2005 WILL BE A TOUGH ACT TO FOLLOW

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  Welcome to 2006. I hope it will be as profitable as 2005 was, although that will be a challenge. In many ways, the year just ended was quite remarkable. No matter where your money was invested, you should have made some nice profits. The Toronto stock market was up almost 22%. Bonds had another positive year, with long bonds especially strong. After staggering under the weight of Ralph Goodale's tax threat, income trusts rallied to close the year at near-record levels. The real estate market continued strong. Gold surged. What's not to like?

That will be a tough act for 2006 to follow and frankly I doubt that the New Year can even come close. Our stock market has enjoyed a great three-year run and is due for a pause. Realistically, think single-digit returns from the TSX this year. If it does better, treat it as a bonus.

Almost everyone has been predicting the demise of the bond market for several years. I was an exception, but this year may be different with interest rates continuing to rise. Unless there is a global economic crisis, a repeat of the long bond performance in 2005 appears impossible. Use a target of 5% for the Universe Bond Index and reduce risk by staying short-term.

Income trusts have been the darlings of investors for most of this young century but with interest rates nudging higher and some dubious new issues coming to market I expect more caution and skepticism in 2006. My target is about 8% return on average.

In short, this should be a year when you reduce your expectations and focus on capital preservation. There will still be profits to be made but not on the same scale as 2005. And don't bet the house on anything!

GOLD IS HOT

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  Gold has had its ups and downs in recent years. Right now it's on a big up-trend, with the recent price breaking through US$540 an ounce. However, opinion on where bullion will go from here is divided. Gold bugs talk confidently of US$1,000 an ounce, but they’ve been saying that for years. Pessimists see the price falling back to the US$425 range this year.

Who's right and what should you be doing about it? You can read my full analysis by going to http://www.buildingwealth.ca/News/Featuredetails.cfm?NewsletterID=2435

TOP FUNDS FOR 2006

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  I have just completed work on a new Special Report titled The Top 50 Funds for 2006. It contains all the information you need to make informed decisions about which mutual funds to buy for your RRSP, RRIF, or a non-registered portfolio.

This report covers all the major fund categories including Canadian Equity, Canadian Small Cap, U.S. Equity, Global Equity, International Equity, Canadian Balanced, and Canadian Bond. From the hundreds of funds that I studied, I picked the ones that offer the best combination of risk and return in the year ahead. Most of the funds in this report receive a top $$$$ rating.

Top 50 contains in-depth reviews and ratings for every fund, along with important information such as RRSP suitability managerial tenure, investment style, risk rating, MER, and load status. There's everything you need to know to make smart investment decisions. Among the recommendations you'll find:

* A Canadian equity fund that never loses money and which outperforms the market in good years and bad ones. * Two U.S. equity funds that use sophisticated techniques to protect investors from the impact of the rising Canadian dollar. * Some dividend funds that stand to benefit from the new tax rules. * A micro-cap fund that has gained more than 50% annually over the past three years. * The best income funds available. * A global equity fund with a truly remarkable record. * A foreign bond fund that is outperforming all others by a huge margin. * A socially-responsible fund that is producing outstanding returns. * Several first-class bond funds that are perfect for RRSPs.

The price of for the electronic edition of this valuable report is only $25 plus GST. We also offer a print version with binder for $39.95 plus shipping and GST. For more information and to order go to http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=571 or call our Customer Service line at 1-888-287-8229.

TAINTED RESEARCH?

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  Many investors rely on research from brokerage firms for insight into whether to put money into a particular security. But just how valid is that information? Tom Slee, a veteran money manager and a contributing editor to the Internet Wealth Builder and The Income Investor has a warning for small investors: Beware! Read his report at http://www.buildingwealth.ca/News/Featuredetails.cfm?NewsletterID=2412

NEW RETIREMENT BOOK

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  On Monday, Royal Bank published the results of a new Ipsos Reid survey that shows that, for the first time in seven years, saving for retirement is the number one financial priority for Canadians. That's a great lead-in to telling you about my new book, The Retirement Time Bomb, which has just been published by Penguin Canada.

This is the first retirement book I have written since Retiring Wealthy in the 21st Century which was published in 1999, just before the great stock market crash of 2000-2002. I was startled to find how much had changed in the interim. For example, in 1999 people were rushing to put their retirement money into high-flying tech stocks. Today they are more cautious than they've been in a generation. In 1999, the big pension worry was whether the CPP was viable. Today, it's whether your employer pension plan is viable. In 1999, income trusts were almost unknown. Today they are a key element in many retirement programs. And the list goes on.

I write about all these changes in The Retirement Time Bomb and provide a great deal of practical advice on how to create and manage a retirement savings program that will provide the money you need to live comfortably after work. The book has something for everyone, from young people just starting out to retirees seeking to increase their cash flow.

