
M4T 2V6
Phone: (416) 960-3601
Fax: (416) 323-0934
MIN: $500 SUB: $50

F.M.O.Q. Marche Monetaire

See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $100

First Canadian Money Market Fund

First Canadian T-Bill Fund
See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $50

Great- West Life Money Market Inv. Fund

See address and phone number under
Canadian equity funds section
MIN: $100 SUB: $100

Montreal Trust Excelsior Funds: Money Market

Fund
See address and phone number under
Canadian equity funds section
MIN: NA SUB: NA
Mutual Money Market Fund
See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $50

National Trust Money Market Fund

See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $100

176
• O.I.Q. Ferique — Marche Monetaire
See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50

• OHA Short-Term Fund

See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $100

• OTG Investment Fund — Fixed Value Section

See address and phone number under
Canadian equity funds section
MIN:$500 SUB: $50

• Prudential Money Market Fund

Prudential Fund Management Canada Limited
200 Consillium Place, 6th Floor
Scarborough, Ontario
M1H 3E6
Phone: (416) 296-0777
Fax: (416) 296-3186
MIN: $300 SUB: $100

• Pursuit Money Market Fund

Pursuit Financial Management Corp.
1200 Sheppard Avenue East, Suite 402
Willowdale, Ontario
M2K2S5
Phone: (416) 502-9393
Fax: (416) 502-9394
MIN: $500 SUB: $50

• Royal Trust $U.S. Money Market Fund

Royal Trust Canadian T-Bill Money Market Fund
See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $25

177
 • Spectrum Savings Fund
Spectrum Bullock Financial Services
Suite 200 - 55 University Avenue
Toronto, Ontario
M5J 2H7
Phone: (416) 360-2200
Fax: (416) 360-2180
MIN: $500 SUB: $25
• Strata Money Market Fund
See address and phone number under
Canadian equity funds section
MIN: $500 SUB: $50

f. MONEY MARKET FUNDS (U.S.)

• Cigna Money Market Fund Inc.
CIGNA
1350 Main Street
Springfield, MA 01103
Phone: 1-800-562-4462, (413) 781-7776
MIN: $500 SUB: $50
• Country Capital Money Market Fund
Country Capital
1701 Towanda Avenue
Bloomington, IL 61701
Phone: (309) 557-2444
MIN: $100 SUB: $50
• Franklin Tax-Exempt Money Market Fund
Franklin Federal Money Fund
Franklin Group of Funds
777 Mariners Island Boulevard
San Mateo, CA 94404
Phone: 1-800-632-2180, (415) 570-3000
MIN: $500 SUB: $25

178
Mariner Cash Management Fund
Mariner Government Fund
Mariner
9003 Greenstree Commons, Suite 1
Marlton, NJ 08053
Phone: 1-800-632-2536, (609) 695-9300
MIN: $100 SUB: $10

MIMLIC Money Market Fund

MIMLIC
400 North Robert Street
St. Paul, MN55101-2098
Phone: 1-800-443-3677, (612) 223-4252
MIN: $250 SUB: $25

Mutual of Omaha Cash Reserve Fund

Mutual of Omaha
10235 Regency Circle
Omaha, NE 68114
Phone: 1-800-228-9596, (402) 397-8555
MIN: None SUB: None

Phoenix Money Market Series

Phoenix
101 Munson Street
Greenfield, MA 01301
Phone: 1-800-243-1574, (413) 774-3151
MIN: $25 SUB: $25

Rodney Square: Money Market Portfolio

U.S. Government Portfolio
Rodney Square
Rodney Square North
Willmington, DE 19890
Phone: 1-800-225-5084, (302) 651-1923
MIN: None SUB: None

179
 • Sigma U.S. Government Fund
Sigma Money Market Fund
Sigma
3801 Kennett Park, Suite C-200
Wilmington, DE 19087
Phone: 1-800-441-9490, (302) 652-3091
AND
100 Oliver Street
Boston, MA 02110
Phone: 1-800-441-9490, (617) 26S-7575
MIN: $500 SUB: $100
• Transamerica Cash Reserve
Transamerica
P.O. Box 2598
Los Angeles, CA 90051-1598
Phone: (213) 741-7702
MIN: $500 SUB: $100

g. DISCOUNT BROKERS
The following is a list of discount stockbrokers in Canada and
the United States.

