Mutual funds newb here...

[quanta]

Prologue: I have a few mutual funds, mostly tied to an RRSP or a bank, which is fine for the long-term. I'm young so I'm content on letting those grow slowly.

However, I'm also interested in putting the rest of my cash lying around my PCFinancial account into a higher-return, more exciting :D mutual fund. So I've done a bit of research, but still have a couple questions in my mind.

1. Is there a reason NOT to invest in a fund that has 5 stars from Morningstar and Globefund? If these ones have such great MERs, why would anyone get a sucky 2% one from their bank?

2. Sometimes when I see Rate of Return charts, the numbers wildly fluctuate between years, i.e. Year 1: 13%, Year 2: -4%, Year 3: 9%, etc. What do they signify?

Thanks for your guys help!

[ilfsoy]

1. MER's, 2%, and bank ... not sure I follow your attempted question. Having a low MER helps returns, improving a funds chance of outperforming. However not all 5 star funds have low MERs, 2% as an MER or even a return isn't always bad, and banks funds don't all suck.

Morningstar skewers to 5yr returns, globefund puts the heavier weighting on more recent returns resulting in a good 3yr return scoring best. Obviously consistent and longterm outperformance with lower risk guarantees a 5 star rating. The reason not to buy a 5 star fund is because it has been outperforming and since future returns aren't guaranteed all you guarantee is that you're buying higher than you may need to be. Other variables such as a change in manager, or high tunover, or too much variation form mandate etc. can also be concerns.

2. Markets like any investmest (or life) has its ups and downs, nothing ever goes straight up or down. BTW the return numbers you posted are not very extreme. The ideal time to buy is when a longterm 5 star has a rough patch, and is just starting to reverse back up (as many longterm standouts will). Market timing is a suckers game though.

[TrevorK]

Prologue: I have a few mutual funds, mostly tied to an RRSP or a bank, which is fine for the long-term. I'm young so I'm content on letting those grow slowly.

However, I'm also interested in putting the rest of my cash lying around my PCFinancial account into a higher-return, more exciting :D mutual fund. So I've done a bit of research, but still have a couple questions in my mind.

1. Is there a reason NOT to invest in a fund that has 5 stars from Morningstar and Globefund? If these ones have such great MERs, why would anyone get a sucky 2% one from their bank?


You have to keep in mind, most people who buy mutual funds buy the recommended ones. If you go into CIBC, they are going to recommend CIBC funds. If you go to RBC, they are going to recommend RBC funds.

That's why there are quite a few ****** funds (And even funds, that are rebranded with a higher MER) that are "popular".


2. Sometimes when I see Rate of Return charts, the numbers wildly fluctuate between years, i.e. Year 1: 13%, Year 2: -4%, Year 3: 9%, etc. What do they signify?

Thanks for your guys help!

Those numbers signify the return - return flucuates every year.

You'll see a more wild variation in riskier mutual funds (That invest heavily in stocks) as opposed to safer ones (Income funds, bond funds).

[quanta]

Thanks for your thoughts.

ilfsoy: Sorry, something got truncated there. I thought there was a correlation between MER and star rating. I have also noticed that while 5-star funds usually rack in double-digit returns, the run-of-the-mill bank ones generally do not. I've noticed that one of my bank funds is performing so badly, I could have just thrown my money in an ING savings account.

I agree, that market timing is a sucker's game. Sort of like holding off on a computer, because there is always a newer, better one around the corner. :)

TrevorK: Are there any neutral, fund-agnostic mutual fund specialists out there? Also, do the return figures specify past performance, i.e. Year 1 = last year, Year 2 = two years ago, etc.? Or is it estimated future performance?

[ItzMe]

If you have the QuickTax 2003 cd, check out the hidden books folder on the CD (root dir afaik) and read up Gordon Pape's guide to Mutual Funds & Gordon Pape's guide to RRSP's ... great intro information and background stuff on mutual funds in general, as well as breakdowns of a ton of different mutual funds in a huge variety of categories with all sorts of info...

There's a ton of info out there on a variety of mutual funds and the like...morningstar's 5 star rating isn't the be all end all (globefund.com also issues ratings btw...) - often morningstar will issue a poor rating to a well performing fund simply because it underperforms a misplaced category (ie a fixed income fund got 2 stars because it was stuck in the divident fund category, most of the funds there are full of common stocks of blue chips making them much riskier than a plain vanilla bond fund :P!)...so be careful and do lots of research :)

Past performance is no indication of future gains! Generally 1, 3, 5 etc year performance #'s take into account all gains as wel as distributions (ie return of capital, dividends, etc.) ...

Developing a portfolio breakdown or asset allocation is important - once you know what you want to invest in (ie x% cdn equity, x% us equity, x% fixed income, x% global equity, x% emerging markets, x% small cap, etc.) - you can then choose the individual funds to match your needs for each category...different co's may have different best fund performers in the categories (ie Phillips hager & north excells in dividend/income but their equity lineup is weaker...Saxon has a great CDN equity lineup but their fixed income entry is new so don't know to much about it, Chou funds only offers equity lineups (which have done really well)...CIBC has some great income offerings but its equity showing is fairly weak...etc. etc. etc. :)...)

Taxation may also figure into your fund choices if its a non-registered account you may wish to search for funds that have more tax advantaged returns as opposed to pure interest income, or may wish to take more risk as you can deduct capital losses, etc...

There's a thousand other topics to write a book on here, so the best bet is to pick up a couple of good books on the topic! :) My recommendation is definately Gordon Pape's stuff...it's fairly basic but gives a great intro to the topics he discusses...

[TrevorK]

Thanks for your thoughts.

ilfsoy: Sorry, something got truncated there. I thought there was a correlation between MER and star rating. I have also noticed that while 5-star funds usually rack in double-digit returns, the run-of-the-mill bank ones generally do not. I've noticed that one of my bank funds is performing so badly, I could have just thrown my money in an ING savings account.

I agree, that market timing is a sucker's game. Sort of like holding off on a computer, because there is always a newer, better one around the corner. :)

TrevorK: Are there any neutral, fund-agnostic mutual fund specialists out there? Also, do the return figures specify past performance, i.e. Year 1 = last year, Year 2 = two years ago, etc.? Or is it estimated future performance?

If you want to get an unbiased view of mutual funds, you'll need an independant financial planner - and most of them require a minimum portfolio size before they deal with you.

Yes - those figures are for PAST performance.

Maybe if you share some of your goals (longterm, shortterm, registered, non registered, amount to invest, etc...) we can recommend some funds to look into...

[quanta]

Lessee...short term, less than $10K to start, risk is okay as long as I perform a bit better than the index. Would prefer a fund that's easy on the taxes (I believe this means I prefer registered).

I've read around and heard Sceptre, Ivy and Sprott come recommended names.

[Rehan]

If you want to get an unbiased view of mutual funds, you'll need an independant financial planner
For a real unbiased view you don't want just any independent financial planner, but a fee-only planner. Most planners get hefty commissions from selling you various funds...and sometimes their suggestions are for their own best interest rather than yours. (Yes, there are some commission-based planners that the client as the top priority, but with a fee-only planner you can be sure of that.)

But a fee-based financial planner will charge something like $200/hour, so it's still not worth it for a small portfolio.

[ItzMe]

Lessee...short term, less than $10K to start, risk is okay as long as I perform a bit better than the index. Would prefer a fund that's easy on the taxes (I believe this means I prefer registered).

I've read around and heard Sceptre, Ivy and Sprott come recommended names.

Definately need to come up with an asset allocation plan - there's many financial planning books (those by Delloite & Touche, Gordon Pape come to mind) - that will help you determine what %'ages you want to allocate to what types of funds (depending on your age, risk tolerance, etc.)...statistics abound state that upto 90% of your returns come from a good asset allocation so it's pretty important :)...I wouldn't recommend going with the default ones on the 'net especially if your younger as they generally give your age in fixed income and the rest to equities - while they assume (perhaps rightly so) that you can ride out downturns in the market, a big loss can be a huge setback to a younger investor, and so a higher %age of fixed income may be more suitable (maybe with some more aggressive types like the monthly income funds as well as less aggressive bonds/bond funds)...but up to you :)

As for registered vs. non-registered - registered means RRSP in this case - it's a tax shelter that gives you a tax deduction ... non registered means basically your holding the funds outside your RRSP...first ya need to get around that and its tax advantages etc. before you can decide which way you want to go :) ... generally one may want to be less aggressive in an RRSP as capital losses cannot be deducted...in a registered portfolio all income is tax sheltered - non registered interest income is the highest tax level, with dividends, capital gains, etc. receiving more preferential tax treatment...

There's way to much to type in one post! lol so need more info if you want more specific info... :D...

[crazyboie]

Sorry to come into this thread halfway, but I'm sort of in the same boat as quanta. I have my RRSP maxed out but still have some money that I'm just putting into my 2% (or whatever) PCF Savings account ..

Judging by the tax implications, what do you guys think would be a good starting figure to invest in a Non-Registered Mutual Fund? I was thinking of getting something with a mix of Money Markets for fixed income and some Dividend Funds because apparently they have better tax implications?

However, is it worth my while if I only have like $2K or should I wait until I have a more substantial amount ($5K, $10K??) and take Rehan's advice and discuss this with a Fee-Only financial planner?

How did you guys get started in Non-Registered funds and what type of issues did you encounter with regards to advice and/or taxes? RRSPs are pretty simple compared to the NR plans.. throw money in, take out later in life...

I basically want my Non-MF to provide some income (as it grows) and some long-term stability. I'm young, so I have time to experience market fluctuations ...

Thanks in advance,

[ItzMe]

*** DISCLAIMER***

None of what I say should be in any way construed as financial advice of any kind...remember to always check with your broker/financial planner before making investment decisions, and past performance is not an indication of future gains...

Sorry to come into this thread halfway, but I'm sort of in the same boat as quanta. I have my RRSP maxed out but still have some money that I'm just putting into my 2% (or whatever) PCF Savings account ..


Thanks in advance,


Judging by the tax implications, what do you guys think would be a good starting figure to invest in a Non-Registered Mutual Fund? I was thinking of getting something with a mix of Money Markets for fixed income and some Dividend Funds because apparently they have better tax implications?


Many mutual funds can be "gotten in on" with as little as 500$ initial investment, and often if you commit to a monthly contribution plan, you can get in with a mere 25$ per month.

Money Market funds are pretty plain vannilla and good for safety, but remember if you hold them in a non-registered plan you will pay your full marginal tax rate on the interest earned...
Bond funds and even income trust funds can be another source of fixed income to add some additional returns to your fixed income side as MMF's generally have the lowest (but safest) returns ...

Dividend funds come in a few different varieties so be careful - some are just blue chip common stock funds in disguise and as such are of a much higher risk than a dividend fund that invests in preferred shares and trusts etc...Phillips Hager & North comes to mind when considering that...make sure you check out what they invest in and the like before making your final choice...you are correct in that they do offer tax advantaged returns ... (pretty attractive)...also potential for some capital gains depending on the fund...


However, is it worth my while if I only have like $2K or should I wait until I have a more substantial amount ($5K, $10K??) and take Rehan's advice and discuss this with a Fee-Only financial planner?


I firmly believe its worth it even if you only have 2k, as long as you can commit to monthly contributions...one option might be to look at a balanced fund that generally invests in 20 to 40% fixed income, and the balance in equities - making it almost a one stop shop for lower amounts of investment capital...you'd have to take a look at them individually to choose which one is right for you...

Also you can take advantage of monthly contribution plans even at companies with high minimum investments - for example, Saxon requires a 5000$ investment (that can be split amongst all of their available funds if you wish), however, if you have less than that, you can commit to contributing 500$ per month until your account balance reaches 5000 at which point you can reduce your monthly contributions to as low as 100/month or stop them all together...an attractive feature to get in on some excellent performing equity funds!...

A financial planner is always a good choice if you don't have the time to do the research, or want a 2nd opinion - the fees can be steep, but you can hold them down by doing alot of research on your own first so they don't have to review the basics with you when you go in...often they'll also have you setup your own discount brokerage account and do the transactions yourself lessening the time commitment as they only give you the planning then...attractive so long as you don't want access to the "F" series of advisor-only funds (but you can always get in on it later as your account portfolio grows in a couple years and it becomes more important...for now at 2000$ a 0.x% difference in MER for a year or 2 shouldn't mean too much...)


How did you guys get started in Non-Registered funds and what type of issues did you encounter with regards to advice and/or taxes? RRSPs are pretty simple compared to the NR plans.. throw money in, take out later in life...


