Look to home, cottage for profits

I know, it seems at times like it’s all unrelenting gloom. Stock markets continue to struggle, with everyone wondering where the bottom is.

Investors are fleeing mutual funds. Even bond investors are nervous.

But all is not doom and gloom. Some types of investments have been doing very well, thank you. In fact, if you were fortunate enough to have some of your money in the right places, you may be faring very well these days, despite the stock market turmoil.

Real estate rises 
Here are some reasons to smile.

  • The value of your home may be rising.

The Canadian Real Estate Association reported last week that the average price of a resale home in Canada in July was $201,372.

That was up 5.8 per cent over the same period in 2001. Homeowners in most major urban markets benefited. And remember, any capital gain on your principal residence is tax-free.

  • If you own a cottage, it is also likely worth a lot more.

A recent survey by ReMax found that 90 per cent of the recreational properties in Canada increased in value in the past year.

Starting pri for a cottage in the Port Carling-Bala area of Ontario’s Muskoka region is up to $450,000, up from around $375,000 last year.

The most expensive area for recreational property is B.C.’s Saltspring Island, where starting prices run as high as $700,000.

Some investments prosper  <BR.

  • Gold stocks and precious metals mutual funds have been very profitable, despite tailing off recently.
    • The average precious metals fund was ahead more than 50 per cent for the year to July 31.

    Top performer was Royal Precious Metals Fund, with a 12-month gain of 94 per cent.

    • Many real estate investment trusts (REITs) are performing well, despite the fact that office vacancy rates in Canada are at their highest level in five years.

    Best bets: Those that focus on shopping malls and retirement homes.

    Example: Riocan REIT, which was trading at $12.13 at the start of this year and which closed August 23rd at $12.78.

    Unitholders have received $0.6425 in distributions so far in 2002, bringing the total return for the year to 10.7 per cent in less than eight months.

    Next page: Bonds gain ground


    Bonds gain ground

    • Some royalty trusts have gained ground, particularly those that have shown the capability of producing steady, predictable cash flows.

    The mutual funds that invest in them, known as income trusts funds, have reflected this prosperity, with an average gain of 11.3 per cent for the year to July 31.

    • Bonds have been profitable.
    The Scotia Capital Markets Universe Bond Index, which reflects a broad spectrum of Canadian issues, gained 8.7 per cent for the year to July 31.

    International bonds did even better, with the average foreign bond fund adding more than 13 per cent during that time.

    Losers become winners
    So the whole world isn’t bleak. It just may seem that way when you pick up the business pages and read about the latest corporate scandal or triple-digit loss on the Dow.

    What will happen in the next 12 months? No one can say with certainty, but the odds are that most of the investment categories mentioned above will not be among the leaders.

    Tomorrow’s winners are more likely to come from today’s losers. Most likely candidates for success:

    • Shares in well-managed large cap companies
    • Health care stocks
    • Energy stocks (if pressures continue to build in the Middle East they could skyrocket)
    • Financial services stocks
    • European equity funds.

    Gordon Pape’s national bestseller, 6 Steps to $1 Million, has just been published in trade paperback. To obtain a copy at a special discount, check the website: