Mutual Fund question

[rodbarc]

My original plan heading to the bank yesterday was to open a GIC TFSA account to park my $5000 for 5 years lol just to let you guys know where I am with my knowledge of investment and my risk taking level.

I would never park money in a GIC, as inflation will make you lose money. If I need the money in 3 months or less, I'd put in a high-savings account. Anything more than that, I buy stocks and put options at the same time, to protect the capital. You're exposed to the market upside and you're guaranteed to protect your capital.

I don't want to get into the habit of panic buying and selling, would it be a bad idea to sit on the mutual fund account for a year seeing that I opened it just yesterday and see how things go for learning experience sake? My portfolio is the option where 70% of my investment is safe while 30% takes the risk. Most likely I won't gain much or if any at all. The worst case is that I might even lose a little after MER charges.

I wouldn't do it - Seeing your mutual fund underperform the market won't teach you how to choose good stocks and be protected against them. Also parking 70% of the money with negative return to "minimize" risk is not the best strategy because you already know that 70% won't do well. And, you should understand where the other 30% go - it should be a calculated and known risk if anything.

I'd start learning about the "Canadian couch potato portfolio" (Google about it) and forums such as financialwebring.org while your money is waiting in a high-interest savings account. Investopedia is also a good start. Once you learn more about investing, technical analysis, you'll make better devisions to invest in the stock market to the point that 100% of money can be there, and you choose how much protection you need. This is for long term in TFSA and RRSP - For short term and investment accounts, you should learn the next level and do tradings using only Options.

Rod

[Wing Nut]

So if someone wants to invest in a Mutual fund, what are some of the key features should one look at to determine if the portfolio has been doing well compared to other mutual funds?

See if it beats its peers over 10 years. First quartile would be good, but check the volatility to make sure your comfy with the ride. See if nothing important has changed, such as the manager.

[cjottawa]

So if someone wants to invest in a Mutual fund, what are some of the key features should one look at to determine if the portfolio has been doing well compared to other mutual funds?

Invest in mutual funds that track major indices such as the S&P/TSX (Canadian Equity), S&P500 (US Equity), MSCI EAFE (international equity - EAFE is Europe, Asia Far East), and DEX Universe (Canadian Bonds).

In TD e-Series funds, those would be TDB900, TDB902, TDB911, and TDB909, respectively.

The way you determine if an index fund is doing well is examining its tracking error, or how closely it mirrors the performance of the index it tracks.

[Clacker]

+1 for the e-series index funds. A GREAT way to start out investing while you figure out more about stocks and you can build a fairly diverse portfolio (see cjottawa's post or the canadian couch potato blog) for very low cost.