Many of the same issues that I had setting up a registered portfolio actually! ;)...
One huge mistake I've heard come down the grapevine was about a planner who setup 2 seperate accounts for a client, one registered, and one non-registered, and then duplciated the investments / funds for both of them, with no consideration of the taxation issues! This is a huge mistake, as most of the interest paying securities/funds could have been sheltered from the high marginal tax rate, and dividend paying/capital gains funds etc. could have been outside the registered plan receiving favourable tax treatment...so remember to take your *entire* portfolio registered and non-registered into account! :) An RRSP is just a "shell" for a huge variety of investments...I'm firmly against treating it as just a savings account or the like and believe to maximize your retirement income you should be carefully considering the types of investments that go into it so that you maximize the compounding effect, and minimize your taxes payable :)

Remember, interest income will be taxed at your marginal rate, while dividend income, capital gains, and the like will be treated much more favourably, so if you hold your fixed income interest paying items in your registered plan, and the others outside it, you could benefit greatly from a tax perspective (as well as having more risky investments outside your registered plan means that in the event of a capital loss you can still obtain some tax relief!...)


I basically want my Non-MF to provide some income (as it grows) and some long-term stability. I'm young, so I have time to experience market fluctuations ...


Do you want the income to live off, or to reinvest as it comes in? You can generally choose to have distributions reinvested, but remember you're still liable for taxes payable even though you didn't actually receive the income as it was reinvested...

Proper asset allocation will let you sleep at night, give you your long term stability, and some excellent growth at the same time...I can't emphasize enough how important I think getting the right balance between fixed income, equities, and the sub-classes is...

IE in fixed income you could have cash (ie MMF, canada savings bonds, etc.), GIC's, short term / medium term bonds, bond funds, income trusts, income trust funds, dividend funds, etc.

In equities you can have Canadian, Global (incl. Canada/US), International (excludes Canada/US), emerging markets, small cap, mid cap, large cap, etc.!

Then there's also "style" diversification - ie some equity funds in the "growth" style, some in the "value" style - enhances your diversification...some funds like RBC's O'Shaugnessy Canadian equity combine both the growth and value approach to stock selection with some pretty decent results...

Finally remember that outside your registered plan you aren't hampered by the foreign content limitation in your RRSP - while presently Canada is fairly attractive and the US isn't as much due to our strong dollar, it isn't always like that, and international markets shouldn't be ignored either!...

Some funds to give you an idea...(V for value, G for growth) - dates refer to performance stat ie Jan/04 + 0.6% means up .6% from jan 04 to oct ...

Canadian Equity Funds

CI Canadian Investment (V) Jan/04 + 0.6% (6 mo) Protecting capital effectively
Mackenzie Cundill Canadian Security (V) Apr/03 +12.6% (1 yr) Holding up well
Chou RRSP (V) Nov/02 +10.7% (1 yr) Conservative style
Trimark Select Can. Growth (V) Sep/02 +12.5% (1 yr) Continues to be strong
RBC O’Shaughnessy Canadian Equity (V/G) Sep/02 +17.4% (1 yr) Continues to impress
Saxon Stock (V) Aug/02 +11.6% (1 yr) Off a bit recently
Mackenzie Ivy Canadian (V/G) Dec/00 + 3.0% (3 yr) Protects capital base
Bissett Canadian Equity (G) Nov/00 + 4.3% (3 yr) Looking good
ABC Fundamental-Value (V) July/97 +14.5% (5 yr) Results continue strong ***TOP PERFORMER***
PH&N Dividend Income (G) April/96 +15.4% (5 yr) Still doing well ***TOP PERFORMER***

Canadian Small Cap Funds

Ethical Special Equity (V) May/03 +20.3% (1 yr) Bit of a drop-off
Saxon Small Cap (V) July/01 +16.8% (3 yr) Pulling back a little

Sector Funds

Front Street Energy Growth Ser. 1 (G) Dec/03 + 3.9% (6 mo) One of strongest labour funds

Balanced Funds

Saxon Balanced Aug/04 - 0.5% (1 mo) Early days
Dynamic Focus+ Balanced June/03 +10.0% (1 yr) Doing well now
Renaissance Canadian Balanced Value Sep/02 + 8.7% (1 yr) Holding up well
Mackenzie Ivy Growth & Income July/02 + 7.2% (1 yr) Performing as expected
Trimark Global Balanced Feb/02 +16.5% (1 yr) Continues to beat the averages
Fidelity Canadian Asset Allocation Aug/01 + 4.1% (3 yr) Beating the category average
ABC Fully-Managed April/97 +11.2% (5 yr) Outperforming in big way ***TOP PERFORMER***

Income Funds

RBC Monthly Income June/03 +11.8% (1 yr) Performing as expected
CIBC Monthly Income Nov/02 + 9.6% (1 yr) Strong cash flow

Bond Funds

Friedberg Foreign Bond May/04 + 1.3% (3 mo) Doing all right
PH&N High Yield Bond Apr/04 + 1.9% (3 mo) Well-managed
CIBC Can. Short-Term Bond Index Nov/01 + 4.9% (3 yr) Solid and safe
PH&N Short-term Bond & Mort. May/00 + 5.5% (3 yr) Safe place for money ***TOP PERFORMER***
PH&N Bond Aug/98 + 7.3% (5 yr) Has rallied nicely

U.S. Equity Funds

RBC O’Shaughnessy US Value Aug/03 +14.7% (1 yr) Very strong results
Chou Associates (V) Nov/02 + 6.1% (1 yr) Beating the averages
ABC American-Value (V) June/02 +29.1% (1 yr) How does he do it? ***TOP PERFORMER***

*** CONTINUED IN FOLLOWING POST ***

[ItzMe]

Post got too long so had to continue it here :)

European Equity Funds

None right now but Chou has recently launched one that may be worth watching...excellent track record, and has lowered the MER until proven results are shown...!

International/Global Equity Funds

Templeton Global Smaller Co. Aug/04 - 1.0% (1 mo) Should do fine
Saxon World Growth (V) Aug/02 + 9.4% (1 yr) A bit weak lately
Trimark International Companies (V) May/02 +15.5% (1 yr) Some recent weakness
Mackenzie Cundill Value C (V) Feb/01 + 5.7% (3 yr) Strong performer

Money Market Funds

Altamira T-Bill June/04 + 0.5% (3 mo) One of the best MMFs

Exchange-Traded Funds (ETFs)

EnerVest Div. Income Trust Oct/04 New Yields 11.35%
G5 iUnits Aug/04 + 1.4% (1 mo) Defensive position
Diversified Preferred Share Trust Jan/04 - 0.1% (8 mo) Quarterly dividend 31c a share

[TrevorK]

Lessee...short term, less than $10K to start, risk is okay as long as I perform a bit better than the index. Would prefer a fund that's easy on the taxes (I believe this means I prefer registered).

I've read around and heard Sceptre, Ivy and Sprott come recommended names.

Is it going to be held in an RRSP - if not there are no tax issues to worry about, but if it is there are quite a few different options for tax - effective investing...

[Jovi]

Sprott Canadian Equity

Fund Name 1 mo rank 3 mo rank 1 yr rank 2 yr rank 3 yr rank 5 yr rank 10 yr rank

Sprott Canadian Equity Fund 34/594 101/589 1/571 12/533 1/452 1/304

Its been on a tear lately, but too bad all new investments have been capped.

Go to www.fundlibrary.com and browse away.

[ItzMe]

Sprott Canadian Equity

Fund Name 1 mo rank 3 mo rank 1 yr rank 2 yr rank 3 yr rank 5 yr rank 10 yr rank

Sprott Canadian Equity Fund 34/594 101/589 1/571 12/533 1/452 1/304

Its been on a tear lately, but too bad all new investments have been capped.

Go to www.fundlibrary.com and browse away.

AFAIK Sprott does require a 100K minimum investment to purchase through them, or 25K to purchase through dealers as well...also, that specific fund has tended to foccus on small to mid-cap equities, meaning its risk level is higher than your run of the mill CDN equity (although it performed really well when gold went up as it had picked out a considerable # of jr issues / mining co's to invest in...)

[crazyboie]

Sprott Canadian Equity

Fund Name 1 mo rank 3 mo rank 1 yr rank 2 yr rank 3 yr rank 5 yr rank 10 yr rank

Sprott Canadian Equity Fund 34/594 101/589 1/571 12/533 1/452 1/304

Its been on a tear lately, but too bad all new investments have been capped.

Go to www.fundlibrary.com and browse away.
Sweet, thanks for the Link Jovi.


Thanks for the breakdown, ItzMe, that must have taken forever to type! hehe

I believe I need to do some more homework. I'm not too confident in my RRSP fund anymore because it was my first fund but now I think it's time to move on (TD Managed Aggressive Growth RSP).

Since we're nearing year-end, is it wise to be switching or joining funds or would it be better to wait until January? As well, with the American dollar so low right now, wouldn't it be a good time to take advantage of Global Funds?

As well, do any of you think a CA would be of better assistance that a financial planner when it comes to getting proper advice?

Thanks again,

[ItzMe]

Sweet, thanks for the Link Jovi.

I believe I need to do some more homework. I'm not too confident in my RRSP fund anymore because it was my first fund but now I think it's time to move on (TD Managed Aggressive Growth RSP).

Thanks again,


Thanks for the breakdown, ItzMe, that must have taken forever to type! hehe


Wrists...on fire...(asprin commercial ;))... :P


Since we're nearing year-end, is it wise to be switching or joining funds or would it be better to wait until January? As well, with the American dollar so low right now, wouldn't it be a good time to take advantage of Global Funds?


Many mutual funds make distributions only once a year, in December. This can create a tax trap, of which many people are unaware. The problem arises when you buy funds outside a registered plan just before the distribution date. Income earned over the previous 12 months is then paid out to investors—including you—and the fund’s unit value is adjusted downwards to reflect the payout. The effect is that you receive back some of the investment capital you’ve just put up, and you have to pay tax on it. This is definitely a situation to avoid.

Not sure I quite understand what you mean by USD being low so good time to take advantage of global funds...do you mean because the USD is low you are predicting that global equities will fare better?...

I'm not a fan of currency speculation - but I do like a currency hedge such as US $ denominated MMF's / bonds and the like...

Because of the high US dollar, return on US equities is lowered / diluted when they get translated into CDN $...combined with strong CDN markets, Canada is pretty attractive right now compared to the US...(doesn't mean one should ignore the US, but some may want to overweight a touch in Canada and underweight the US depending on objectives...)


As well, do any of you think a CA would be of better assistance that a financial planner when it comes to getting proper advice?


A CA can give some excellent advice on taxes, and if they are also educated and/or certified in financial planning, it's a doubly good situation as they can give a wide range of advice...

I would hesitate to say that a CA without financial planning certification and/or education can give better advice than a certified planner - a planner may be able to help you with things like portfolio allocation, risk tolerance, etc. - topics that a CA may not be as well-versed in...(but a planner may not be anywhere near as knowledgable as a CA when it comes to taxation issues)...

Often if your financial affairs are complex or you are of a high(er) net worth, a financial planner will advise you to bring in your team of outside experts to round out a financial plan - ie your accountant (CA) for tax implications and the like, your lawyer for estate planning, your banker for your day to day financials, and your broker to help fine tune your plan and understand your needs...

***EDIT***
An additional group of funds that I like is the Brandes equity lineup (value) (their money market fund seems way over priced so I'd shy away from fixed income)...they offer Canadian Balanced, Canadian Equity, US Equity, US Small Cap, International Equity, Global Equity, Emerging Markets Equity, Global Balanced, etc...their Canadian equity / balanced has turned in some reasonably impressive results...

Website:
http://www.brandesinvestments.ca/

An interesting fact of note - afaik the Canadian fund lineup is managed by their small-cap desk out of san-diego...shows how many US equity managers regard Canadian markets - even though we have some companies that we'd consider to be quite large, many of them rate a small to mid cap mention in comparison to US markets... :)

[Ragnarok0T5]

what are some good index funds?

[ItzMe]

what are some good index funds?

The ones I'm most familiar with are the TD e-funds lineup...

http://www.tdefunds.com/

Low MER's, only available online, 180 day hold period to avoid early redemption charge (as opposed to standard 90 day), no loads

There's also ETF info available here:

http://www.moneysense.ca/investing/stocks_markets/indexes_etfs/

Tonnes of links, articles, etc...

[crazyboie]

The ones I'm most familiar with are the TD e-funds lineup...

http://www.tdefunds.com/

Low MER's, only available online, 180 day hold period to avoid early redemption charge (as opposed to standard 90 day), no loads

There's also ETF info available here:

http://www.moneysense.ca/investing/stocks_markets/indexes_etfs/

Tonnes of links, articles, etc...

Hey ItzMe,
Thanks again for your knowledge! Do you do this for a living or have just spent countless hours doing research? What is your view on managed funds? Did you start out with that type? That's what was suggested to me from my bank (TD Canada Trust) but I'm starting to think that it may not be my best bang for the buck.

Cheers,

[quanta]

Sorry for the late reply...ItzMe, TrevorK, you guys are top-notch. Lots of good advice, I'm still trying to wrap my head around most of it.

