Top five vacation destinations for your money

Top five vacation destinations for your money


With the lazy, hazy days of summer upon us, it may be the ideal time to send your money on vacation. The summers of our childhood may have been filled with risky adventures, but as we age, a quiet lakeside cottage, or even a leisurely evening on our deck, may be the high point of the summer. Similarly, I believe this summer will be a wonderful time to seek a secure, comfortable, peaceful destination for our money. In fact, with the many unsettling issues and potential events around the world, it may be a great summer to consider a “staycation.” The turbulence of our daily lives, which makes the quiet vacation destination so attractive, is also a compelling argument for seeking a safe harbour for the summer. Let’s take a look at my five ideal vacation destinations for our money.

1) Consider a “Staycation”

In a volatile world, there may never be a better time to seek the safe haven of the Canadian Domestic economy. We have a great government balance sheet, relatively business friendly economic policy, and a wealth of resources unmatched in the western world. We are readily accessible to the booming economies of the Far East, and we still have the best trade relationship with the US of any country in the world. The market may be turbulent on the low volumes of summer, so the opportunity may emerge to pick away at great Canadian companies with solid balance sheets and growth in revenue.

Take a Staycation. Buy Canada.

2) Avoid the roller coasters

The Flash Crash of May 6th remains largely unexplained. Europe is essentially bankrupt. The states in our southern neighbour are worse off than the EU. Global markets have recovered about half of the losses they experienced through the catastrophe of 2008 and early 2009, but have broken many important technical trend lines over the last couple weeks. The market reminds me of Space Mountain, the great dark roller coaster. You really don’t know what is coming next, you can’t see it, but you know it is going to be wild. I love roller coasters, but I think money belongs on the sidelines when the ride looks wild. Ultimately, the majority of long term equity returns have come from dividends, so why not look for stability, with a steady pattern of dividend growth.

Avoid the roller coasters. Buy dividend growers and lower volatility stocks.

3) Go somewhere boring

In January of this year, I took a very strong stance in favour of corporate bond funds. Virtually every advisor I knew was bearish on bonds. I took some heat for this stance, but I was right, and I continue to think the broad based hatred of bonds is misplaced. There is a lot to be said for return of your money trumping return on your money. In fact, even government debt has rallied recently, but I prefer corporate bonds over government bonds. Corporate bonds pay better interest than government bonds. Most Corporate balance sheets are far superior to those of governments. If the economic recovery continues, corporate will benefit from upgrades, and may even earn capital gains despite the fact that global yields on government debt will rise. If the economy stumbles, corporate bonds are much more likely to hold their own than stocks. Get paid to sit on the sidelines, whichever way the economy goes.

Go somewhere boring. Buy corporate bonds

4) Go somewhere unloved

Halloween of 2006 may have been the last time you considered the great, unloved, and dying segment of the Canadian investment market, the income trust. In their glory days, they were the darling of Bay Street. The beneficial tax treatment is disappearing. Investment dealers provide little research. If you held them in O6, they hurt you. Many are busted businesses, with busted capital structures, yet I believe they deserve a second look. With this painful environment, it is tough to own the trusts, but there are some real gems among them, with eye popping, often double digit distributions. I love income payers, so these unloved companies are on my radar.

Go somewhere unloved. Buy income trusts.

5) Consider a seasonal retreat

One of the most impressive interviews I have conducted was of Brooke Thackray, the author of a number of books, including an excellent guide on seasonal investing. Brooke has brought out an Exchange Traded Fund (ETF) that tracks the seasonal nature of the market. This ETF has been outstanding so far. If you want a copy of his book on the subject, let me know. If you want to put your money on autopilot for the summer, why not consider his ETF?

Consider a seasonal retreat. Buy the seasonal ETF.