SCOTT ADAMS

WHAT ARE WE LOOKING FOR?

Investors pay fees to mutual fund managers for one reason: To do better than a benchmark. Otherwise, investors are better off owning exchange-traded funds. Outperforming for a mutual fund can come when markets are doing well. But it can also mean preserving assets when markets are imploding. Today we’ll look for mutual funds that lost the most yesterday and may not be earning their fees.

MORE ABOUT TODAY’S SCREEN

We’ll use Globefund.com for this screen. We’ll open it up to all asset classes except ETFs and limit it to funds with more than $50-million in assets.

Print Edition – Section Front

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 WHAT TO DO NEXT

This is a good time to really test if you want to own a mutual fund. If your fund is one of the losers on the list today, do more research and check how it has done against its appropriate benchmark over the past few months and over the past few years.

If your fund is still outperforming, then you should consider keeping it if you’re happy with being invested in that asset class. If it is underperforming its benchmark, now is a great time to start looking for a fund that can do better.

Funds with largest 1 day negative decline as of September 29, 2008 (exclude all ETFs and segregated funds)

   As of Sept. 29, 2008  As of Aug. 31, 2008

                                                1-day       1-month Yr.-to-date 1-year     3-year

                                MER       change change         change     return      return

Fund name              Asset class              (%)          (%)          (%)          (%)          (%)          (%)

AIC American Advantage Corp Class    Financial Services Equity        2.84         -13.31      -22.83      -34.07      -23.79      -6.63

AIC American Advantage       Financial Services Equity        2.76         -13.14      -22.53      -33.49      -23.64      -6.59

Scotia Latin American             Miscellaneous         2.54         -12.79      -31.70      -39.62      -4.27        19.67

Mackenzie Univ Wld Resource Class     Natural Resources Equity        2.46         -12.70      -32.41      -38.09      2.14         18.82

Investors Glo Financial Services-A        Financial Services Equity        2.75         -12.46      -17.84      -30.03      -24.44      -2.85

Investors Glo Financial Serv Cls-A        Financial Services Equity        2.86         -12.35      -17.80      -30.47      -24.99      -3.31

TD Latin American Growth-A                Miscellaneous         2.73         -12.05      -27.19      -30.49      4.24         -

Mackenzie Univ US Div In-T5(Hedged)                U.S. Equity             2.42         -12.05      -17.22      -27.77      -8.51        -

Investors Glo Natural Resource Cl-A     Natural Resources Equity        2.86         -11.53      -29.45      -32.17      4.91         19.64

Acker Finley Select US Value 50-A       U.S. Equity             1.94         -11.52      -25.45      -35.52      -26.71      -6.82

Manulife Emerging Markets Fund          Emerging Markets Equity       2.90         -11.35      -24.01      -36.39      -13.78      -

Quadrus Mac Unv Cdn Resource           Natural Resources Equity        2.65         -11.29      -28.53      -33.09      2.63         17.54

Mackenzie Univ Canadian Resource       Natural Resources Equity        2.41         -11.29      -28.52      -32.96      2.89         17.85

Investors Greater China Class A             Greater China Equity               2.81         -11.13      -24.73      -43.17      -19.65      -

Manulife European Opportunities Fd      European Equity      2.70         -11.11      -21.01      -31.02      -13.61      -

Investors Greater China A      Greater China Equity               2.73         -11.01      -24.68      -43.47      -20.00      -

TD Global Multi-Cap-A         Global Equity          2.52         -10.87      -26.26      -32.33      -6.59        -

Middlefield Commod & Agriculture       Natural Resources Equity        2.62         -10.71      -31.93      -               –              -

Renaissance Emerging Markets              Emerging Markets Equity       2.90         -10.67      -24.02      -38.02      -11.22      11.30

Altamira Energy Fund             Natural Resources Equity        2.88         -10.64      -26.03      -16.67      17.48       11.07

Dynamic Power Canadian Growth-T      Canadian Focused Equity        3.76         -10.57      -28.99      -33.02      8.48         -

Note: Only for funds that had reported results as of 7 pm Sept. 29

DOUGLAS COULL/THE GLOBE AND MAIL // SOURCE: GLOBEFUND.COM

ROB CARRICK

 Worry about the stock markets if you must, but not the financial system on which it’s built.