I've done some checking, and it looks like I've maxed out my RRSP too. So it looks like I'll have to go non-registered. What kind of funds would you recommend as a good balance between returns and minimal tax?

I have some Money Market stuff from TD already, and boy does it suck. I think I make more in my ING account. (and I got the $13 signup bonus too!)

[Gdog]

ItzMe, those are some amazing posts. Good job! :)

[ilfsoy]

Sorry for the late reply...ItzMe, TrevorK, you guys are top-notch. Lots of good advice, I'm still trying to wrap my head around most of it.

I've done some checking, and it looks like I've maxed out my RRSP too. So it looks like I'll have to go non-registered. What kind of funds would you recommend as a good balance between returns and minimal tax?

I have some Money Market stuff from TD already, and boy does it suck. I think I make more in my ING account. (and I got the $13 signup bonus too!)

Yeah looks like ItzMe put some effort into those posts.

Money market funds over the past few years of low interest rates have underperformed "high-rate" savings accounts such as ING, the MER is the main reason why. With rising rates cash investments will get better but don't expect much from a money maket fund. MMF's are shortterm cash parking spots while you wait to buy something else. Guaranteed not to lose a lot though.

Dividend funds tend to produce consistently good returns with risk lower than the general market, and have some tax benefits over capital gains. However, in a rising rate environment they tend to underperform, same can be said for income trusts and the monthly/high income fund group. Already having an ING account you may want to look at their Dividend Income Fund it's one of the best in the category. This is not a recommendation simply a suggestion, confer with your financial advisor or do your own research before making a decision.

[TrevorK]

Sorry for the late reply...ItzMe, TrevorK, you guys are top-notch. Lots of good advice, I'm still trying to wrap my head around most of it.

I've done some checking, and it looks like I've maxed out my RRSP too. So it looks like I'll have to go non-registered. What kind of funds would you recommend as a good balance between returns and minimal tax?

I have some Money Market stuff from TD already, and boy does it suck. I think I make more in my ING account. (and I got the $13 signup bonus too!)

I'm just going to bump this thread because I have to go rebuild a workstation, but if you don't hear from me with suggestions by tonight shoot me a PM

[ItzMe]

Hey ItzMe,
Thanks again for your knowledge! Do you do this for a living or have just spent countless hours doing research? What is your view on managed funds? Did you start out with that type? That's what was suggested to me from my bank (TD Canada Trust) but I'm starting to think that it may not be my best bang for the buck.

Cheers,

Thanks! lol sorry for the late reply - didn't notice this thread bumping along :)

Mostly countless hours doing research :P ... becoming a financial advisor never appealed to me as I detest sales, meaning I likely wouldn't make alot of money doing it :P

I'm making the assumption that the managed funds your talking about are the "funds of funds" offered by most major banks etc...

I did start out with a pseudo-managed fund from ING Direct - they actually have 2 seperate programs there - 1 is their "Ensemble" portfolio which is a true fund of funds (but not accessible through ING Direct Funds, only through ING advisors or other advisors/brokers), - the other is their recommended portfolio allocations for Aggressive, Moderate, Conservative, etc...

Overall, I suppose the concept isn't too bad, but I am not a huge fan of them - I suppose they can be good in limited circumstances, but some good research can easily create a portfolio allocation with similair funds that would likely be of better quality than the group in the managed set...

i.e with TD Managed, their income funds might be top notch, but the equity may be only so-so - if you use the managed series you're stuck with what they give you, but if you create your own, you can pick and choose the cream of the crop for each category in your portfolio allocation...(i.e you could pick and choose some funds from say CIBC, others from TD, others from PH&N, so on and so forth to match your portfolio design, and maximize the strengths of each company...)

Note this would not really apply to a passive-indexing style of investing, whereby one would create a portfolio out of ETF's or index funds (in which case I wholy recommend TD's e-funds lineup as their MER's are ultra-low making them really attractive esp. in small $ amts...)

I'd definately recommend getting ahold of some good reading on the topic - Gordon Pape's books are a good place to start...the PDF ebooks of his mutual fund 2004 and RRSP 2004 guide are on the quicktax CD - while the individual fund info may be a little changed now that it's 1 year later, the concepts he presents are sound and easy to understand...I think I have the PDF's around here somewhere too :)...

Hopefully this helps you out some! :D

***ADDED***

One way to go may be a Canadian or global balanced fund (depending on your objectives and wheter you require rsp eligibility)...generally they're in around a 70/30 mix between equity/fixed income and can vary from 50/50 to 80/20 depending on the different fund and the constraints placed on the manager...while it's not a "perfect" solution (ie you likely won't get too much fixed income exposure to income trusts) it may be better-performing than a managed portfolio and still suitable for so called "one stop shopping"...I think I put some specific fund ideas in a previous post for the balanced category?...

[ItzMe]

Sorry for the late reply...ItzMe, TrevorK, you guys are top-notch. Lots of good advice, I'm still trying to wrap my head around most of it.

I've done some checking, and it looks like I've maxed out my RRSP too. So it looks like I'll have to go non-registered. What kind of funds would you recommend as a good balance between returns and minimal tax?

I have some Money Market stuff from TD already, and boy does it suck. I think I make more in my ING account. (and I got the $13 signup bonus too!)

I think the important part first is to figure out your optimal asset allocation first - remember, some studies feel upto 90% of your returns can come from optimal asset allocation (of course if you choose all loosers for the funds or stocks you put into the allocation you'll still loose, but it's assuming you combine it with good research and solid performing products )...

For example many people missed out on the big bond profits of 1995-1998 (if they had been allocating properly, they would've had a portion of their portfolio in bonds to take advantage of the rally)...similarly, people may not have been burned so badly in the 2000-2002 bear market if they had a more balanced equity approach between value and growth securities/funds...

I think I touched on this before but one way you can solve the asset allocation dilema if you're looking at smaller amts to invest, is to use a balanced fund - generally they come in CDN equity/bond balanced, and global equity/bond balanced - the first is RSP eligible, while the 2nd is usually foreign content...
They will often have a mandate to maintain a healthy mix of around 70% equity and 30% fixed income, and at the discretion of the manager may fluctuate from 50/50 to 80/20 depending on the fund...

While I think one can do better by buying individual equity funds and seperate bond/fixed income funds or physical bonds etc. it's often not viable when the amt invested is less than 5000$ (or sometimes even more depending on the equity fund you choose)...

My previous posts should have some balanced funds that I was looking at before...

Once you determine your asset allocation, you can start looking at creating a tax advantaged portfolio.

If you're in the situation where you have no RRSP room left and you're running a non-registered account as well, I'm of the opinion that you should take your entire portfolio into account, RRSP & non-RRSP - shield your interest bearing investments in your RRSP (such as bonds/bond funds, mortgage funds, etc.) and try to maximize the effect of compounding (ie strip bonds etc.)

In your non-rrsp account, you can maintain your equities and tax advantaged securities such as certain income trusts ... this will allow you to take advantage of the favourable treatment on capital gains and the like while giving you some tax relief on any losses you incur (remember, losses in an RRSP cannot be deducted, and when you withdraw from your RRSP it's treated as regular income at your marginal rate - even if it came from capital gains etc.)

Dividend funds are tax advantaged as dividend income is treated favourably - many income trusts & income funds are also tax advantaged (eg. CIBC or BMO Monthly income fund returns 6 cents per month per unit, much of which is tax advantaged through return of capital, capital gains, etc. as opposed to straight interest income)...equities/equity funds are also of course tax advantaged...

Beware - you shouldn't simply overload your non-registered portfolio with tax advantaged securities if it throws your portfolio balance off-whack - remember to maintain your asset allocation closely, as you don't want to end up with exhorbatent amounts of equities and too little fixed income just to avoid paying some taxes...

A good point from Irwin Michael, manager of ABC funds:

The following is an excerpt from the ABC Perspective - July 2002 - Pg. 1


Greed, Taking Profits and Paying Taxes

I really don't mind paying capital gains taxes since this event implies that I'm making money in the stock market. Besides, as the old saying goes, the only two things in life which are a certainty are death and taxes. We can escape neither.

Over the years we have had disgruntled clients complain to us about our realized capital gains and the fact that they had to pay taxes. We explain that our job is to pick undervalued stocks and when a particular stock becomes very expensive, it is our duty to sell it, regardless of the capital gains implication. But taking profits, to many investors, is an extremely difficult discipline. For instance, if a stock becomes fundamentally overvalued and a mini-mania of price momentum has powered the stock to unprecedented levels, the average investor will usually want to hang on for a greater gain. This is where greed sets in. On the other hand, when a stock collapses, the average investor wants yesterday's price. Unfortunately, there does not exist a "money-back guarantee" or a return policy for common stocks. The stock market, after all, does not follow the Canadian retail industry practice of no questions / merchandise returns.

An important impediment confronting the average investor contemplating taking a capital gain is the phobia of paying taxes. Investors just don't like paying capital gains taxes when they consider that they have taken all the risk. Often this hesitation can lead to disastrous results. For example, over the past six months, we have met numerous prospective ABC Fund investors. Many are refugees from the high technology sector and of this group the vast majority have been longtime holders of Nortel shares. During the course of explaining our ABC Funds' investment style, the conversation inevitably shifts to the prospective client's investment experience. Invariably, many confess that they owned and held onto their Nortel shares throughout its incredible price rise to a $124½ peak and never bothered to take any profits. They rode the stock all the way up and have since experienced a tumultuous price decline to Nortel's present level of $2.25.

It is an interesting thought that from its peak price to its recent trough, we estimate that over $360 billion of value has been vapourized from Nortel shareholders' net worth. We attribute much of this to greed. In fact, when queried further, the Nortel holders would often explain: "Yes, I knew that Nortel wasn't cheap, however, I didn't want to take a capital gain. I wanted to postpone paying taxes." This point leads to an interesting quandary: the dilemma of when to take a profit in an overvalued investment versus one's natural propensity to postpone paying the inevitable capital gains tax. There is no argument that this is a very tough decision; it is often a question of how piggish an investor wishes to be.

Ultimately, we believe that investors must separate the determination of selling an overheated common stock as opposed to one's phobia of paying taxes. Both are completely separate decisions. Overall, it is our view that, as investors, we must push aside the greed aspect, stick to our investment knitting and adhere to strict buy/sell disciplines, regardless of the tax consequences.

Irwin A. Michael


Please note that none of what I say should be construed in any way as any type of specific recommendation to any personal situation, or as advice to purchase any specific securities. As always, one should always check with their advisory team before making any decisions.

[ItzMe]

Yeah looks like ItzMe put some effort into those posts.

Money market funds over the past few years of low interest rates have underperformed "high-rate" savings accounts such as ING, the MER is the main reason why. With rising rates cash investments will get better but don't expect much from a money maket fund. MMF's are shortterm cash parking spots while you wait to buy something else. Guaranteed not to lose a lot though.



Definately a good point - I think one of the better ones, the Altamira T-Bill fund came in a quarter point below ING direct for the year...definately pitiful...but remember, even with rates rising, historically banks (even ING!) have been slow(er) to raise their savings acct. rates, so MMF's may yet be worth another look...keeping the MER under .5% is critical (but hard to do at most major banks...unless you happen to have 3 million sitting around in which case CIBC will put it into a MMF with a MER so small you'll need a magnifying glass to find it! :D)...


Dividend funds tend to produce consistently good returns with risk lower than the general market, and have some tax benefits over capital gains. However, in a rising rate environment they tend to underperform, same can be said for income trusts and the monthly/high income fund group. Already having an ING account you may want to look at their Dividend Income Fund it's one of the best in the category. This is not a recommendation simply a suggestion, confer with your financial advisor or do your own research before making a decision.


Good point - many dividend funds produce healthy tax advantaged returns...

But be cautious - there's a major difference between "true" dividend funds that invest the majority of their assets into safer securities such as preferred shares etc. and "pseudo" dividend funds that simply amass common stock of banks and utilities...not only are the pseudo funds more risky by nature as they invest in common stock (and therefore are no more than an equity fund), they may also be hit hard by a rising rate environment as generally banks/utilities tend to get hurt during that time...they also have added concentration risk as they may not be as diversified as some other dividend or equity funds...

I'd hesitate to allocate too much to just a single class of fund (dividend or any other) - balance is key...putting all the eggs in one basket can be high-risk...

On interest rates I suppose there is the entire debate about just how far they'll go with oil so high, but assuming we do continue the rate hikes, not all Income trusts will be affected adversly - certainly interest rate sensative ones such as REIT's and the like will be, but others that are more cyclical in nature such as business trusts may tend to be more immune to interest rate movements (although some like the SLK pulp fund have their own inherent business risks that can be quite high...although they do compensate one handily with 13.x% returns! :))...

[TrevorK]

Sorry for the late reply...ItzMe, TrevorK, you guys are top-notch. Lots of good advice, I'm still trying to wrap my head around most of it.

