WHO IS 5i? Peter Hodson

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1 5i Research

taken great pride in helping Canadians with their financial futures.

2 WHO IS 5i? Peter Hodson Fellow of Canadian Securities Institute Chartered Financial Analyst Previous Chairman of Sprott Asset Management For over 31 years I ve taken great pride in helping Canadians with their financial futures. As a former industry insider, I know the tricks of the trade and can help you save money on fees and avoid being duped. Investors are beber on their own than buying mutual funds, but no one tells you this because fees are lucracve in the investment industry. We want to help investors like you become more knowledgeable, so keep a look out for our pro Cps throughout this guide! - Peter

Finance Featured in The Globe and Mail, Canadian Business, CNBC.

3 WHO IS 5i? Ryan Modesto Honours Bachelor of Business Administration at Wilfrid Laurier University Chartered Financial Analyst High-net-worth PorIolio Management and Corporate Finance Featured in The Globe and Mail, Canadian Business, CNBC.com and on BNN Market Call With a deep understanding of finance and invescng, I try to pass along what I ve learned to the members of 5i and beyond. I ve seen it all, from managing high-net-worth poriolios at one of the big six banks to dealing with mulc-million dollar cap-ex decisions at an alternacve energy company. I hope you find this guide useful and that it helps you to see success with your future investments. - Ryan

The Importance Of Dividends 7. Keep Fees Low 8. Find Good Companies First Worry About Valuation Later 9.

4 WHAT YOU LL GET FROM THIS GUIDE 1. Basic Investment Principles 2. How to Select The Right Broker 3. Setting Yourself Up With The Right Tools and Education 4. Understanding The Conflicts 5. The Importance of Compounding 6. The Importance Of Dividends 7. Keep Fees Low 8. Find Good Companies First Worry About Valuation Later 9. Pay Attention To Revenue Trends 10. Understanding The Price-Earnings (P/E) Ratio 11. Don t Stress Over A Single Quarterly Miss 12. DO Nothing 13. Let Your Winners Run 14. Don t Place All Your Investments In One Basket

6 KNOW THE BASICS Making solid investments in your future does not take place overnight. Your post retirement and personal situation are huge factors in your decisions. Consider these basic investing principles when you start to think about the importance of investing: o You won t make a fortune in a day. Try to ignore the short-term gyrations. o Stocks tend to fluctuate up and down unexpectedly. o It s important to think long term when considering investments. o Make sure to stay diversified. o Avoid the next hot stock tip when possible. o Don t underestimate the knowledge of the market.

8 SELECT THE RIGHT BROKERAGE Having the right broker that suits your needs is important. Various brokerages offer differing levels of fee structures, services, and account minimums. Ensuring that your brokerage of choice can service not just what you need now, but what you may need in the future (RRSPs, TFSA, Option accounts, etc.) is key to ensure you are set up for success over the long term. Pro Tip from Peter Here s a helpful link to the Globe and Mail online broker ranking to help ease the stress of selecting a broker for your investments.

9 SELECT THE RIGHT BROKERAGE Here are some things you should consider when looking at a brokerage: o Transaction fees for investments o Are you getting what you pay for? o Some brokerages have commission free ETF trading. o Only doing a few trades a month? Maybe low trade costs is not a key factor. o The various types of speciality accounts available to investors (TFSA, RRSP, Margin, etc.) o Who you can contact for customer service, and how responsive are they? (this will come in handy when you need it) o US dollar accounts (including how to use these accounts) within a TFSA, RRSP

11 SETTING YOURSELF UP WITH THE RIGHT TOOLS AND EDUCATION Retail investors are at a disadvantage when in comparison to larger investment companies and institutional firms. Fortunately, navigating information overload has become easier thanks to the great number of online resources: o o o o o o o o o o Google and Yahoo Finance TMXmoney Morningstar.ca Stockcharts.com Canadian Moneysaver Market Masters by Robin Speziale (With a chapter featuring Peter Hodson!) The Intelligent Investor by Benjamin Graham A Random Walk down Wall Street by Burton G. Malkiel What Works on Wall Street by James P. O Shaughnessy All About Asset Allocation by Richard Ferri

13 UNDERSTANDING THE CONFLICTS As a Canadian investor, you have to remember that most key players in the financial industry have something to gain. As a result, this creates conflict and motivation for people to acquire your assets to manage (for money), or push deals on you (for fees), or encourage you to buy and sell (for even more fees!). Remember that at the end of the day, no one cares more about your money than you do. That s why reliable, trustworthy resources are so important to the regular investor.

That means the earlier you start, the more potential for earning you'll have.