It's available now in all bookstores or you can order it on-line at a 34% discount from Amazon.ca by going to www.buildingwealth.ca and clicking on the link at the left of the page.

IWB MEMBERS DOUBLE THEIR MONEY

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  Readers of our flagship Internet Wealth Builder newsletter have just scored a double on one of our stock picks. Contributing editior Tom Slee advised selling positions in Dofasco at $65 in the issue of Jan. 9. He had originally recommended the steel maker in December 2003 when it was trading at $32.15. The stock price took off recently when Dofasco became a take-over target with two European firms vying for control of the company. With dividends, IWB members walked away with a total profit of 110%.

For information on becoming an IWB member, go to http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=532

MUTUAL FUNDS FOR A RRIF

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  Many Canadians had to convert their RRSPs to RRIFs by the end of 2005. In some cases they may be wondering whether the mutual funds they have been holding in their RRSP for years are still appropriate now that they have to start drawing money from their registered plan. The answer is: probably not.

A RRIF is a totally different animal from an RRSP. In the latter case, long-term growth is the main objective. With a RRIF, the priorities shift to safety and income. This often means a complete portfolio overhaul.

In a recent issue of Mutual Funds Update I offered several suggestions for suitable RRIF funds. Here are three of them. Performance figures are to Nov. 30.

BMO Monthly Income Fund. This is not the top-performing fund in its category by a long shot, but it offers good cash flow (6c a unit monthly) and has an excellent safety record plus a well-diversified portfolio. The one-year gain was just under 12%.

Dynamic Focus+ Diversified Income Trust Fund. This fund invests almost exclusively in income trusts. It has a very good performance record and pays a monthly distribution of 8c a unit. However, there'’s more risk here than in a diversified portfolio like the one offered by BMO. Latest 12-month gain was 20.2%.

TD Canadian Bond Fund. This well-managed entry offers a nice blend of government and corporate issues. Returns are above average over all time frames. Distributions are paid quarterly. They vary but are usually between 14c and 16c per unit, except for a higher payment in December.

For more information about Mutual Funds Update go to http://www.buildingwealth.ca/bookstore/productdetail.cfm?product_id=80

OUR 10TH ANNIVERSARY

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  This year marks the 10th anniversary of the launch of the www.buildingwealth.ca website. I don't know if anyone keeps records of this type but that must make us one of the oldest financial websites in Canada outside the major companies.

We're very proud of our site, which is constantly evolving. If you haven't paid a visit recently, please do so. You'll find important investing articles, free downloads of budget and net worth spreadsheets, information about our newsletters, and more.

If you'd like to read some of the history of the site and take a trip into the past to see what we looked like originally, go to http://www.buildingwealth.ca/News/Featuredetails.cfm?NewsletterID=2429

ITALIAN WINE TOUR

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  This has nothing to do with investing -- rather, it's a great way to spend some of the profits you made last year. My good friend Tony Aspler, Canada's best-known wine author, is organizing a trip to northern Italy in May. It sounds great and I have already signed up for it.

Tony personally knows almost all of the great vintners of Italy and he'll be taking us to some of the finest wineries in Piermont, Tuscany, and the Verona region. We'll be staying in great hotels in the Italian Lakes district, Verona, the Venice area, and Tuscany and visiting Milan, Florence, and Venice along the way. He's also arranged a number of special dinners for us at top restaurants.

For complete details, visit Tony's website at http://www.tonyaspler.com/pub/articleview.asp?id=898&s=11 where you will find a full itinerary and links to the hotels where we'll be staying. Space is limited so if you're interested I suggest that you sign up soon. I hope you'll be able to join us -- should be a lot of fun!

WORLD MONEY SHOW

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  Again this year I'll be representing Canada at the big World Money Show which will be held in Orlando Florida from Feb. 1-4. I'll be delivering a keynote address on Feb. 2 and also giving two workshops on income trusts and the Canadian stock market. If you're going to be in the Orlando area at that time, drop by. Admission is free. For more details go to www.worldmoneyshow.com

That's all for this month. We'll be back with you again in February.

Best regards, Gordon Pape

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All material in Investing Today is copyright Gordon Pape Enterprises Ltd. and may not be reproduced in whole or in part in any form without written consent. All recommendations are based on information that is believed to be reliable. However, results are not guaranteed and the publishers and distributors of Investing Today assume no liability whatsoever for any material losses that may occur. Readers are advised to consult a professional financial advisor before making any investment decisions. Contributors to Investing Today and/or their companies or members of their families may hold and trade positions in securities mentioned in this newsletter. No compensation for recommending particular securities or financial advisors is solicited or accepted.