Pretty much everything financial looks like garbage today. Stocks had a historically bad day, the capper on a September to remember for its nastiness. In the United States, lawmakers voted down a rescue plan that was supposed to save the U.S. financial system from ruin. And in the background, more U.S. and European banks were flat lining.

Mattresses, anyone? The rate of return isn’t so hot, but at least you know your money won’t be used by any financial Einsteins to fund mortgage loans for people who can’t begin to afford them. That, in essence, is what’s causing the mayhem in financial markets right now. Bankers, brokers and insurance guys blew it, and everyday savers and investors are getting hammered.

But let’s not lose perspective. Here in Canada, your money is safe.

We need to distinguish here between the various kinds of risk you face as a saver or investor. There’s stock market risk, and it’s fierce. When the markets have a mind to fall, things can get ugly. Plan accordingly by including bonds and cash in your portfolio and remembering during the good times to own investments that won’t get annihilated when a downturn comes.

The other kind of risk faced by savers and investors is related to the security of the financial institution where you’ve placed your money. It sounds like Depression-era stuff to have to even raise this matter. But when you see renowned U.S. investment firms like Lehman Brothers and Merrill Lynch hitting the wall, or big U.S. banks like Wachovia or Washington Mutual, it’s not being alarmist to question the safety of money held here in Canada.

Let’s talk about our banks. Hate them all you want for their ubiquitous fees and surcharges, but they never came close to reaching the same level of institutional stupidity as their U.S. counterparts when it comes to mortgage loans.

Don Drummond, chief economist at Toronto-Dominion Bank, said 4 per cent of Canadian mortgages being written not too long ago were subprime, a euphemism for Grade Z quality, while the comparable number in the United States was 40 per cent.

“The Canadian banks have lots of capital, and none of them have large quantities of these toxic assets,” Mr. Drummond said.

Even if a bank were to have problems, deposits of up to $100,000 are covered by Canada Deposit Insurance Corp., a federal Crown corporation. As well as covering money held in bank accounts, CDIC also protects guaranteed investment certificates, the investment of choice for many seniors and other conservative investors.

“I don’t think that anyone has to worry about their GICs inside Scotiabank or TD Bank or Royal Bank not being accessible to them when they need it,” said Greg Holohan, a wealth adviser with ScotiaMcLeod in Markham, Ont. “Anything in a major Canadian bank is safe.”

Investment dealers and sellers of mutual funds have their own protection plans similar to CDIC. Both the Canadian Investor Protection Fund and the Mutual Fund Dealers Association Investor Protection Corp. cover you against losses of up to $1-million if your firm goes under.

The combination of plunging stock markets and trouble in the financial system is going to make a lot of people think hard about safer investing, both in terms of what they buy and where they buy it.

The greatest nanny investments of them all, Canada Savings Bonds, are just going on sale and demand is bound to be brisk. CSBs are, after all, guaranteed by the federal government and its triple-A credit rating.

CSBs are where you put your money if stock market risk and worry about the financial system are paramount for you. Just remember the oldest investing lesson of them all: When you reduce risk down to nearly nothing, your returns follow along. On the CSB website, you’ll find regular bonds are paying 2.45 per cent in the first year, while premium bonds pay 2.75 per cent.

It’s easy to see investors also showing renewed interest in “safe” stock market investments like principal-protected notes and segregated funds, which are mutual funds with an insurance guarantee if you hold for a preset period. One insurance company has been advertising its seg funds with ads headlined: “Stop the market roller-coaster. I want off.”

Truth be told, this is not a smart time to be buying guaranteed investments. You buy the guarantee to protect against market declines like we’ve just seen. Now that a big plunge has already occurred, you’re better off investing aggressively for the long term than conservatively for the short term.

However long it takes for the stock markets to sort themselves out, investors and advisers are going to be fixated on safety. Fortunately, the system on which all investment choices are based here in Canada is sound.