I've done some checking, and it looks like I've maxed out my RRSP too. So it looks like I'll have to go non-registered. What kind of funds would you recommend as a good balance between returns and minimal tax?

I have some Money Market stuff from TD already, and boy does it suck. I think I make more in my ING account. (and I got the $13 signup bonus too!)

One family I really like are the Acuity funds.

The objective of their High Income fund is:
The investment objective is to provide a high level of current interest and dividend income by investing in a diversified portfolio of interest bearing, dividend-paying or distribution-paying securities.

The objective of their Growth/Income fund is:
The objective is to achieve a balance of current income and long-term capital appreciation, by investing in a diversified portfolio of dividend-paying and/or distribution-paying equity and income securities.

Both of those two appear to be paying in dividends.

If you are more concerned with instant gains, you can become riskier and invest in sector specific funds, like Energy - if you are willing to actively manage them.

[ItzMe]

Isn't Acuity formerly the "Clean Environment" brand? Are they available no-load?

After they changed to Acuity, seem to have turned around, a definate + :)...
Good for socially responsible investing; their panel of scientific advisors means a higher than average MER (I think its 2.8x% on the high income fund) - offset by the higher than average returns though :)...I don't think it's pure dividend income as it seems to be split between t-bills, bonds, income trusts, and a small portion of common shares, but alot of it should be tax deffered...when I looked a while back it was 8 cents per unit payout (almost double that of TD's monthly income fund at 4.25c now) which is always nice :)...

AFAIK if you have 150K minimum investment you can participate in Acuity's pooled funds meaning no sales fees & lower MER's...

[surreybc]

index funds or etfs are the only way to invest in stocks. managed mutual funds do not increase return but do increase risk. a govt study(stromberg report) estimated that you end up with 40% less in retirement because of hidden expenses in mutual funds. there is no secret way of getting a high return on stocks or bonds without taking on unacceptable risk. in fact, many of the smartest finance researchers would tell you that even the most conservative bonds and stocks are still too risky for individual investors.

The wealthy boomer site hosted by jonathon chevreau is a very good canadian financial site. It is only good because of the presence of byloselhi.

http://24.222.18.250/w_boomer/forum/login.cfm

(click on guest button)


http://www.bylo.org/ilinks.html

byloselhi has his own site. he is a computer programmer but he knows more about personal finance than anyone in canada. stock brokers come to his site to learn about real return bonds that bylo introduced to canada. bylo does this as a hobby and gets nothing for it. jon chevreau and others quote him in their column. i have a degree in economics and accounting and bylo knows more than me.

[TrevorK]

Isn't Acuity formerly the "Clean Environment" brand? Are they available no-load?

After they changed to Acuity, seem to have turned around, a definate + :)...
Good for socially responsible investing; their panel of scientific advisors means a higher than average MER (I think its 2.8x% on the high income fund) - offset by the higher than average returns though :)...I don't think it's pure dividend income as it seems to be split between t-bills, bonds, income trusts, and a small portion of common shares, but alot of it should be tax deffered...when I looked a while back it was 8 cents per unit payout (almost double that of TD's monthly income fund at 4.25c now) which is always nice :)...

AFAIK if you have 150K minimum investment you can participate in Acuity's pooled funds meaning no sales fees & lower MER's...

Yeah - Acuity has the "ethical" funds, but I'm not recommending that he invest in those ;)

As my financial planner says jokingly, "...don't you want them to cut down the trees so that there is paper to print all your money you'll make on?"

Yes - their pooled funds need 150K, however their non-poolled funds only need $500 - they just have a slightly higher MER.

As well, there are no sales fees - at least through my planner (As I recently bought some Acuity).

[ilfsoy]

Isn't Acuity formerly the "Clean Environment" brand? Are they available no-load?

Acuity manages the "Clean Environment" and "Social Values" funds, only 6 funds make up these two groups. The rest are regular funds.


AFAIK if you have 150K minimum investment you can participate in Acuity's pooled funds meaning no sales fees & lower MER's...

That's correct. MERs on the pooled funds are much lower meaning better returns. Some discount brokerages don't charge a front fee or give a DSC rebate (2.5-3%) which applies to the non-pooled funds as well.

[ItzMe]

cool, thanks for the info :) I had thought all of the funds through Acuity were ethical or socially responsible or whatever :) good to know info :) thx!

[quanta]

I'm going to go back and read a bit more on this subject...I can barely comprehend what you guys are saying!

How about this for a good question: who would you all recommend as the best in value and personal online fund management in allowing you compile your own portfolio?

And is there any point in me sticking with TD? I went into a branch today, and they wouldn't even give me a prospectus. >:(

[ilfsoy]

I'm going to go back and read a bit more on this subject...I can barely comprehend what you guys are saying!

How about this for a good question: who would you all recommend as the best in value and personal online fund management in allowing you compile your own portfolio?

And is there any point in me sticking with TD? I went into a branch today, and they wouldn't even give me a prospectus. >:(

Experience and knowledge + research and a little luck are certainly an asset to investing (and pretty much everything else too).

Are you looking for a brokerage account - discount? BMO Investorline is #1 overall, a few others are cheaper, it really depends on what type of investor you are and what and how much you trade.

A financial advisor may be a good idea, best to find someone local that comes well recommended and fits your style. FA's are best suited to people with over $100k and little time or interest in managing their own money.

The beginner with little cash is best to stick to ETF's or mutual funds, for this it's easiest to deal with one of the big banks and it doesn't matter a whole lot which one. Several of the fund companies will hold your account with them if there is one particular fund company that you think can serve all your interests well. Some of the top fund companies have been mentioned earlier in this thread, but keep in mind only the bigger ones allow for full diversification. Some top fund companies in no particular order include PH&N, Mawer, Saxon, Chou, Acuity, Montrusco Bolton, Beutel Goodman, ABC, McLean Budden, Franklin Templeton, AIM Trimark, TD, etc.

[TrevorK]

I'm going to go back and read a bit more on this subject...I can barely comprehend what you guys are saying!

How about this for a good question: who would you all recommend as the best in value and personal online fund management in allowing you compile your own portfolio?

And is there any point in me sticking with TD? I went into a branch today, and they wouldn't even give me a prospectus. >:(

When you say fund management - you are referring to a place that offers online trading/research?

I've just used CIBC Investor's Edge before I got a Financial Planner - worked perfect for me. It was free since I had over $15,000 in it. The commission wasn't bad on stock trades either....

Personally, I think that using their research, combined with that of other sites (Like Morningstar.ca) is perfect. I'm sure that any of the big banks can offer you what you're looking for.

[ItzMe]

I'm going to go back and read a bit more on this subject...I can barely comprehend what you guys are saying!

And is there any point in me sticking with TD? I went into a branch today, and they wouldn't even give me a prospectus. >:(


How about this for a good question: who would you all recommend as the best in value and personal online fund management in allowing you compile your own portfolio?


I personally like TD Waterhouse discount brokerage for a NON-registered account for the following reasons:

- All of their in-house TD funds are available no-load for purchase online.
- If you're a fan of indexing for equities or bonds, you can use their e-funds lineup with big MER discounts.
- In addition to the in-house TD funds of which many are fairly decent, you can also access the following companies as part of their "No Transaction Fee" program which allows you to aquire no-load funds at "no load" - compared to other brokerages like CIBC Investor's Edge that charges AFAIK 40$ for each non-CIBC no load fund purchase.
List of funds eligible available at: http://www.tdwaterhouse.ca/mutual/mfamnl.jsp
Fee breakdown available at:
http://www.tdwaterhouse.ca/mutual/mfcs.jsp

TD Canada Trust offers the "Asset Accumulator Account" both registered and non - I wouldn't recommend it simply because they charge a 25$ annual fee for the non-registered account for the priveledge of purchasing mutual funds & fixed income - you can do this with TD Waterhouse and purchase equities for no annual fee.

Be aware that for non-registered accounts there is a 15$ maintenance fee per quarter for accounts less than 5000$ - BUT - this is waived IF:

1. You register for "e-services" - (your prospectus, trade confirmations, and monthly statements are in PDF online).
OR
2. You complete 2 or more comissionable trades in the previous quarter (but you may want to double check this to be sure)

As far as I know the other bank brokerages (except RBC Action Direct?) also charge this fee for small(er) accounts (BMO flatly states they don't open the account for under 5000$ clients) - again AFAIK TD is the only one to waive the fee if you utilise the free e-services feature ...

For registered (RRSP) accounts, you need 25,000$ account balance to waive the 125$ annual fee, but if you don't plan on holding individual stocks, you can pay just 25$ per year to hold mutual funds / fixed income etc. (CIBC also offers this more limited account for 25$ as opposed to the 100$ annual fee, with a 15,000$ minimum for the fee waiver - does not apply to Imperial Investor accounts which have a bit of a different comission/billing structure)...

Remember, you can generally acquire funds on a no-load basis from the selling company themselves as opposed to paying a fee to TD for funds not part of their no-transaction fee program. (an example would include Phillips, Hager & North - TD will charge a fee of several hundred dollars for an investment of 25K, PH&N will charge you nothing to open the account)...just something to keep in mind.

If you find yourself spreading accounts over 2 or 3 different places (ie your brokerage account and a couple of mutual fund co's) don't despair - it's actually fairly easy to do record keeping with something like Quicken - while you can't download your Waterhouse account directly into the program, what you can do is enter transactions, and track your portfolio "as a whole" (ie get a pie chart showing allocations for ALL your accounts) - this way you can see your entire asset allocations, and even enter targets so you can see what you need to adjust...very handy IMHO :)

Hope this helps!

[TrevorK]

- In addition to the in-house TD funds of which many are fairly decent, you can also access the following companies as part of their "No Transaction Fee" program which allows you to aquire no-load funds at "no load" - compared to other brokerages like CIBC Investor's Edge that charges AFAIK 40$ for each non-CIBC no load fund purchase.


Just a correction - CIBC does not charge a fee for buying a no-load mutual fund outside their family.


Remember, you can generally acquire funds on a no-load basis from the selling company themselves as opposed to paying a fee to TD for funds not part of their no-transaction fee program. (an example would include Phillips, Hager & North - TD will charge a fee of several hundred dollars for an investment of 25K, PH&N will charge you nothing to open the account)...just something to keep in mind.


Good point - you can just go to the fund's themselves, and either they can do it or point you to who they recommend (Which usually means the lowest fee).

[ItzMe]

Just a correction - CIBC does not charge a fee for buying a no-load mutual fund outside their family.


My mistake - misread the info in the globe & mail survey.

Fee stated on Investors Edge site says that there is a 25$ fee to sell non-CIBC no-load funds.

https://www.onlinebrokerage.cibc.com/Customer/en/home/AllAboutUsFees.jsp#null

Equity trading also seems to be cheaper @ CIBC - 25$ for a market order vs. 29$ @ TD Waterhouse (but I think CIBC charges 28.95 as opposed to 25 for limit orders...)

I remember E-Trade Canada a while back was going to offer the "F" class funds for sale on their site (the ones for the fee only advisors that don't pay a trailer) but I think that fell off the wayside?...

[quanta]

I will stick with TD Waterhouse WebBroker. Seems to work okay, although I noticed they will charge a transaction fee if I buy/sell any RBC funds. :(

For the other novices in this thread, here's a nice graph describing all the fund types. Index funds are subclasses of each fund. Not sure where dividend and income funds come in, though.

http://www.silentblue.net/workshop/mutualfunds_ror.gif

Some more questions:

1. Is there any portfolio difference between TD eFunds and "I" funds, other than the MER? They seem the same, but the TD quicktake reports have different star ratings. :?:

2. What is defined as a "tax-inefficient fund"? And do distributions almost always happen at the end of year (or fiscal end of year?)?

3. Any comments on loading? Is there any advantage of taking front/back/low load funds over no-load funds? Will going cheap cost me in the long run, as it were, because I will be missing out on high performers?

P.S. ilfsoy, the ING Dividend fund *does* look good - but it's so new, it's hard to say if it can keep up the momentum.

Thanks to all. Let's keep this thread running, I think it can be a great learning experience for everyone. And can be more profitable than Mentos or Staples PMs, yes? :p

[ilfsoy]

1. TD's efunds and regular "I" funds are the same. The only difference is the MER (saves them money by only doing it online). The efunds will slightly outperform the others because of the lower MER which could result in a higher star rating.

2. Tax efficiency is variable, income funds etc, that pay out distributions are more favourably taxed than capital gains. Distributions vary by fund, some are monthly, others are quarterly, the remainder yearly (usually is Dec.). Need to check the fund info to be sure. Paid more frequently gets the chance to compound if reinvested.

