Couple in 50s questions their strategy

Question: My husband and I are a little over 50 years old but, for various reasons, we depend on our investment income for about 20 per cent of our living expenses. Over the course of the last several years, on the advice of our broker, we have purchased a number of foreign funds whose performance has been disappointing. We have sold several of these funds but are keeping some, such as Templeton Growth and Trimark, because of their reputation for value investing. We are considering purchasing good quality corporate bonds with the proceeds from the sale of the unsatisfactory funds. I have three questions:

1. How appropriate do you think foreign investing is at this time for persons in our situation?

2. We have occasionally seen on the SEDAR website prospectuses being filed for corporate bonds. Some of these are from companies which interest us but our broker seems unable to provide any detailed information on these bonds. Is there a way around this difficulty? (Examples are Dofasco, rated AA-low, and FortisBC, rated BBB, both filed Oct. 29/04).

3. We feel the recommendations we continue to receive are too risky for our situation. We have tried two other financialompanies (both affiliated with large banks) but have not found a satisfactory solution yet. How do we go about finding advice which is conservative and considerate of our preferences? – A.D.

Gordon’s answer: To answer your questions in order:

Foreign investing is certainly appropriate for your age group. The real problem these days is that the rise of the Canadian dollar has been offsetting part of the gains from foreign funds. That is a cyclical phenomenon and won’t continue forever. However, if you want to add a foreign fund that protects the Canadian dollar value of your account, look at RBC O’Shaughnessy U.S. Growth and RBC O’Shaughnessy U.S. Value. Both are hedged against currency rate changes.

As far as foreign bonds are concerned, when a new issue comes out check to see what brokerage firms are involved in the underwriting syndicate. If your company is among them, your broker should be able to acquire some for you. However, if you are dealing with a smaller house or a discount broker, you may have to switch to a large full-service broker to have access to these issues.

If you are not happy with the recommendations you are receiving, request a meeting with the broker and the manager of the office he works from. Discuss the matter openly. It may be that your broker has misunderstood your wishes. If so, the meeting should clear the air. Otherwise, ask that your account be reassigned to a broker who takes a more conservative approach. – G.P.

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