Things tend to come full circle for Mayur Pendse. Born in India, he graduated from computer studies at York University in Toronto.
And where has he ended up working as a software developer? The Toronto office of Infosys Technologies Ltd., a global information technology company with its headquarters in Bangalore, India, that just happens to be the first Indian company to be listed on the Nasdaq Stock Market.
What's more, when his family moved to Toronto about five years ago, he landed a part-time job as a dishwasher. Part of his chores included delivering lunches to the offices upstairs -- the very offices where he today shows up for work. A different company leased it then, but it still made an impression on the 25-year-old.
"I thought, Oh man, these guys are so lucky they just call down for food and everything," he recalls. "At that time it sure looked good."
Living with his mom, he was working several odd jobs to help pay the rent. His mother, a psychologist, was looking at job opportunities in Canada, but meanwhile, cash was in short supply because of Indian currency restrictions.
Mr. Pendse picked up investing at his father's knee back in India. A scientist, his father was also a cost accountant, and would happily spend leisure hours poking about the balance sheet of companies listed on the Bombay Stock Exchange, and keeping detailed notes on dividend payouts and corporate correspondence on index cards.
"He used to sit down with me and teach me fundamental stuff like price-earnings ratios," Mr. Pendse says. "I found the idea of making money using your brain fascinating."
How he does it
Mr. Pendse got right to investing when he graduated in 2000, making some simple but smart moves. First he set up a registered retirement savings plan using monthly contributions, as well as taking advantage of his company's benefit plan that matches up to 4 per cent of his salary.
Every month he also directs $250 into an ING savings account, quoting the old financial out-of-sight, out-of-mind monetary mantra. "That money I don't see, and if I don't see it, I don't spend it."
Right now he figures that money will likely be used for a down payment on a home. He's looked at, but decided against using the federal government's Home Buyer's Plan. The plan lets would-be first-time home buyers take up to $20,000 out of their RRSP to use toward the purchase of a home.
Unlike regular withdrawals, the money doesn't have to be included in your taxable income. But Mr. Pendse finds the cost of the conditions too high.
First, the money has to be replaced over the next 16 years. But since it's simply replacing the tax-free withdrawal, it doesn't earn a tax deduction. And if it's been a struggle to come up with regular RRSP contributions, they can become an impossibility after repaying the borrowed funds.
For Mr. Pendse, another strike against the plan underscores his understanding that investing in the stock market is best undertaken with a truly long-term perspective.
"If I wanted to take the money out in the next few years, I'd have to keep it in assets that can be sold off easily," he says. He also understands that there's no point getting into stocks if you need to be out of them in the next little while. "If I'm in mutual funds, I'm in them for the long run."
Up to 1½ years ago, he owned some individual stocks, but sold them because he simply felt their performance was becoming too unpredictable. "Good companies were going down, so I felt that diversifying with mutual funds would cut my losses."
Over all, about 30 per cent of his portfolio is in his company's plan, invested in funds that include Talvest RSP Global Health Care, AIC Diversified Canada, AIC RSP America Focused and Clarington Global Income. This last one, he notes, is "not really an income fund. If you look at its composition, it's more of a balanced fund." He discovered that early on, since part of his homework is checking to see whether a fund's name is a true indicator of the fund's approach. "I regularly check on the companies they invest in because funds sometimes change their focus, but keep the same name."
Another 30 per cent is with Saxon Funds, not least because the fund company itself is small enough that he's able to talk to the managers once a year. He also likes the fact that fund managers Rick Howson and Rob Tattersall have direct ownership in the company. "How the funds do directly affects them."
And he approves of their low-profile approach. "Personally I don't like fund companies that advertise because the money comes from me if I'm an investor."
But more to the point is the fact that Saxon is a no-load company, and offers both low management expense ratios and above-average returns. For instance, take the Saxon Small Cap Fund. The fund has a three-year annual average return of 11.73 per cent, while the average for similar funds is 2.93 per cent. Over 10 years, Saxon outperforms even more -- ringing up an average annual return of 14.68 per cent, compared with the 7.73 per cent the average fund returned each year.
Mr. Pendse also looks to see how much money a fund has under management. But he's not looking for reassurance that the fund is popular with the punters -- just the opposite.
"With a large fund, it's hard for the managers to keep finding companies to invest in," he says, noting it's a particular problem for small-cap funds. And it's in small-caps that Mr. Pendse is overweighted.
He figures he's young enough to ride out the more severe ups and downs the sector throws out, and has the time to see his investments there really pay off. "The problem with small caps is finding the good companies, because the bad ones can go under, so I leave that to the fund managers."
The remaining 40 per cent of his portfolio is in a discount brokerage account with eNorthern, which attracted him with its offer of no commissions, even on load funds.
"I didn't want advice, I just wanted someone who could execute orders for me."
A lot of his focus on fees comes from how he values his money.
"I used to wash dishes for $7 an hour, and I'd walk for an hour to save money on a bus ticket," he says. "I still work hard for my money and want to take care of it, and spending money on commissions is unnecessary."
The eNorthern account is used to purchase income trusts, which Mr. Pendse calls good defensive plays because of their real estate holdings.
"I think the real estate market will stay hot mainly, because interest rates are going down and people can afford much more. And with these low interest rates, I think income trusts will still offer good returns."
He also holds several bond funds in this account, including HSBC World Bond, Talvest Global Bond, Fidelity Canadian Bond and Trimark Canadian Bond.
Best move
Now here's a blast from the bubbly past: 360networks Corp. Mr. Pendse made some nice change buying it at $1.20 and selling it at $3 last year as the company, which has emerged from bankruptcy protection, had got a good gasp of air. "They had received some sort of credit facility and I was sure the stock would jump because there was a lot of speculation and a lot of short sellers," he says.
Worst move
Late in 2001, Mr. Pendse thought that gold was poised to move, given the rising fears of terrorism. He played it by buying an exchange-traded fund that mimics the performance of a basket of gold stocks -- iUnits S&P/TSX golds exchange-traded fund (XGD-TSX) -- paying $44 a unit, but the gold rally didn't materialize, and he cashed in his units at $42.
Advice
"You'll make some mistakes and lose some money when you start investing, but that's okay. It's just like paying tuition for school."
Tony Martin is the co-author of the book Investing For Canadians For Dummies, published by CDG. Interested in being profiled in Me and My Money?
tony.martin1@sympatico.ca
The investor
Mayur Pendse.
Age
25.
Occupation
Software developer.
Investment personality
Value seeker.
Portfolio
Saxon High Income, Saxon Small Cap, Renaissance Canadian Income Trust, Guardian High Income Monthly Trust, Talvest RSP Global Health Care, AIC Diversified Canada, AIC RSP America Focused, AGF International Stock Class, Clarington Global Income, HSBC World Bond, Talvest Global Bond, Fidelity Canadian Asset Allocation, Fidelity Canadian Bond, and Trimark Canadian Bond.
Portfolio size
Five figures.
Rate of Return
Over one year: Company plan, loss of 7%; eNorthern portfolio, gain of 7%; Saxon account, loss of 7.4%.
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