3. There is absolutely no benefit to a load fund over a no load, except the obvious that it may be a better fund. Load funds pay trailer fees to brokers increasing fund costs. If you're confident the fund is a long time buy then go with the DSC since in a few years there will be no cost, and brokerages such as BMO Investorline give DSC rebates up to 3% up front. Shorter term investment favours front load many brokers now sell for no cost, but no rebate either. Low load etc. is best avoided as fees are worse longterm. I own five funds MER was only a consideration if the choices were virtually identical in all aspects. That said low fee is always the best choice because you don't need to outperform all the time.

The ING Dividend fund is very good, but note it is really a blue chip large cap equity and not a true dividend fund. Yield is very good by comparison so it is the one on my watchlist currently.

[ItzMe]

Some more questions:

Thanks to all. Let's keep this thread running, I think it can be a great learning experience for everyone. And can be more profitable than Mentos or Staples PMs, yes? :p


I will stick with TD Waterhouse WebBroker. Seems to work okay, although I noticed they will charge a transaction fee if I buy/sell any RBC funds. :(


As far as I know RBC Funds (formerly called Royal funds?) are part of TD's No-Transaction-Fee program for purchasing - but there is a 25$ fee to sell their no-loads...you can always just walk into any Royal Bank branch and purchase any RBC funds that you wanted to get in on ... (should phone TD to be sure before making a decision based on that though :D)...


2. What is defined as a "tax-inefficient fund"?

A bond fund may be a good example - alot of the income will be interest income as opposed to capital gains (but there are some generally)...since interest income is taxed at your marginal rate, it's "tax inefficient"...contrast to a dividend income fund whose income is taxed at a prefered rate by the gov't...


the ING Dividend fund *does* look good - but it's so new, it's hard to say if it can keep up the momentum.


Remember, past performance is no indication of future gains :P ... as ilfsoy said, ING Dividend is similair to RBC Dividend and the like in that it's a blue-chip equity fund with large portions of common stock that pay dividends...therefore disguising itself as a dividend fund (and often the returns represent capital gains as opposed to dividend income as is the example in the RBC dividend fund)...as such these types of funds should form part of your equity as opposed to income %ages...


A "true" dividend fund example could be something like the Signature Dividend Fund ...

[ilfsoy]

As far as I know RBC Funds (formerly called Royal funds?) are part of TD's No-Transaction-Fee program for purchasing - but there is a 25$ fee to sell their no-loads...you can always just walk into any Royal Bank branch and purchase any RBC funds that you wanted to get in on ... (should phone TD to be sure before making a decision based on that though :D)...

"FundSmart - Transaction Fee (TF) Mutual Fund Program" includes Royal.

"No commissions apply to BUY or SWITCH from a wide range of eligible funds. A $45 redemption fee will be charged on all sell transactions in this case, including Money Market funds. A short-term redemption fee may apply (see below).

Receive a discount of 25% off the $45 redemption fee when using WebBroker, TalkBroker or TeleMax."

source: http://www.tdwaterhouse.ca/mutual/mfcs.jsp

[ItzMe]

"FundSmart - Transaction Fee (TF) Mutual Fund Program" includes Royal.

"No commissions apply to BUY or SWITCH from a wide range of eligible funds. A $45 redemption fee will be charged on all sell transactions in this case, including Money Market funds. A short-term redemption fee may apply (see below).

Receive a discount of 25% off the $45 redemption fee when using WebBroker, TalkBroker or TeleMax."

source: http://www.tdwaterhouse.ca/mutual/mfcs.jsp

Apologies, I think I was thinking of CIBC when I said 25$ :P ... 33.75$ is what TD would charge through web-broker @ time of redemption for an RBC no-load. (may be worth the convenience I suppose if there's a solid RBC fund that one wants (I was looking at the O'shuagnessy line but figure I'll probably just open an account at RBC too as its free :P)...quicken makes it pretty easy to compile all the accounts...

[quanta]

Added my cool graph in my previous post. Where do income/dividend funds fall in this graph? Are they also subclasses of these types? Comment away.

[ItzMe]

Added my cool graph in my previous post. Where do income/dividend funds fall in this graph? Are they also subclasses of these types? Comment away.


I don't quite agree with the graph's position that Canadian Equity is less risky than US equity and that US equity is less risky than Int'l equity especially without regard to Currency protection/hedging etc...

Also it makes no differentiation between asset classes and the like...for example a US Small Cap equity fund is likely more risky than a Global Large Cap fund ...

In any case, I'd say pseudo-dividend funds fall in with Canadian Equity, while "True" dividend funds may fit more between the balanced and bond fund category....income funds (assuming you mean the popular "Monthly Income funds" and the like) are generally classified in with balanced funds although they have different types of risks (ie income trust exposure may be more interest rate sensitive than the equity portions of traditional balanced funds...)...

What about extremely rate sensative bond funds like Long-Term bond funds, or "Junk" bond funds that have high credit risk...again I don't think they all should lump in with the generic "Bond fund" label that's been applied...

But I don't really like the graph so I can't say for sure w/ regard to positioning :P :D...

[basis]

I have been reading the thread and I must congratulate ItzMe on well reasoned and good advice worthy of all RFDers to think about.

I only have a few things to add:

You need to decide what kind and where to get financial advice. The preferred ranking is below:
1. Yourself or a trustworthy relative. Only you or your relative will have your best interest in mind and have no conflict of interests.
2. A fee-only planner. If you have enough money $30k+ to afford a planner.
3. A free advisor from a bank or mutual fund. You usually get low quality from a bank. The only advisor from a financial institution I would recommend is Altamira or Philips Hager and North ($25k min.).
4. A commission based financial planner or broker. Be aware that the financial planner gets compensated for steering you to front or rear load mutual funds that have higher fees (MERS 2.5%+). The higher fees are needed to pay the financial planner the trailer fees when you hold your funds with the mutual fund company.

There is no free lunch. If you do it yourself you need to spend time and research to figure out your ASSET ALLOCATION strategy and then figure out which mutual funds or stocks to buy to fit the strategy. It is extremely important that you follow the Asset Allocation Strategy. If you don't have time to do the asset allocation then you can go to a financial institution get free advice which may or may not be any good for your specific circumstances. Or to a financial planner who will give you good advice but stick you into a high fee fund so that can get a commission for offering you advice. You also go to a fee-only financial advisor who will take your specific needs and build a lower cost portfolio. The route you take is yours.

If you want to learn more about investing and mutual funds then check out these links.

www.bylo.org Excellent resource
www.altamira.com Okay advice and reasonable mutual fund MERS
www.tdwaterhouse.ca Good online discount broker with a good new Bond offering
www.phn.com The best mutual fund company in Canada. Minimum investment is $25k per fund.
www.etrade.ca No-cost mutual funds for almost all mutual funds including PHN and Beutel Goodman but a crappy Bond offering
www.iunits.com If you have over $50k to invest buy the IUnits and forget about the market with ultra low MERs. The only weakness in the lineup is no Corporate Bonds and No Resource iunits unless you mix in the Gold and Energy iunits but its still deficient in the other resource stocks like forestry and mining.

Answers to a few questions below.

2. A tax inefficient fund is one that pays out its capital gains or interest in a continuous basis. The most tax efficient fund one who doesn't pay out taxable capital gains or interest because it only invests in stocks and never sells its stocks to trigger a capital gain.

3. You should never buy a mutual fund with a load charge unless you really like the mutual fund portfolio that cannot be found anywhere else without a load charge. If you are going through a commisioned financial planner and you are offered a front or back end load, I would suggest the back end load as long as you hold it for at least 3 years. Back end load charges usually disappear after about 7 years.

I don't like the ING funds the MER is too high. You can do better with TD or Altamira or CIBC. Or the Iunits.


I will stick with TD Waterhouse WebBroker. Seems to work okay, although I noticed they will charge a transaction fee if I buy/sell any RBC funds. :(

For the other novices in this thread, here's a nice graph describing all the fund types. Index funds are subclasses of each fund. Not sure where dividend and income funds come in, though.

Some more questions:

1. Is there any portfolio difference between TD eFunds and "I" funds, other than the MER? They seem the same, but the TD quicktake reports have different star ratings. :?:

2. What is defined as a "tax-inefficient fund"? And do distributions almost always happen at the end of year (or fiscal end of year?)?

3. Any comments on loading? Is there any advantage of taking front/back/low load funds over no-load funds? Will going cheap cost me in the long run, as it were, because I will be missing out on high performers?

P.S. ilfsoy, the ING Dividend fund *does* look good - but it's so new, it's hard to say if it can keep up the momentum.

Thanks to all. Let's keep this thread running, I think it can be a great learning experience for everyone. And can be more profitable than Mentos or Staples PMs, yes? :p

[ilfsoy]

Good post basis.

Your comment about tax efficiency brings up a good point about a fund's portfolio turnover, it's generally a good idea to have a lower turnover ratio as it is more tax efficient and creates less transactions costs for the fund to make up. Some funds by nature will be higher turnover so it's not a simple comparison of numbers.

ING actually compares favourably to Altamira on MER's, however Altamira is no load. Where Altamira is better than average is on the index funds which I believe you were referring to. However TD's efund MER's are even lower.

[ItzMe]

I agree with basis that bank planners unfortunately can be pretty poor in their advice :(

I've dealt with CIBC's Imperial Service arm, and the perks they can offer can be good, but the advice is minimal and is generally very limited to the specific products offered by the bank...(which is why I don't bother to take advantage of it :P)...

A broker from one of the bank brokerage's may be more helpful but they will generall want a high(er) net investment to take someone on as a client (100k and up usually)...TD Waterhouse & CIBC Wood Gundy both offer brokerage services that I'd recommend, but again be aware that they are comission driven (unless you get a managed portfolio for a flat fee but those are generally 500k and up AFAIK...)

I'd definately recommend a fee-only planner by far - they're not cheap but well worth it IMHO if you need help...I hesitate to approach friends and relatives just because of the fact that if, say my brother/sister/father/mother or whatever gave me some financial tips that for whatever reason didn't work out, I wouldn't want it to come between us ... but then again my cousin and I trade tips regularly but we keep it to our "play" accounts and have strict rules on not blaming each other ;)...

A fee-only planner can help you with all aspects of your financial planning, and depending on the situation(s), may involve your lawyer, accountant, etc. if and as applicable...they can help you with issues ranging from specific investment advice / portfolio management, to insurance and estate planning depending on their qualifications...

Advocis has published some tips here on finding an advisor, as well as some questions you should ask when interviewing them...

http://www.advocis.ca/display_document.htm?token=public&id=2227&isdoc=1&catid=153#choosing

Macdonald, Shymko & Co. are a planning firm based out of Vancouver that I've seen recommended...you can check 'em out here:

http://www.macdonaldshymko.com/

If your in GVA it may be useful - they advertise that you can utilise their services even if you are not from Vancouver, but you would probably be better off using somebody local to you (imho) as you can see them face to face whenever you need to ...

***EDIT*** n/m I think I'm the only poster in this thread from GVA :P ... but family / friends may be able to give you some references for places in GTA and the like? ***/EDIT***

Finally, I'd stay away from firms like Edward Jones...I haven't dealt with them personally, but I haven't heard the greatest things about them...very sales / comissions driven, often not the best educated/trained...but sometimes it can be the only choice if one doesn't have the resources to get a fee-only planner ...

Good luck! :)

[basis]

TD Bank can be a jerk sometimes. Many years ago I also requested a prospectus from TD Bank and was refused. :evil: Note that before any mutual fund sale is completed the purchaser is supposed to understand the prospectus details including fund objective.

It was many years after this when I came back to TD. I have many experiences with different banks over the years and come to the same conclusion: they all suck some are worse than others.

After doing research on the different discount online providers I conclude that there is none with the best price, breadth of services, and online tools. I mentioned a few before none have the ultimate combination of no-fee mutual funds, good initial offering bond selection, online reports, online research tools, and online status.

Here are some comments.

BMO: Good status portfolio updates with book value and market value and gain, poor bonds, good stock tx costs, poor/average research, good online GIC rates, accountlink allows you to write a cheque on the brokerage account thus making tx easy to move funds around to a different bank

ETrade: Online web site needs updating it hasn't changed much in many years, good research, recently added cost vs market value, the suckiest hard copy account statement of all the discount providers, okay bonds but no new issues, can buy almost any mutual fund with no fee including PHN and Beutel Goodman and the standard AIC, AGF, Mackenzie, etc.

TD Waterhouse: probably the best out of there but still difficient in some areas such book value to market value, no quick online GIC purchases, the no-tx fee mutual funds is better than before but no PHN and Beutel Goodman
HSBC: on paper the offering looks good with no fee mutual funds, the Merril Lynch reports are the best but they may not offer it free in the future, very good online linkage of bank, credit card, and brokerage accounts on one screen with easy transferring of funds

If TD added online GIC purchases, added more bonds in the inventory, added better book vs market value status, and had a true no fee MF list like ETrade it would be the ideal online discount brokerage.

