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Book Reviews

The Fundline Advisor

by Richard Croft & Eric Kirzner

Gordon Pape’s 1997 Buyer’s Guide to Mutual Funds

by Gordon Pape

Smart Funds 1997

by Jonathan Chevreau

Money Coach Guide to Top Funds 1997

by Duff Young

MUTUAL FUNDS HAVE become hugely popular with Canadians, even those who never put money in anything more adventurous than a bank deposit before. As a result, assets have grown at a brisk 30% annual clip since the early 1990s. Why are investors flocking to funds? There’s a variety of reasons:

• With interest rates at 40-year lows, bank deposits are unappealing to all except risk-averse senior citizens.

• Baby boomers and Generation Xers realize they need to save for retirement. The government is broke and company pensions are unreliable, given the current downsizing mania.

• People are now living well into their 80s or 90s. To finance their golden years, they need investments that have higher risks but yield higher returns.

• Stock-market investing is challenging and forces you to do your homework. Mutual funds offer professional management, along with a diversified portfolio.

The only problem with mutual funds is that there’s so darn many of them – about 1,500 for sale in Canada. Faced with the confusing array of choices, many investors want to do research before they buy. They don’t trust dealers to give them the straight goods on all the products, especially the so-called “no-load” funds that don’t pay sales commissions. Hence, the need for books by experts who rate the funds and give guidance on which ones to buy.

Canada is blessed with many fund experts who are also talented writers. They have produced a number of useful guidebooks, which land on store shelves in late fall, just in time for the surge in sales of registered retirement savings plans. With the lowest interest rates in recent memory, January and February are expected to be hot months for mutual funds.

Gordon Pape, a Toronto-based author and broadcaster, singlehandedly invented the category in 1991. His is the oldest fund guide on the Canadian market and has gone through the most annual revisions. Like Phil Edmonston’s Lemon Aid series, Pape’s books are a staple of the genre and have the most name recognition. (Interestingly, Pape recently took on Edmonston by writing a book on how to buy used cars.)

His latest entry, Gordon Pape’s 1997 Buyer’s Guide to Mutual Funds, is 140 pages thicker than it was last year. The ratings now cover 650 funds, compared to 600 before, and there are new chapters on the Internet, royalty trusts, and performance evaluation, among other things. But the publisher, Prentice-Hall Canada, has wisely maintained the price at $14.95. The bulk enhances the book’s credibility, without making it overly intimidating for the novice.

Pape has a lively, engaging writing style and likes to have fun with funds. His last chapter, Fundlists, has some amusing headings: Ten Funds I Don’t Own, And Don’t Want To; Five Funds That Are Doing So Well It’s Scary; A Half-Dozen Funds That Should Be Doing Better But Aren’t; and, finally, The One Fund To Buy If You’re Buying Only One (no surprise, it’s Templeton Growth Fund, one of Canada’s largest and most popular offerings).

But is Pape’s success going to his head? At times, he sounds peevish that investors continue to buy funds that have earned low ratings. “I simply can’t understand why so many people are putting their money here,” he says about Great-West Life Equity Index Fund. “Obviously, these investors haven’t been reading this Buyer’s Guide!”

Smart Funds 1997, by Financial Post reporter Jonathan Chevreau and two analysts from Nesbitt Burns, is on its third edition and has gone through substantial changes. The book is 40 pages slimmer than before and is aimed at a broader market. Previously pitched to more sophisticated investors, it now tries to include the novice as well.
The merit in the Financial Post’s approach is that it profiles fund families as well as individual funds. The authors argue that investors should first pick two or three major fund families, then make selections within those families. “That way, you’ll minimize fees, paperwork and confusion, while avoiding the overdiversification that may actually reduce your returns.” It’s a sensible philosophy, one that distinguishes the book from its rivals.

Pape also profiles fund families, but not nearly as thoroughly. In the Financial Post book, the first half is devoted to thumbnail sketches of Canada’s 50 major fund families. The authors list each company’s strengths and weaknesses, noteworthy funds and management fees. This is information that is hard to find elsewhere.

In the second half, they pick out 125 “smart funds” that have performed better than competitors, with low variability and reasonable management fees. They give useful risk measures for each fund, such as how often it lost money and how it did in its best and worst three months. They also graph each fund’s performance relative to a benchmark index and Canada Savings Bonds.

Unfortunately, the authors got caught in an embarrassing choice. They included the brand-new Fidelity True North as one of their smart funds, based on the reputation of Veronika Hirsch. “The fund is chosen strictly because of the manager,” they say. But Hirsch was replaced as fund manager after details of her personal investments were revealed in the media, an event that obviously occurred after the book went to press.

Money Coach Guide to Top Funds 1997 is also in its third edition. The book is 70 pages thicker than last year, but maintains its $14.95 price. The most striking in terms of graphic presentation, it makes generous use of colour in charts and graphs and informational nuggets sprinkled throughout the text. This year’s version profiles about 100 funds in depth, while providing quickie ratings on another 1,000 funds at the back.

What I find fascinating is to watch the shifts in the relative positions of the two authors, who both work in the financial industry. Top Funds 1995 was by Riley Moynes and Duff Young. Top Funds 1996 was by Duff Young with Riley Moynes. Top Funds 1997 is by Duff Young, edited by Riley Moynes, and Young’s cover photo is three times the size of Moynes’ photo. Author of a bestselling personal finance book, The Money Coach, Moynes let Young take over the research and writing this year. “My role has been more editorial, with a view to ensuring a visual and stylistic connection with The Money Coach,” he says.

The FundLine Advisor is a brand-new book, though it optimistically says “1997 edition.” Authors Richard Croft, an investment counsellor, and Eric Kirzner, a finance professor at the University of Toronto, are fond of naming things after themselves. The book features “the exclusive Croft-Kirzner FundLine” and “the Croft-Kirzner Performance Index.” In forecasting interest rates, they refer to the “Croft-Kirzner Targets” or the “CK target range.” Modest they’re not.

This is a more basic guide than the others, aimed at readers who want a lot of explanation of how investments in general and mutual funds work. The ratings of individual funds start on page 223 and take up less than a third of the book. Only about 75 funds are reviewed in depth. The book is heavy on questionnaires and worksheets for investors to fill in.
The guides mentioned here are just a taste of what’s available. There are plenty of choices for readers, whether beginners or expert investors. The category is vibrant and growing, with diversified products appealing to different market niches. Kind of like mutual funds.

 

Reviewer: Ellen Roseman

Publisher: HarperCollins

DETAILS

Price: $19

Page Count: 326 pp

Format: Paper

ISBN: 0-00-638600-8

Released: Nov.

Issue Date: 1997-1

Categories: Reference

Reviewer: Ellen Roseman

Publisher: Prentice Hall

DETAILS

Price: $14.95

Page Count: 578 pp

Format: Paper

ISBN: 0-13-575168-3

Released: Oct.

Issue Date: January 1, 1997

Categories: Reference

Reviewer: Ellen Roseman

Publisher: Key Porter

DETAILS

Price: $19.95

Page Count: 270 pp

Format: Paper

ISBN: 1-55013-751-4

Released: Dec.

Issue Date: January 1, 1997

Categories: Reference

Reviewer: Ellen Roseman

Publisher: Addison Wesley

DETAILS

Price: $14.95

Page Count: 256 pp

Format: Paper

ISBN: 0-201-89295-2

Released: Oct.

Issue Date: January 1, 1997

Categories: Reference