15 THE IMPORTANCE OF COMPOUNDING Compounding is a very powerful element of managing your investments. Here are a few key facts that you should know about the concept: Compound interest occurs when you accrue interest on your money, and then that money in turn also accrues interest. That means the earlier you start, the more potential for earning you'll have. This is why retirement accounts are such a good financial decision: they aren t just savings, they're actively invested and can reap the benefits of compound interest for you. In short, the longer you stay invested, the better! Pro Tip from Ryan This is a really great article if you d like to learn more about how compounding affects your investments in the long term.

17 THE IMPORTANCE OF DIVIDENDS Another important factor to consider is the power of dividends. Dividend payers send a cheque straight to your bank account on a monthly or quarterly basis. So even if your stock is down, the dividends can mean that you have an overall gain on your investment. Similar to the idea of compounding; reinvesting your dividends over the long-term can have a huge impact on your portfolio.

18 THE IMPORTANCE OF DIVIDENDS You can reference this sample chart below, which outlines the price return of the TSX, and the price return of TSX with dividends reinvested.

20 KEEP FEES LOW As investors, it s important for you to make sure to keep fees and costs for investments to a minimum. These fees eat into your net worth over the long-term. Don t buy into the traditional excuse of you get what you pay for. Ask questions and be sure you not only understand the fees you are paying on/to funds and advisors/managers but that you are actually getting a service that justifies what is being paid.

KEEP FEES LOW Here s a great resource from the US Securities Exchange Commission that outlines the impact that just a small difference in fees can have.

21 KEEP FEES LOW Here s a great resource from the US Securities Exchange Commission that outlines the impact that just a small difference in fees can have. After realizing that Canada has some of the highest mutual fund fees in the world, nearly double what is referenced in the above link, it becomes pretty clear the risk of not paying attention to fees can have on your financial independence.

23 UNDERSTANDING THE PRICE-EARNINGS (P/E) RATIO Many websites will quote conflicting information. This cannot be truer when looking at the P/E ratio. While this ratio is not a silver bullet with investing, it can be a great starting point. Investors just need to ensure that they are aware of what it is they are ACTUALLY looking at! Pro Tip from Peter Learn more about price-earning ratios with this helpful overview.

25 FIND GOOD COMPANIES FIRST WORRY ABOUT VALUATION LATER Follow the best, and consider adding to it at opportune times In most cases, the best companies are expensive and remain expensive Warren Buffett said it best: It s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price. Many investors wait for a good price that never comes, only to miss out on great returns Don t ignore valuation, but don t let it scare you away from the truly great companies and investments. Pro Tip from Ryan We recommend that you focus on finding the best companies in their industry or niche first and build a watch list that you can monitor and reference.

PAY ATTENTION TO REVENUE TRENDS Growing revenues are key. If the end customer is no longer willing to buy a company's products or services, why should you be willing to buy part of that company?

27 PAY ATTENTION TO REVENUE TRENDS Growing revenues are key. If the end customer is no longer willing to buy a company's products or services, why should you be willing to buy part of that company? A trend of flat or declining revenues can be a sign that the best days are behind a company. Revenues are also one of the more difficult accounting items to manipulate and adjust in financial statements.

29 DON T STRESS OVER A SINGLE QUARTERLY MISS Investments that do not perform to analyst expectations or miss earnings expectations are not necessarily ones that should be sold off. Things rarely go as planned in the real world and the same goes for quarterly earnings reports. One bad quarter does not always justify selling a company. Pay attention to the trend and fundamental changes to the underlying business.

31 DO NOTHING If your stock crashes because something bad happens, chances are the bad news is priced in and the damage is done. We usually prefer to let the dust settle and get some benefit from possible overreactions in the market. Take time to assess the situation and determine if the decline was justified.

33 LET YOUR WINNERS RUN You may have made a 10% return on an investment, but don t sell everything just because a stock is up. Often times a company will be at a higher price while the prospects have never been better! Diversification needs to be kept in mind, but a gain on a stock does not always mean you should sell it all. If you only sold all of your good stocks, you would end up with a portfolio full of the bad ones only! Trim the weeds and water the flowers.

35 DON T PLACE ALL YOUR INVESTMENTS IN ONE BASKET It s important to remember not to make you entire portfolio a bet on a single stock. Ensure no single stock is at or over a 10% position and no industry is at or over a 25% position. Canadian index investors likely have a very high financial and energy exposure by default. We think betting a quarter of your portfolio on a single industry when there are 10 (11 if you include real-estate) to choose from makes little sense Choosing an investment for the first time can be stressful. Making time to educate yourself on the basics of investing will help you prepare for your financial future.

36 Now Get Started You ve reviewed the basics and learned some of the most important concepts. Now it s Cme to take make your first investment! Or re-evaluate your current strategy if you re already accvely invescng. We hope you found this guide useful and we wish you the best of luck in your future investment success. Peter Hodson and Ryan Modesto Do You Have More Investment Questions for Us? Get Trusted, Conflict-Free Investment Answers from our FAQ. FIND YOUR INVESTMENT ANSWERS

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