Almost all discount brokers offer good prices on stock purchases so there is little differentiation unless you are a heavy trader. The value comes in the differentiation among the other services that you will require.

Note: now you don't need to get a hard copy of the prospectus from the bank since you can read it online.


I'm going to go back and read a bit more on this subject...I can barely comprehend what you guys are saying!

How about this for a good question: who would you all recommend as the best in value and personal online fund management in allowing you compile your own portfolio?

And is there any point in me sticking with TD? I went into a branch today, and they wouldn't even give me a prospectus. >:(

[ItzMe]

TD Waterhouse: ---snip--- the no-tx fee mutual funds is better than before but no PHN and Beutel Goodman ---snip---


AFAIK PH&N funds are available through TD Waterhouse, however there is a hefty fee charged by TD to purchase them on the order of several hundred dollars for the 25K minimum investment - one would likely be better off opening an account with PH&N directly ...

[basis]

You correct. But the result is the same. I asked a TDW representative if PHN was available and he said it's on a special list and costs a lot of money to get a PHN tx purchase. It's so excruciatingly painful to find and purchase the PHN MF that its not really feasible to buy it from TDW. His recommendation was to go to PHN to open up an account.


AFAIK PH&N funds are available through TD Waterhouse, however there is a hefty fee charged by TD to purchase them on the order of several hundred dollars for the 25K minimum investment - one would likely be better off opening an account with PH&N directly ...

[skywalker]

Great. I learn a lot from these posts.
I noticed there are much better return on Energy Resource mutual fund. Considering natural resource price is going up year by year. Any suggestion on this kind of funds?
Thanks.

[ItzMe]

Great. I learn a lot from these posts.
I noticed there are much better return on Energy Resource mutual fund. Considering natural resource price is going up year by year. Any suggestion on this kind of funds?
Thanks.

Sector / Specialty funds are by nature more volatile and risky than broad-based equity funds as they foccus on one sector alone...generally I'd prefer to keep them to a lower percentage of an overall portfolio (say 10 - 20% at most or so), and I'd also prefer them in a non-registered account - gains will be taxable, but losses can be claimed for tax relief as well which makes it a bit better considering the volatility...

Resources, Oil & Gas, etc. have had an amazing run this year...whether one feels they'll continue that run into 2005 is up for debate...there's no guarantees! (China's demand may go down, oil prices may stabalize at a lower level, etc. etc. etc)

There's plenty of different sector funds out there, many of which do really well, many of which not so much - pretty much all the resource sector funds did well this year, but make sure you do your research - some may have gone up by 20%, others by 40%, etc. all depending on the specific choices of security they made...good active management is generally important to maximize the returns - otherwise a passive strategy such as ETF's or even Oil & Gas income trusts may be more suitable

Many actively managed sector funds in particular can have higher MER's...of course it's not the be all and end all as shown here in a Q&A with relation to the Sprott Gold & Precious Minerals Fund):...


Q – You recommend buying the Sprott Gold and Precious Minerals Fund on the grounds that gold is in a "new uptrend". I checked this fund on the Globefund site and found its MER to be a horrifying 10.2%.

With a bit of searching, I found the exchange-traded iUnits Gold Fund (TSX: XGD). Unless the management of the Sprott fund is so enormously shrewd that it can outperform the index fund by 10% per year, the index fund seems a preferable way to profit from the general trend in gold prices. Any comment? – K.W.

A – You raise a good point so let’s take a close look at these two options.

The iUnits S&P/TSX Capped Gold Fund is run by Barclay’s Global Investors. It has an MER of 0.55% and is supposed to track the S&P/TSX Capped Gold Index, but you need to probe more deeply here. The index itself consists of 20 stocks. But the iUnits fund has only 10 stocks in it. Moreover, 48% of the portfolio is invested in two companies: Barrick and Placer Dome. Both companies have been laggards for some time and, while that should not go on forever, the result has been to hold back the performance of these units.

The Sprott Gold and Precious Minerals Fund was created in November 2001 and is actively managed. It does indeed show an MER of 10.2% right now, but that is inflated by the performance bonus earned by the managers last year. This bonus is only paid when the fund exceeds specific benchmarks. Those benchmarks won’t be met this year, so the MER will be much lower in 2005.

You say the Sprott fund would have to outperform the iUnits by 10% a year to make it the better choice. Unfortunately, we don’t have a long history to compare but let’s look at the results so far.

In 2002, the Sprott fund returned 116.2%, after all fees. The Gold iUnits returned 42.8%. Sprott advantage: 73.4 percentage points.

In 2003, the Sprott fund gained 72.4% while the iUnits were ahead 13.8%. Sprott advantage: 58.6 percentage points.

So far in 2004, the Sprott fund shows a loss of 16.5% while the iUnits are down 6.3%. Advantage iUnits: 10.2 percentage points.

As you can see, in years when bullion prices were rising sharply, the Sprott fund outperformed by huge margins because the managers were not constrained by being forced to put much of their capital into Barrick and Placer Dome. In an off-year, such as we have experienced through most of 2004, the heavy weighting on those more conservative gold stocks works to protect the downside risk of the iUnits.

Since we expect gold to continue strong for a while, that makes the Sprott fund the better choice in our estimation – especially since the MER will be much lower next year. – G.P.

[skywalker]

Sector / Specialty funds are by nature more volatile and risky than broad-based equity funds as they foccus on one sector alone...generally I'd prefer to keep them to a lower percentage of an overall portfolio (say 10 - 20% at most or so), and I'd also prefer them in a non-registered account - gains will be taxable, but losses can be claimed for tax relief as well which makes it a bit better considering the volatility...

Resources, Oil & Gas, etc. have had an amazing run this year...whether one feels they'll continue that run into 2005 is up for debate...there's no guarantees! (China's demand may go down, oil prices may stabalize at a lower level, etc. etc. etc)

There's plenty of different sector funds out there, many of which do really well, many of which not so much - pretty much all the resource sector funds did well this year, but make sure you do your research - some may have gone up by 20%, others by 40%, etc. all depending on the specific choices of security they made...good active management is generally important to maximize the returns - otherwise a passive strategy such as ETF's or even Oil & Gas income trusts may be more suitable

Many actively managed sector funds in particular can have higher MER's...of course it's not the be all and end all as shown here in a Q&A with relation to the Sprott Gold & Precious Minerals Fund):...

Great help. Thank you.

[crazyboie]

Bump for a great thread! Much thanks goes out to ItzMe, TrevorK, ilfsoy and basis (as well as others)

Well to be honest, since this thread started, I haven't done much :o My RRSP is still in a managed fund with TD Canada Trust and it's pretty much hovering around the same point as it was 6 months ago...

I'm also sort of caught in a rough place... People around me are saying that I'd be better off investing my money in a property rather than funds. Obviously I must make the decision on which route I should take, but can funds provide me with the same sort of gain that a property will?

I rent and will probably not need to move for atleast another 2 years..and with the way the prices of homes are right now, I'm not sure if it's a good strategy to invest in real-estate right now...

I guess it's because I haven't done the proper asset allocation with my portfolio (Which is my goal this year - You guys seem to push it pretty hard..must be critical :) ) that I haven't really 'gained' much.


The other question I had, when buying a home, is it a great idea to use your RRSP and/or Non-RRSP Mutual Funds to pay off your mortgage/deposit? People at the bank seem to think so..(as they push it to a great extent ..)

I will be speaking with a financial advisor..but your thoughts and opinions are always welcomed!

[Jovi]

One Fund

Sprott Canadian Equity.

Buy it with an up front load fee.
Then you are laughing all the way to the bank.

Its the #1 fund in all category rankings from 6 mts to 5 yrs.

[stevethewheel]

Lessee...short term, less than $10K to start, risk is okay as long as I perform a bit better than the index.

And here is where most of the difficulty is for your final investment decision. Meaning when you actually put your money down. Being OK with risk as long as it outperforms..... Risk means that you cannot be gauranteed to outperform, especially in the short term.

Which index specifically do you mean? Inflation? Prime interest rate? TSE300? It matters because it will affect the types of investments you will choose. (for instance interest rate is never negative, but TSE300 could be)

And yes, sometimes chucking your money into an ING account is the best thing. When you look at a fund's performance chart and see the -5 or whatever negative return then your money would in fact have been better off in a savings account. Those were years when the investors were realizing their risks, and if they were short term investors they were fuming.

In my humble opinion if your entire investment portfolio can return an average of +3% over GIC rate on a 5 year span then you are doing really really well.

[tbayboy]

Bit of a hijack but after reading lots of great info here I wonder if anyone has recommendations for FAs in the GTA area? Currently all my investments are with nesbitt burns (BMO) and I'm not very happy with the involvement I'm getting (flat rates and the token once a year BUY RRRSPs email). My friends aren't helpful (and I thought I was bad at saving) so what says the RFD crowd?

Anyone have any good experiences to share? Sitting on about 50K right now at nesbitt and $100K year salary if that helps you with ballpark investment numbers. I'm terribly lazy so I'm willing to pay more for someone who will kick my @ss and 'go the extra mile' for me since otherwise I'll forget to do it myself :).

Thanks in advance

[ItzMe]

I'm also sort of caught in a rough place... People around me are saying that I'd be better off investing my money in a property rather than funds. Obviously I must make the decision on which route I should take, but can funds provide me with the same sort of gain that a property will?



Real-Estate has had a great run up in the last few years - whether it can keep going up or will come down gradually or is there a bubble waiting to burst etc. is a matter of debate amongst top economists :P...

The #1 issue I'd have with going real-estate is that you're locking yourself in to one investment - real-estate and therefore not diversified...(but don't get me wrong - plenty of people have made fortunes doing nothing but real-estate so it may not be a bad choice :P)

Can funds provide you with the same sort of gain? Absolutely - and more often than not, properly selected and allocated, they could provide you with a better gain than property can ... but it all depends on the risk you are willing to take, the $ commitments you can make, etc.!

I'd use the example of a close family member of mine - he's heavily involved in real-estate from purchasing rooming houses to developing condominiums - most of his net worth is tied up in real-estate and related ventures with comparatively small amounts in the markets - over the last 10 years he's done extremely well for himself with it ... I've read of others who are the opposite - one senior Vice President at CIBC world markets rents a townhouse in Toronto because he doesn't want to tie up any money in real-estate - he feels that anyone who puts their money on it instead of the markets is foolish! So there's 2 extremes - I'd go somewhere in the middle - real-estate is good, but don't jump on the bandwagon just because everyone tells you to - do your homework, find what's right for you, and balance it with the rest of your portfolio - everything in proportion I say ! :)


I rent and will probably not need to move for atleast another 2 years..and with the way the prices of homes are right now, I'm not sure if it's a good strategy to invest in real-estate right now...



I suppose it depends on the area - I felt the same way about Vancouver where I am 2 years ago - now I'm kicking myself for not plunking some $ down on a condo or two to flip them ... but I'm no economist or expert at reading the trends - I've got a long way to go and learn, and I don't know what the market will do as to correct itself, stay steady, keep rising, etc!...my feeling is that property for investment will be tougher now if you plan on purchasing and renting out to people - vaccancy rates seem to be rising across the board meaning landlords will have to work harder to attract tenants and the like so rents may be below your mortgage cost, etc...so in that respect it can be tough I suppose...if your purchasing for yourself, some say is that it's never a wrong time (well almost never) but you should be willing to stick with it for several years - if you're patient and devote a few months to house-hunting you can definately still find good deals out there - there's always someone in trouble who needs to sell in a rush, or someone who doesn't have the money to throw a few thousand in fixups to bring the value up, etc...so if you can find a good agent who is willing to spend the time with you, it's definately possible to get a good deal even in this overheated market!


The other question I had, when buying a home, is it a great idea to use your RRSP and/or Non-RRSP Mutual Funds to pay off your mortgage/deposit? People at the bank seem to think so..(as they push it to a great extent ..)


Not 100% sure what you mean ...

You can use the funds in your RRSP towards the downpayment of your home through the home-buyers plan ... I think it's upto 20K withdrawn tax free that has to be repaid within 15 years and you have to qualify as a "first time buyer"...

If you mean should you cash in your investments to pay down your mortgage, I'd usually say no - on the assumption that your investment return is greater than the mortgage cost...ie if you are earning 8% on your investments, and only paying 5% on your mortgage, there's a 3% spread...?

The bank people might be encouraging you to cash in so that you'll put up a downpayment and take out a mortgage right away?...I'm wary of bank salespeople recommending things :P...

Again not too sure what you mean so donno if I got it right there, but whatever you do, do it on your schedule, not theirs! :)


I will be speaking with a financial advisor..


Definately the best idea!!! Nothing can take the place of objective professional advice tailored to your specific situation and finances! :) What works for person A may be completely wrong for B but great for C ! :P

[eBuddy]

Being a financial guru myself who became rich through investments, I own Sprott Canadian Equity and I do agree that it is the #1 performing mutual fund. I bought it with no fees through a discount broker.