1. Canada
• Toronto Dominion Greenline
Geenline Investor Services Inc.
P.O. Box #1,TD Centre
Toronto, Ontario
M5K 1A2
(416) 982-7981, (416) 944-5467

Regional offices:

Ontario: 1-800-268-8209

Quebec: 1-800-363-1171

Atlantic: 1-800-565-0769

Manitoba: 1-800-665-8705

180
Saskatchewan: 1-800-667-6856

Alberta: 1-800-472-9717

Saskatoon: (306) 975-7398

Edmonton: (403) 448-8088

British Columbia: 1-800-663-0480

Windsor: 1-800-265-0846, (519) 252-7703

Local offices:

• 1791 Barrington Street, Suite 510

P.O. Box 634
Halifax, Nova Scotia
B3J2T3
Phone: (902) 423-1171

• 2001 University, 19th Floor

Montreal, Quebec
H3A 2A6
Phone: (514) 289-8439

• Royal Trust Tower

77 King Street West, 16th Floor
Toronto, Ontario
M5K 1A2
Phone: (416) 982-7686

• 100 King Street West, Suite 310

Hamilton, Ontario
L8P 1A2
Phone: (905) 521-1073, 1-800-263-8560

• Talbot Centre, 11th Floor

148 Fulerton Street
London, Ontario
N6A 5P3
Phone: 1-800-265-4447, (519) 679-6440

181
Minto Place Building
427 Laurier Avenue
P.O. Box 56088
Ottawa, Ontario
KIR 7Z1
Phone: 1-800-267-8884, (613) 783-6322

Suite 1617, 201 Portage Avenue

Box 7700
Winnipeg, Manitoba
R3C 3E7
Phone: (204) 988-2641

1874 Scarth Street, Suite 1280

Regina, Saskatchewan
S4P4B3
Phone: (306) 525-3370

Home Oil Tower, T.D. Square

#1100, 324 8th Avenue S.W.
Calgary, Alberta
T2P 2Z2
Phone: (403) 292-2870

Pacific Centre
590 Howe Street
Box 10261
Vancouver, B.C.
V7Y1E8
Phone: (604) 654-3783

Bank of Montreal
Investor Services
302 Bay Street, 6th Floor
M5A 1A1
(416) 867-4000

182
• Scotia Discount Brokerage
1 Richmond Street West
Toronto, Ontario
M5H 3W4
Phone: (416) 866-2006

• Desjardins Securities
2020 Universite, 9th Floor
Montreal, Quebec
H3A 2A5
Phone: 1-800-268-8471

2. United States

• Bidwell
209 S.W. Oak Street
Portland,OR 97204
Phone: 1-800-872-0711, (503) 790-9000

• Muriel Siebert and Co.

885 3rd Avenue, Suite 1720
New York, NY 10022
Phone: 1-800-547-6337, (212) 644-2400

• Burke Christensen & Lewis

303 West Madison Street
Chicago, IL 60606
Phone: 1-800-621-0392, (312) 225-8283

• York Securities
160 Broadway, East Bldg., 7th Floor
New York, NY 10038
Phone: (312) 349-9700

• Fidelity Brokerage Services Inc.

82 Devonshire Street
Boston, MA02109
Phone: 1-800-225-1799, (617) 570-7000

183
 • Fleet Brokerage
2 North Riverside Plaza, Suite 1717
Chicago, IL 60606
Phone: (312) 930-5879

• PacificBrokerage Services
5757 Wiltshire Boulevard, Suite 3
Beverly Hills, CA 90036
Phone: 1-800-421-8395, (213) 939-1100

• Quick & Reilly, Inc.

26 Broadway, Lobby
New York, NY 10004
Phone: 1-800-221-5220, (212) 747-5000

• Charles Schwab and Co.

101 Montgomery Street
San Fransisco, CA 94104
Phone: 1-800-472-4922, (415) 398-1000

h. NORTH AMERICAN STOCK EXCHANGES

The following is a list of North American stock and commod-
ity exchanges.

1. Canada
• Alberta Stock Exchange
300-5th Avenue S.W., 21st Floor
Calgary, Alberta
T2P 3C4
Phone: (403) 974-7400

• Montreal Exchange
800 Square Victoria, Box 61
Montreal, Quebec
H4Z 1A9
Phone: (514) 871-2424

184
• Toronto Futures Exchange
Toronto Stock Exchange
The Exchange Tower
2 First Canadian Place
Toronto, Ontario
M5X 1J2
Phone: (416) 947-4700, (416) 947-4487

• Vancouver Stock Exchange

Stock Exchange Tower
P.O. Box 10333, 609 Granville Street
Vancouver, B.C.
V7Y1H1
Phone: (604) 689-3334

• Winnipeg Commodity Exchange

500 Commodity Exchange Tower
360 Main Street
Winnipeg, Manitoba
R3C 3Z4
Phone: (204) 949-0495

• Winnipeg Stock Exchange

1 Lombard Place, 29th Floor
Winnipeg, Manitoba
R3B 0Y2
Phone: (204) 942-89431

2. United States
• American Stock Exchange (AMEX)
86 Trinity Place
New York, NY 10006
Phone: 1-800-THE-AMEX, (212) 306-1000

• Boston Stock Exchange (BSE)

