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Author: larmstro One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 3296  
Subject: More CDN index funds Date: 7/12/2001 4:54 PM
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Well, whaddya know?  Here I am minding my own business taking The Fool's 
beginning investing seminar, and lessons 3+4 are all about index investing.  
One of the on-line instructors directed me over to this board, but only 
AFTER I'd done all my homework.  (Was that fair?)  He thought I should 
share some of my results with some fellow canucks, and so here goes.  I 
apologize if some of this is old news, but I have not had time to peruse 
many of the posts here.  Actually, since I'm kind of wordy, I will split 
my homework into two posts.  I'd appreciate any and all comments/corrections
/feedback regarding the following.  Thx.	
_______________________________________________________________________
Assgnt. A: Decide which index investment best suits your situation.

The following table compares the TSE indices available, against the S&P500.
The TSE35 and TSE60 seem comparable to the S&P500, in terms of returns.  
Unfortunately, I was not able to find 15-year, 20-year, or 25-year returns 
for these.  Nor was I able to get answers for my questions (see following) 
from either the TSE, or S&P, the latter who I found out does all the 
administration for the TSE indices.

A lot of data here, but in trying to compare apples to apples, I zeroed 
in on the returns of May 31/01.  And the winner is.... [drum roll, please]
   >>the S&P500 (based on a ten-year return of 14.84%)!!  The TSE35 and 
TSE60 seem comparable, but a couple of key points.  The TSE35's 10-yr 
return of 13.77% as of May 31 looks impressive, until you consider they 
have a 1-yr return of 12.12%, vs. the S&P500's 1-yr return of -10.55%.
As a contrarian investment, then, does the TSE35 make sense?  The 1-yr 
return of 12.12% boosts the ten-year return by approx. 1.2% annually, 
so, stripping out this 'contrarian' boost, the adjusted ten-yr return 
would be 12.57%.

The second catch in the returns is the exchange rate between the Canadian 
and U.S. dollars.  The returns for the TSE indices are returns in Canadian 
dollars, and those for the S&P500 are in U.S. dollars.  In 1991, the 
Canadian dollar was worth approx. 80¢U.S.  In 2001, it is worth 65-66¢ U.S.
(For example, on June 19/01, the canuck $ was trading at 65¢U.S.; today 
(July 3), it was trading at 66¢U.S.)  This represents a decline of 18.75% 
over ten years, or an annual decline of 2.05%!  So, all the TSE returns 
need to be reduced by this 2%!  The real questions is, of course, as an 
investor does one feel the Canadian dollar will continue this decline, 
stabilize, or recover back to the 80¢ level.
  
I just don't know, so, maybe to hedge my bets, I should split my investment 
between the S&P500 and the TSE35 or TSE60 (how do they get 10-year returns 
for an index that has only been around for 2½ years?).  But remember, this is
based on ten-year returns only.

Questions: of what significance, if any, are the PE ratios?
_______________________________________________________________________________________________
	Year		Returns/PE					Returns
Index	started	Source	   as of	PE	1-year	3-year	5-year	10-year	15-year	25-year
_______________________________________________________________________________________________
TSE300	1977	TSE	May 31/01	26.9	-10.67	3.93	10.96	11.06	n/a	n/a
		Review	Apr. 30/01	23.5	-13.94	2.66	10.81	11.04	n/a	n/a
			Mar. 31/01	19.7	-18.61	1.66	10.62	10.49	n/a	n/a
			Feb. 28/01	20.5	-10.47	5.93	12.14	11.29	n/a	n/a


TSE35	1987	TSE	May 31/01	20.50	12.12	12.00	17.53	13.77	n/a	n/a
		Rvw.	Apr. 30/01	18.5	8.55	10.82	17.35	13.73	n/a	n/a
			Mar. 31/01	15.6	0.14	9.06	16.68	13.04	n/a	n/a
			Feb. 28/01	16.3	13.70	14.21	18.58	13.92	n/a	n/a


TSE100	1993	TSE	May 31/01	24.20	-12.29	3.57	11.11	10.93	n/a	n/a
		Rvw.	Apr. 30/01	21.6	-15.67	2.66	11.05	10.98	n/a	n/a
			Mar. 31/01	18.3	-20.24	1.73	10.84	10.48	n/a	n/a
			Feb. 28/01	19.3	-10.56	6.22	12.46	11.28	n/a	n/a


TSE200	1993	TSE	May 31/01	>99	2.98	11.44	12.48	8.83	n/a	n/a
		Rvw.	Apr. 30/01	60.9	0.76	4.07	10.76	12.07	n/a	n/a
			Mar. 31/01	46.2	-4.82	2.43	10.42	11.14	n/a	n/a
			Feb. 28/01	37.2	-7.88	5.2	11.12	11.84	n/a	n/a


TSE60	1999	TSE	May 31/01	n/a	-14.16	3.89	13.14	12.63	n/a	n/a
		Rvw.	Apr. 30/01	n/a	-16.91	3.05	13.11	12.68	n/a	n/a
			Mar. 31/01	n/a	-21.08	8.37	16.99	14.23	n/a	n/a
			Feb. 28/01	n/a	-7.94	6.83	14.96	13.98	n/a	n/a

S&P500	?	S&P	May 31/01	22.9	-10.55	n/a	15.13	14.84	n/a	n/a
		TMF	Dec. 31/00(?)	-	-10.02	11.91	18.13	17.35	15.93	15.29

Notes:
-TSE Review/Rvw. = Toronto Stock Exchange Review (monthly publication)
-TSE200 index: base level was set to 250 as of August 31, 1993.
-Standard & Poor's Index returns for May 2001 (http://www.spglobal.com/
specialdata.html).
-PE for S&P500, as of June 19/01 (http://www.spglobal.com/earnings.html).
-TMF returns, as shown in lesson 3 notes, Dec.  31/00(?)
-how can they get ten-year returns on indices that are less than ten 
years old?
-looks like the TSE35 and TSE60, in the longer term, are about equal 
(slight edge to TSE35, but don't forget the boost this index gets from 
its stellar 1-yr. return), as well as coming close to matching S&P500 
returns (without taking into account exchange rate)
-approx. exchange rates for Jan./91, and Jan./01...	1991 approx. 
80¢(?); 2001, approx.  66¢(?), an approx. 17.5% decline over ten years 
(about -1.9% annual decline - .98110 return compounded for ten years = .82545).
>June 20/01: buy 1 U.S.$/ 64.259¢, sell 1 U.S.$/65.946¢, spread 
	= 1.687¢, or 2.56%(!)  (Royal 	Bank).  
	Yahoo!  quote 1 Cdn$ = 0.6517 U.S.$
>July 3/01: Yahoo! quote 1 Cdn$ = 0.6619 U.S.$

-pepi
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