 A special report
for Canadian Investors
Jack Chan
www.traderscorporation.com
Aug 1, 2005
Foreign Content 30% Ceiling Has Been
Removed... (finally)
The federal budget bill eliminating
the foreign content limit for registered, pension and other tax-deferred
retirement plans received Royal Assent on Wednesday, June 29th,
2005.
Because of this you will see
all RSP clone version of foreign funds be rolled into their pure
foreign content family member (ie. CIBC Nasdaq index RSP will
be rolled into CIBC Nasdaq Index).
This long awaited change is
very good news for Canadian investors and traders. Now you can
park 100% of your money in American stocks, ETFs, and mutual
funds, within your RRSP portfolio. What is most significant for
many of our Canadian subscribers, is that you can participate
100% in the tech sector with ETFs such as QQQQ and SMH.
The QQQQ is an ETF, which stands for "exhange traded
fund", for the Nasdaq 100. It is a fund traded as a stock,
which is basically a basket of the top 100 stocks within the
Nasdaq index. Excellent diversification, excellent daily volume
for instant fills and very little slippage. While the QQQQ, or
affectionately known as the "cube", is currently exactly
where it was on January 1st, our trading model has banked 20%
profit already for the year so far.
SMH
is the ETF for semi conductors, another excellent instrument
for the technology sector. Our trading model has recently issued
a major buy signal (IP1), and if past history is a guide, we
are looking at upside of 30 to 50%.
With the lifting of the restriction
on foreign contents, we are removing XIT.TO from our roster.
This Canadian tech ETF is very illiquid, and terrible slippage.
Worst of all, it is heavily weighted with Nortel. The single
performance of one stock affects greatly on this ETF, and we
are glad to dump it. However, there is a small drawback if you
intend to trade the QQQQ and SMH within your RRSP portfolio,
because your RRSP can only be in Canadian funds, every transaction
on a US stock, ETF, or fund will cost you due to the exchange
rate. Canadian banks are the biggest bloodsuckers outside of
Transylvania, and each transaction could cost anywhere between
1 and 2%. A round trip on a trade could cost near 4%. OUCH. This
applies to RRSP accounts only, because investment accounts in
US funds can stay in US funds in between transactions.
A simple way to avoid working
for the banks is to purchase a Nasdaq index fund from a Canadian
bank. Here you have the full benefit of trading the Nasdaq index,
but in Canadian dollars, therefore no exchange necessary. And
these bank funds are no load, with fairly low management fees,
and are redeemable or switchable into another fund anytime with
no penalty or front/back load commissions. There is a one time
registration fee of about $40, check with your banks to confirm
these details.
Most of the Canadian major
banks have a full line of mutual funds which include index funds
such as the Nasdaq, SP500, and DowJones. You can see that this
CIBC Nasdaq index fund mimics the QQQQ, and performs almost exactly.
This fund is up 15% from the May bottom, and the QQQQ is up 16%
in the same time frame. Close enough.
Summary
The Canadian government has
finally done the right thing and this new "free trade"
is welcomed by all investors. Now the pressure is on Canadian
banks to allow US funds within an RRSP account, but don't count
on it, the profit is too good to pass up. Of the three sectors
of energy, precious metals, and technology for which we
provide buy/sell signals for subscribers, only the technology
sector has been difficult to trade due to the 30% restriction.
The door is now wide open to allow Canadian investors/traders
to fully participate the next bull market in technology, which
according to our current trading models, is already underway.
JC
Jack Chan
 Archives
email: jack@simplyprofits.org
website: www.simplyprofits.org
321gold Inc
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