One Boston Place
Boston, MA 02108
Phone: (617) 723-9500

185
Chicago Board of Trade (CBOT)
141 West Jackson Boulevard
Chicago, IL 60605
Phone: (312) 435-3500
Chicago Board Options Exchange (CBOE)
400 South LaSalle Street
Chicago, IL 60605
Phone: (312) 786-5600
Chicago Mercantile Exchange (CME)
30 South Wacker Drive
Chicago, IL 60606
Phone: (312) 930-1000
Chicago Rice & Cotton Exchange
141 West Jackson Street
Chicago, IL 60604
Phone: (312) 341-3078
Chicago Stock Exchange
440 South Lasalle
Chicago, IL 60605
Phone: (312) 663-2222
Cincinnati Stock Exchange (CSE)
36 East 4th, Suite 906
Cincinnati, OH 45202
Phone: (513) 621-1410

Coffee, Sugar & Cocoa Exchange (CSCE)

4 World Trade Center
New York, NY 10048
Phone: (212) 938-2900
Commodity Exchange Inc. (COMEX)
4 World Trade Center
New York, NY 10048
Phone: (212) 938-2900

186
Kansas Board of Trade (KCBT)
4800 Main Street, Suite 303
Kansas City, MO64112
Phone: (816) 753-7500

MidAmerica Commodity Exchange (MID AM)

141 West Jackson Boulevard
Chicago, IL 60604
Phone: (312) 341-3000, (312) 341-3078

Minneapolis Grain Exchange (MGE)

400 South Fourth Street
130 Grain Ex. Building
Minneapolis, MN55415
Phone: (612) 338-6212

New York Cotton Exchange (NYCE)

Phone: (212) 938-2650, (212) 938-2652
New York Futures Exchange (NYFE)
Phone: (212) 938-4940

New York Mercantile Exchange (NYMEX)

Phone: (212) 938-2222
4 World Trade Center
New York, NY 10048
Phone: (212) 938-2222

New York Stock Exchange (NYSE)

11 Wall Street
New York, NY 10005
Phone: (212) 656-3000

Pacific Stock Exchange (PSE)

301 Pine Street
San Fransisco, CA 94104
Phone: (415) 393-4000

187
 • Philadelphia Stock Exchange (PHLS)
Philadelphia Board of Trade (PBOT)
1900 Market Street
Philadelphia, PA 19103
Phone: (215) 496-5000, (215) 496-5165

i. SWISS BANKS
The following is a list of Swiss banks. Please note that many
of these banks need a large minimum. If you are curious, you
may want to write to some of these banks and request more
information.

• Credit Suisse
Paradeplatz 8
P.O. Box 590
8070 Zurich
Switzerland
Phone: 01-215-1111

• Foreign Commerce Bank

Bellariastrasse 82
8038 Zurich
Switzerland
Phone: 01-482-6688
Mailing Address:
P.O. Box 5022
8022 Zurich

• Ueberseebank AG
Limmatquai 2
8024 Zurich
Switzerland

• Bank Leu AG
Badenerstrasse 244
CH-8004 Zurich
Switzerland

188
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 ANOTHER TITLE IN THE
SELF-COUNSEL SERIES
PRACTICAL TIME MANAGEMENT
How to get more things done in less time
by Bradley C. McRae
Here is sound advice for anyone who needs
to develop
practical time management designed to
skills. It is
help any busy person, from any walk of life, use his or
her time more effectively. Not only does it explain
how to easily get more things done, it shows you how
your self-esteem will improve in doing so. More im-
portant, emphasis is placed on maintenance so that
you remain in control. Whether you want to find extra
time to spend with your family or read the latest best-
seller, this book will give you the guidance you need —
without taking up a lot of your time! $7.95
Some of the skills you will learn are:

• Learning to monitor where your time goes

• Setting realistic and attainable goals

• Overcoming inertia

• Rewarding yourself
• Planning time with others
• Managing leisure time

• Finding time for physical fitness

• Planning time for hobbies and vacations
• Maintaining the new you
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copies of Practical Time Management, $7.95

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 Yes, it's still $5 a day!
Even if you know nothing about investing, this book will show
you how to achieve financial freedom starting with very little
money. It explains how you can use investment strategies that
most people think are available only to the rich. Also included is
a valuable resource directory that gives the names and addresses
of important contacts throughout North America.

This book will show you step by step:

How to start your investment program even if you are

an absolute beginner
How to save money painlessly, even if you do not have
any savings at the moment
Investment opportunities available to the small investor
How to take advantage of profit opportunities even if
you have just $100 to invest
How to get free information on different investments
How to keep yourself informed about current develop-
ments

About the author

Dr.Chuck Chakrapani, a Certified Investment Manager, is Chair-
man of the Investors Association of Canada and Editor of Money
Digest. He is a Fellow of the Royal Statistical Society and the
Professional Marketing Research Society. He
has held academic
appointments at the London Business School and
the University
of Liverpool. Dr. Chakrapani is a frequent speaker at seminars
and conferences throughout the world, and the author of several
books on investing and finance.

ISBN D-flflTDfl-7TM-b $10.95