Profit from the recovery

Stock markets have been predicting an economic turnaround since March and based on the current signs it appears they were right. As of the close of trading on Oct. 23, the S&P/TSX Composite Index had rebounded by 52 per cent from its March low of 7,480. The index is still well off its all-time high of 15,155 reached in June 2008 but if present trends continue we could be back there sooner than anyone would have thought possible six months ago.

Of course, there will be bumps along the way -- markets never go straight up. But investors are clearly feeling much better about the future and are more willing to consider moving back into equity and balanced funds.

The latest sales figures from the Investment Funds Institute of Canada (IFIC) confirm this. In September, IFIC reported almost $2 billion in net sales of long-term funds. Fixed-income and balanced funds were the most popular, suggesting that while people were willing to stick a toe back into equities, they weren't ready to dive in head-first. Meantime, investors continued to bail out of low-yielding money market funds, to the tune of $2.7 billion.

Assuming we are indeed at the start of an economic recovery, which funds should you choose to maximize your profits? Here is a suggestion for investors who are willing to take a little more risk. Ask a financial advisor if it is suitable for your needs.

Fidelity Canadian Opportunities Fund. This is an aggressively-managed Canadian stock fund that focuses on small to mid-cap stocks with high growth potential. It is run by one of Fidelity's few home-grown managers, Hugo Lavallée of Montreal. Since he took over in 2006, the fund has turned in outstanding results despite the market collapse of 2008-09.