For investing newbies who at least know how to use the Internet, the best choice is TD eFunds (http://www.tdefunds.ca), with MER of 0.48% or less.

Sprott Canadian Equity.
Buy it with an up front load fee.
Then you are laughing all the way to the bank.
Its the #1 fund in all category rankings from 6 mts to 5 yrs.

[ItzMe]

Bit of a hijack but after reading lots of great info here I wonder if anyone has recommendations for FAs in the GTA area? Currently all my investments are with nesbitt burns (BMO) and I'm not very happy with the involvement I'm getting (flat rates and the token once a year BUY RRRSPs email). My friends aren't helpful (and I thought I was bad at saving) so what says the RFD crowd?

Anyone have any good experiences to share? Sitting on about 50K right now at nesbitt and $100K year salary if that helps you with ballpark investment numbers. I'm terribly lazy so I'm willing to pay more for someone who will kick my @ss and 'go the extra mile' for me since otherwise I'll forget to do it myself :).

Thanks in advance

I'm not familiar with anyone specific in GTA...

Some ideas might be:

1. Get in touch with your advisor and his/her manager at BMO Nesbitt - explain to them that you're not satisfied, and what it is you'd like - give them a chance to fix it.

2. Explore other bank options (CIBC Wood Gundy, TD Waterhouse, etc.)

3. (IMHO best way) - find a fee-only planner ... this can be difficult but the best starting place is usually to talk to friends and family and get some recommendations, then setup appointments to meet them, and see who clicks/meshes with you...be clear with what you want and what your expectations are, and hopefully, you'll find someone who can help you! :)

[crazyboie]

The #1 issue I'd have with going real-estate is that you're locking yourself in to one investment - real-estate and therefore not diversified...(but don't get me wrong - plenty of people have made fortunes doing nothing but real-estate so it may not be a bad choice :P)

Ya, but the thing is, I'm just starting out. I have enought in my RRSP to plunk down a nice down payment. So I feel that if I went the real-estate way, I wouldn't be able to afford to make other investments.

The hardest part is saving up the capital in the beginning. How much would I need before a fee-only planner would even consider me?

Can funds provide you with the same sort of gain? Absolutely - and more often than not, properly selected and allocated, they could provide you with a better gain than property can ... but it all depends on the risk you are willing to take, the $ commitments you can make, etc.!

Once I find the financial advisor for me, should I walk in with my Asset allocation mapped out? I'm no expert so I might make mistakes ...

value up, etc...so if you can find a good agent who is willing to spend the time with you, it's definately possible to get a good deal even in this overheated market!

That's a good point, just gotta keep my head up high..


You can use the funds in your RRSP towards the downpayment of your home through the home-buyers plan ... I think it's upto 20K withdrawn tax free that has to be repaid within 15 years and you have to qualify as a "first time buyer"...


That's exactly what I meant! I was pre-approved for a mortgage and LOC this week at my bank and they knew about my RRSP. They told me I would be silly not to use the FTHBP as I would be giving myself an interest free loan.

- on the assumption that your investment return is greater than the mortgage cost...ie if you are earning 8% on your investments, and only paying 5% on your mortgage, there's a 3% spread...?
And that's the thing.. because I'm with a managed portfolio at TDCT, I doubt I'm getting 8%...

BTW, still haven't found that Gordon Pape PDF file that you spoke of earlier in the thread. That would be a nice article to get my hands on. Do you think there will be another one included in this year's version?



Definately the best idea!!! Nothing can take the place of objective professional advice tailored to your specific situation and finances! :) What works for person A may be completely wrong for B but great for C ! :P

Leading to another toughie, who to 'trust' as a financial advisor... Most of my friends and family have never gone the Mutual Fund route and so do not think it's a viable option... I think differently! I just don't want to get burned ...

Was it hard for you to choose your first financial advisor? Or did you just dive in yourself? Thanks again ItzMe, you zoom right into the thread each time :)

[ilfsoy]

FA's prefer about $100k to start, some will consider 50k +.

Best to go in with a plan and some good ideas, let the FA finetune the plan, not ride you into his own.

I've always done my own investing so no personal FA experience. Also not a huge Gordon Pape fan so not current on his stuff.

[ItzMe]

Ya, but the thing is, I'm just starting out. I have enought in my RRSP to plunk down a nice down payment. So I feel that if I went the real-estate way, I wouldn't be able to afford to make other investments.



That can be tough...if it's not your primary residence I'd be wary of putting all your eggs into one basket unless you have a high confidence in the continued growth of the real-estate market (and many people do, so it's a tough call I suppose)...If you are purchasing the home as an investment, I don't think you can use your RRSP funds unless you withdraw them and pay the tax - I believe it's for your primary residence only?...

If you are investing in a home for your primary residence then it's probably a different story - something you can (in theory) ride out if times get tough and there is a correction in the market - but be careful not to overextend just because of low rates - keep a good buffer so you can afford to put a little extra into the mortgage if rates go up etc...


The hardest part is saving up the capital in the beginning. How much would I need before a fee-only planner would even consider me?


Comission-only FA's might have minimums, but in theory a fee-only planner should take on any client - since you are paying him/her an hourly fee, they (in theory) shouldn't care as they won't make a comission on the size of your portfolio etc.

In practice, you could encounter some difficulty if you walked in with only say 5K ... a planner costing 100$+ per hour shouldn't in good concience take on a client with a too small portfolio, but at 50 or 100K etc. I don't think it'll be too tough to find one - just make sure you go through the steps of interviewing them, reviewing credentials, references, etc. - most will likely give you a free 1 hour consult to get to know you and so you can ask them questions - so be prepared with your info, as well as questions to ask them :)...


Once I find the financial advisor for me, should I walk in with my Asset allocation mapped out? I'm no expert so I might make mistakes ...



The more you can go in with, the better - the more you know about what you want, and your financial plan overall the less time the planner will have to bill you to explain the basics to you :)...

I don't see a problem with going in with an allocation mapped out as long as you notify them it's just a draft :) - just tell the planner it's a draft you came up with, and you'd like too see what they can do with it to correct/tweak it - alternatively if you want to avoid any chance of the planner being biased, let them come up with the allocation and then compare it to yours to see whether it was similair - if there's some big differences, ask them why and get them to exlpain to you (for example maybe you wanted more allocation to bonds, but they gave more to equities because they assumed a higher risk profile, etc.)...


That's exactly what I meant! I was pre-approved for a mortgage and LOC this week at my bank and they knew about my RRSP. They told me I would be silly not to use the FTHBP as I would be giving myself an interest free loan.


Pape actually goes into about 15 pages of detail in the RRSP book on the HBP and the like with some detailed calculations that may help you figure out whether it's worth it or not for you in your personal circumstances... (your local library might have it?)...

Likewise, a good FA should be able to run the numbers reasonably quickly for you and give you your options (ie money left in RRSP growing at X%, taken out and put into HBP, mortgage savings vs. lost growth in RRSP, etc...)


BTW, still haven't found that Gordon Pape PDF file that you spoke of earlier in the thread. That would be a nice article to get my hands on. Do you think there will be another one included in this year's version?



Not sure if it will be - as far as I'm aware, he's not printing a new '05 edition of the books...but your local library may have a copy?


Leading to another toughie, who to 'trust' as a financial advisor... Most of my friends and family have never gone the Mutual Fund route and so do not think it's a viable option... I think differently! I just don't want to get burned ...

Was it hard for you to choose your first financial advisor? Or did you just dive in yourself? Thanks again ItzMe, you zoom right into the thread each time :)

For myself personally I dove in myself without going the FA route - I made mistakes along the way no doubt about it, but just starting out when I was 18/19 I didn't have nearly enough $$$ to make it worthwhile to get a FA...now a couple years later I suppose I cheat in a way as my old next-door-neighbour is a senior partner at Delloite & Touche who is retained by my mom/dad as well as one of my older sisters quite a bit with money & tax related affairs :D...so I sneak in a few times to get some answers and what not ;)...not bad in return for a few home-cooked meals :D LOL...the rest of my family also has various FA's and since I'm the "baby" of the family I'm often able to sneak some free advice on their time :D <G> (I'm cheap so what :P)...

Hope all my babbling helps! ;)

[ItzMe]

Two articles by Ellen Roseman in the Star recently appeared that may help w/ the FA hunting:


Bad advice spurs book

ELLEN ROSEMAN

Choosing a financial adviser is a lot of work.

You have to interview several people to gauge their qualifications, philosophy and approach.

Sometimes, it's easier just to drift into a relationship with someone you know and trust already.

John Lawrence Reynolds shares his experience in a new book, The Naked Investor: Why Almost Everybody But You Gets Rich on Your RRSP (Penguin Canada, $25).

In the spring of 2000, he and his wife consulted a financial adviser they knew socially. They were middle-aged with grown kids and grandchildren, looking to work less and travel more.

Instead of help solving cash-flow problems and managing their existing assets, they were given a thick report with some radical recommendations:

"Sell all your bonds. They're too risky." The bonds, issued by federal and provincial governments in the early 1990s when interest rates were high, made up about half of the couple's RRSP.

"Sell all the mutual funds you have accumulated over the years." Instead of buying blue-chip companies, the couple should be moving into growth funds that were technology-based.

"Purchase $400,000 each in new life insurance." The couple already carried policies totalling $300,000 in benefits. No explanation was given for buying new policies with annual premiums close to $10,000, except to build their retirement nest egg.

Reynolds and his wife were appalled. Reviewing the report that evening, they estimated the adviser stood to earn from $30,000 to $40,000 if they implemented every proposal.

They decided not to go ahead. Within a few weeks, stock markets started falling and the adviser's recommended mutual funds suffered the worst.

Interest rates began to slide at the same time, making their bonds more valuable. (Bond prices move in the opposite direction to interest rates.)

The couple would have lost thousands in potential earnings if they had sold as he suggested.

This is a timely book, aimed at average Canadians who put too much trust in their financial advisers.

Reynolds is a novelist and author of an award-winning book about jailed Bay Street broker Michael Holoday.

He tells enough stories about betrayal of trust to convince readers that self-interested advice is far from rare.

Is he on the right track? I asked a few people who work with disillusioned investors.

Robert Goldin is an investment-dispute consultant who works mainly with retirees. Lately, he's seeing a new group of clients—investors in their 20s or 30s, with good jobs and high salaries. "They're not complaining about suitability of investments, as seniors do," he says.

"Instead, they're saying their brokers are doing unauthorized transactions or churning their accounts with enormous amounts of trades."

These clients fill out account applications saying they prefer 100 per cent high-risk or speculative investments, "because their advisers tell them it's just a formality," Goldin says.

If there's a dispute later on, the broker can say the client agreed to the high-risk strategy.

Tony Davidson also mediates investment disputes. He's concerned about income trusts, a new investment category that provides higher yields.

"There's always a flavour of the month and now it's income trusts. No one tells you they're equities based on a commodity," Davidson says.

"Income trusts have tax advantages when you hold them outside an RRSP. But RRSPs have all the money, so that's where income trusts get sold. They're driven there inappropriately in some cases."

Robert Kyle, a former stockbroker, is a strong critic of the investment industry. At his website, regulators.itgo.com, he keeps a running tally of the failures of self-regulatory organizations.

He claims credit for hearings held last August, allowing ordinary investors to present their views to an Ontario finance committee.

After listening, the committee found "a deep-seated skepticism on the part of the investing public. They simply are not confident that complaints will always be handled in an objective manner under a system of self-regulation."

Kyle says investors will play second fiddle as long as government permits the securities system to be controlled by those who benefit from an abuse of that system.

My conclusion? When it comes to your money, trust no one. Delegate responsibility to no one.

And if you end up with a friend as your adviser, never let down your guard. And never forget you're dealing with a salesperson. Trust yourself to do the monitoring needed to keep your adviser honest.



AND


Finding a good financial adviser

ELLEN ROSEMAN

How do you find a good financial adviser? That's one of the most common questions I hear.

I always tell people to take their time. Talk to at least three advisers with different firms and ask a lot of questions up front.

Asking pointed questions may disturb a prospective financial adviser. You may come off sounding as if you already expect the relationship to crash on the rocks.

It's like asking a romantic partner to sign a prenuptial agreement that sets out how assets are split after the marriage dissolves.

"Don't you trust me?" That's how a financial adviser may respond when you probe too deeply.

Your answer should be a resounding no. You can't trust someone who won't address your legitimate concerns.

Never put blind faith in an individual who's looking after your money. The consequences can be disastrous.

I've heard from too many people who get into trouble with their investments because they don't cover their bases in advance.

Here's a list of 20 subject areas to explore with anyone to whom you're entrusting your savings:

How many years have you been in the business? How many ups and downs in the market have you experienced? How many firms have you worked for? Have you or your firm been subject to disciplinary proceedings in the last few years?

What are your credentials? What do your financial designations mean to me? How are you upgrading your education?

What do you sell? What product licences do you have? Can you prepare tax returns? Can you advise on wills and estate planning?

Who are your clients? What kind of incomes do they have and what size of portfolios? Do you require a minimim investment amount? How many clients do you have? Do you put a limit on the number?

Can you give me references? Will you provide names of clients I can interview? Are they clients whose financial position is similar to mine? Have they been with you for a long time?

What's your investment philosophy? Do you have an area of expertise? What asset mix do you recommend for me? Do you provide regular rebalancing? Will you do a financial plan before recommending any investments?

What's your view of risk? How much risk can I handle? How do you assess my risk tolerance? Do you have a questionaire? How do you try to preserve capital?

How are you paid? Do you charge commissions on products you sell? Do you charge fees? Can you give advice for a fee? Can you provide a second opinion on an existing portfolio? Do I pay for a financial plan? Can I see a sample plan?

What are you paid? What do you make when I buy and sell products (GICs, stocks, bonds, mutual funds, insurance)? What are your annual service charges, or trailers, on mutual funds? What do you charge for looking after my RRSP?

Which mutual funds do you sell? Can I buy or hold bank-sponsored funds? What about funds from smaller independent firms such as Saxon, Chou or Phillips Hager & North? Does your firm have its own funds? Are you paid more when you sell these funds? How many fund groups do you follow?

What's your view of diversification? How many funds should I own? How many stocks? How much cash? What interest rate do you pay on cash? Do you think it's better to buy bonds directly or to buy bond funds?

Who's on your team? Can I meet your assistants? Can I meet your boss? Who's your back-up when you're away? Who will handle my portfolio if you retire or leave the firm?

How often will we talk? Will you call me on a regular basis? Will you notify me about bad news? Do you have an after-hours number? How quickly will you respond to my calls and emails?

How often will we meet? Will you see me at least once a year? Do I have to come to your office? Do you make house calls? Can you stop by my workplace or meet me for coffee?

How often do you send out statements? Do you provide online access to my portfolio? Do you show the original cost and current market value? If I don't understand my statements, do you go through them with me?

What is my rate of return? Can you give me an annual percentage return on my entire portfolio? What benchmarks used for performance comparisons? Can you explain why I'm leading or trailing my benchmarks? If I'm behind, what can we do to get back on track?

How are my investments protected? Is there a contingency fund for compensation if your firm goes under? What's the name of the plan and what's the coverage?



Con't in next post...

[ItzMe]

Con't from prev. post ...


How do I complain if things go wrong? Who's your compliance team? Who is your regulator or self-regulator (Ontario Securities Commission, Investment Dealers Association of Canada, Mutual Fund Dealers Association of Canada, Market Regulation Services Inc.)?

Who's your internal ombudsman for complaints? What's the name, number, email address or Web site? Is there an industry-level ombudsman for appeals?

Can you put it in writing? Do you use an investment policy statement or service policy statement? If so, can I see one? Does it contain all the above information? How often do you update it? Can we work on it together?

I've put together this list of questions to ask a new financial adviser. But you can also try them out on an existing financial adviser.

Your goal: To review your progress on a regular basis and put the relationship on a firmer footing. As a side benefit, you'll be in great shape if anything happens to you. With the details in writing, your friends or family members will have no trouble taking over your portfolio.

[crazyboie]

Wow ItzMe! That's like the grand slam of questions in one post!
Thanks a bunch ..

[bdckr]

If you mean should you cash in your investments to pay down your mortgage, I'd usually say no - on the assumption that your investment return is greater than the mortgage cost...ie if you are earning 8% on your investments, and only paying 5% on your mortgage, there's a 3% spread...?

The bank people might be encouraging you to cash in so that you'll put up a downpayment and take out a mortgage right away?...I'm wary of bank salespeople recommending things :P...
But what makes it more complicated even outside of the unpredictability of investments, is that 8% is before tax dollars (whether outside your RRSP, or even inside your RRSP, since it's a tax deferral system -- you'll pay tax when you take the money out, hopefully less than if you paid it now), while you pay your mortgage in after tax dollars, making the potential spread even less, depending on your marginal tax rate.

Maybe someone who works at selling mortgages at a bank can comment on that. I've always believed that mortgages are one of the really easy ways for a bank to make money (not a lot of service to have your money tied up at the bank for them to use for a number of years, low risk of losing their money -- house as collateral in case you default), and I've wondered how big, if any, the commissions are for each mortgage that someone handles.

[ItzMe]

But what makes it more complicated even outside of the unpredictability of investments, is that 8% is before tax dollars (whether outside your RRSP, or even inside your RRSP, since it's a tax deferral system -- you'll pay tax when you take the money out, hopefully less than if you paid it now), while you pay your mortgage in after tax dollars, making the potential spread even less, depending on your marginal tax rate.



No doubt - a good point :P one could always revert to the traditional canadian compromise of contribute to the RRSP and use the refund to pay down the mortgage...two birds with one stone ;) ... or one could pay down the mortgage and then leverage it again with a heloc and use it for the investments thereby making the interest tax deductable (isn't that some smith manuever or something similar...) mucho complicatido ;) ...

[bdckr]

Many mutual funds make distributions only once a year, in December. This can create a tax trap, of which many people are unaware. The problem arises when you buy funds outside a registered plan just before the distribution date. Income earned over the previous 12 months is then paid out to investors—including you—and the fund’s unit value is adjusted downwards to reflect the payout. The effect is that you receive back some of the investment capital you’ve just put up, and you have to pay tax on it. This is definitely a situation to avoid.


One thing to remember with distributions is to keep the tax info from each year's distribution. The tax that you paid on those distributions (if you hold a fund outside an RRSP) is less tax that you will need to pay when you sell the units in the end. What the distributions represent are the fund's net realized gains.

Distributions aren't necessarily a sign that the fund is doing well: only a fraction of the fund's total assets were bought/sold in a given year, and the net gain of what was bought/sold plus income is paid out as a distribution. The other assets that are still being held may have gone up or down in value, independent of the distribution.

You will inevitably need to pay some taxes on your gains (if there are any) when you sell all your units in a fund, but almost always better to pay them later than now -- unless your tax situation later means that you pay more tax later because you're in a higher tax bracket.

When you eventually sell your units, you will (hopefully) sell them at a higher value than what you paid for them. You will need to pay tax on that difference after subtracting the amounts for which you have paid taxes on over the years i.e. the distributions.

So you'll get your money back in the end as long as the final net gain is more than the amounts that were paid out in distributions over the years (that you held the units).

There's a really good book by Kurt Rosentreter (http://www.amazon.ca/exec/obidos/ASIN/0773760962/qid=1106857939/ref=sr_8_xs_ap_i1_xgl/702-5940197-1029657) that discusses the tax implications of investing. He's Canadian, so the examples and tips he gives are relevant.

[bdckr]

2. What is defined as a "tax-inefficient fund"? And do distributions almost always happen at the end of year (or fiscal end of year?)?
2. Tax efficiency is variable, income funds etc, that pay out distributions are more favourably taxed than capital gains. Distributions vary by fund, some are monthly, others are quarterly, the remainder yearly (usually is Dec.). Need to check the fund info to be sure. Paid more frequently gets the chance to compound if reinvested.

I think "tax efficiency" is a phrase used when talking specifically about equity funds.

ilfsoy is absolutely right that different types of gains are taxed differently. From highest to lowest rate of taxation: interest, dividend, and capital gains. It used to be: interest, capital gains, then dividends, but a few years back the Canadian gov't changed the rules to decrease the tax paid on capital gains, so it's marginally better than dividends. Dividends are taxed cheaper than interest because of the corporate taxes paid before dividends are paid out.

A "tax efficient" mutual fund tends to either hold onto assets without selling (hence no realized gains, no distribution made, no need to pay tax for that year's distribution) or balances realized gains with realized losses (so something is sold for more than was paid, something that went down in value is sold at the same time, net realized gain is zero). A "tax inefficient" mutual fund will have more net realized gains that need to be distributed, and you will need to pay taxes on it that taxation year.

The main advantage of a "tax efficient" fund is that you pay tax when you decide to: when you sell your units, not every year (because of distributions). The more tax you pay each year, the less money you have working for you. It's not a tax reduction but a tax deferral -- you'll eventually pay taxes on the money made, but hopefully by then it will be less (lower tax bracket) or you'll have had the benefit of your money longer.

Sorry for getting into this thread late, great information, nice summary of a lot of different things. Lots of good info from ItzMe, ilfsoy, and TrevorK.

Edit: Here's a link to explain tax efficiency (http://www.thestreet.com/basics/gettingstarted/1030843.html). Looks like I was wrong about "tax efficiency" referring to only equity funds: it's any fund that tries to limit distributions. Although in an equity fund, the manager has more control over this (as opposed to, for example, a dividend fund which is supposed to be making gains through regular dividends).

[bdckr]

No doubt - a good point :P one could always revert to the traditional canadian compromise of contribute to the RRSP and use the refund to pay down the mortgage...two birds with one stone ;) ... or one could pay down the mortgage and then leverage it again with a heloc and use it for the investments thereby making the interest tax deductable (isn't that some smith manuever or something similar...) mucho complicatido ;) ...This is one of those times where it's too bad we don't do things the American way: the interest they pay on their mortgage is tax deductible. No need for the complicated manoeuvres to minimize our taxes. :razz: Taxes. :razz:

[ItzMe]

This is one of those times where it's too bad we don't do things the American way: the interest they pay on their mortgage is tax deductible. No need for the complicated manoeuvres to minimize our taxes. :razz: Taxes. :razz:

The saying that the only two certainties in life are death and taxes seem to be most applicable in Canada... :evil: lol

Ah well...unfortunate, but what else can you do :)

[crazyboie]

Hey ItzMe!
It's been a while since this nice thread was updated. I was wondering, where would I locate a reputable financial advisor? Preferably a Fee-Only advisor (So commissions don't sway his/her decisions).

Would going to my bank be the ideal place to locate such a service?


As well, I recently signed up to WebBroker (TD Waterhouse) and their fees seem pretty high, is that the norm?

Thanks to all for the great advice!

[kornstar369]

mutual fund = gamble with your $$

because just as fast as it can go up...it can come down...if your young , i am as well, just take the safe way out and invest in a stable fund. guaranted investment. slow but steady wins the race.

[Rehan]

It's been a while since this nice thread was updated. I was wondering, where would I locate a reputable financial advisor? Preferably a Fee-Only advisor (So commissions don't sway his/her decisions).

Would going to my bank be the ideal place to locate such a service?All advisors at banks are commission based, I believe. The percentage of advisors that are fee-only is between 5% and 10%...so most that you'll fine won't fit the criteria. Keep in mind that you're probably looking at $150-$250/hr for their services. If you head over to http://www.financialwebring.com/forum and post your request there, I'm sure a few of them will respond. You may even get good free guidance from the more experienced DIY investors there without having to start off with before seeing an advisor.

[Hymac]

If you are young and have a long term investment horizon, you're actually in the best position to take on a higher level of risk.

[Rehan]

mutual fund = gamble with your $$

because just as fast as it can go up...it can come down...if your young , i am as well, just take the safe way out and invest in a stable fund. guaranted investment. slow but steady wins the race.If you invest 100% in GICs, you definitely won't win "the race". :|

Diversity is the name of the game. And that's what mutual funds offer.

Read the "Asset Allocation" and "Portfolio Construction" sections (among others) at http://www.shakesprimer.com/

[crazyboie]

All advisors at banks are commission based, I believe. The percentage of advisors that are fee-only is between 5% and 10%...so most that you'll fine won't fit the criteria. Keep in mind that you're probably looking at $150-$250/hr for their services. If you head over to http://www.financialwebring.com/forum and post your request there, I'm sure a few of them will respond. You may even get good free guidance from the more experienced DIY investors there without having to start off with before seeing an advisor.

If you invest 100% in GICs, you definitely won't win "the race". :|

Diversity is the name of the game. And that's what mutual funds offer.

Read the "Asset Allocation" and "Portfolio Construction" sections (among others) at http://www.shakesprimer.com/

Rehan, much thanks for the links! kornstar, A mutual fund can be stable based on your Risk Level. It depends if you choose a fund based more with GICs, Money Markets (Read: Cash Assets), Bonds (Read: Debt Assets) or Stock (Read; Equity Assets)

Truth be told, they all have their advantages/disadvantages! I'm reading a book right now 'Risk is STILL A Four Letter Word' and it points out the pros/cons of each. Rehan is bang on with diversification and Hymac is correct about time being on our side.

The longer you're involved with something, the better your odds are receiving a profitable return.

With that being said: If you're young, Time Diversification X Asset Diversification = Great Opportunity to enhance your profits

I'll never look at savings accounts and/or bonds the same way again, inflation eats their rates away! Ugh!