Comments on: Portfolio Update http://www.investingintelligently.com/2006/03/05/portfolio-update/ Not just another (Canadian) financial blog Fri, 21 Nov 2008 10:32:48 +0000 http://wordpress.org/?v=abc By: Investing Intelligently » Blog Archive » First Portfolio Update Since Starting at Clearsight http://www.investingintelligently.com/2006/03/05/portfolio-update/#comment-941 Investing Intelligently » Blog Archive » First Portfolio Update Since Starting at Clearsight Wed, 26 Jul 2006 03:13:20 +0000 http://www.investingintelligently.com/2006/03/05/portfolio-update/#comment-941 [...] It was quite a while ago, in March of this year, when I completely switched to my advisor at Clearsight and left the self-directed RRSP days at TD Canada Trust behind. I just realized looking back at that article that I never actually gave the final portfolio that my advisor and I decided on. At least I couldn’t find the post. Well here’s what I initially bought back in March (book value from middle of March): [...] [...] It was quite a while ago, in March of this year, when I completely switched to my advisor at Clearsight and left the self-directed RRSP days at TD Canada Trust behind. I just realized looking back at that article that I never actually gave the final portfolio that my advisor and I decided on. At least I couldn’t find the post. Well here’s what I initially bought back in March (book value from middle of March): [...]

]]> By: Investing Intelligently » Blog Archive » Portfolio Update: Settled In http://www.investingintelligently.com/2006/03/05/portfolio-update/#comment-262 Investing Intelligently » Blog Archive » Portfolio Update: Settled In Sun, 09 Apr 2006 08:46:26 +0000 http://www.investingintelligently.com/2006/03/05/portfolio-update/#comment-262 [...] Back on March 5th, I mentioned a proposed portfolio my advisor and I were working on. We finally came to an agreement on my allocation and what to buy, and this is what I bought on March 10, 2006: [...] [...] Back on March 5th, I mentioned a proposed portfolio my advisor and I were working on. We finally came to an agreement on my allocation and what to buy, and this is what I bought on March 10, 2006: [...]

]]> By: Investing Intelligently » Blog Archive » Mutual Fund Loads http://www.investingintelligently.com/2006/03/05/portfolio-update/#comment-231 Investing Intelligently » Blog Archive » Mutual Fund Loads Wed, 22 Mar 2006 06:03:55 +0000 http://www.investingintelligently.com/2006/03/05/portfolio-update/#comment-231 [...] On a previous blog post of mine about my new portfolio allocation as proposed by my advisor, I received a comment from Average Joe in regards to the MERs and the loads on these funds (CI Value Trust fund, Templeton International Stock fund, and E&P Growth Opportunities fund): These are all loaded funds as well (ie. they are not no-load funds). You will more than likely be locked in or have to pay a penalty to get out. [...] [...] On a previous blog post of mine about my new portfolio allocation as proposed by my advisor, I received a comment from Average Joe in regards to the MERs and the loads on these funds (CI Value Trust fund, Templeton International Stock fund, and E&P Growth Opportunities fund): These are all loaded funds as well (ie. they are not no-load funds). You will more than likely be locked in or have to pay a penalty to get out. [...]

]]> By: Canadian Capitalist http://www.investingintelligently.com/2006/03/05/portfolio-update/#comment-207 Canadian Capitalist Fri, 10 Mar 2006 15:38:27 +0000 http://www.investingintelligently.com/2006/03/05/portfolio-update/#comment-207 Average Joe: I disagree that fee-based advisors don't have a conflict of interest. I am going to make a post on this topic as my argument will be fairly lengthy :) Average Joe: I disagree that fee-based advisors don’t have a conflict of interest. I am going to make a post on this topic as my argument will be fairly lengthy :)

]]> By: Canadian Capitalist http://www.investingintelligently.com/2006/03/05/portfolio-update/#comment-206 Canadian Capitalist Fri, 10 Mar 2006 15:30:43 +0000 http://www.investingintelligently.com/2006/03/05/portfolio-update/#comment-206 Dave: If I were you, the first question I would ask an advisor is how much fees / commissions they get. This is a critical question because if you end up paying even 1% of your assets in fees and if long-term returns range from 6-8%, you are shelling out 12-16% of your returns in fees. Whether I am investing myself or through an advisor or through a mixture of funds, the first thing I would do is create my benchmark portfolio composed of index funds / ETFs. I would track it over 3-5 years and if I am not able to beat my target by at least 2%, why even bother. Dave: If I were you, the first question I would ask an advisor is how much fees / commissions they get. This is a critical question because if you end up paying even 1% of your assets in fees and if long-term returns range from 6-8%, you are shelling out 12-16% of your returns in fees.

Whether I am investing myself or through an advisor or through a mixture of funds, the first thing I would do is create my benchmark portfolio composed of index funds / ETFs. I would track it over 3-5 years and if I am not able to beat my target by at least 2%, why even bother.

]]> By: Average Joe http://www.investingintelligently.com/2006/03/05/portfolio-update/#comment-195 Average Joe Mon, 06 Mar 2006 21:20:48 +0000 http://www.investingintelligently.com/2006/03/05/portfolio-update/#comment-195 Fee based advisor charges you a fixed amount of money. Either they charge you a fixed amount per hour, or possibly charge you a certain amount to set up your finances. Since you pay these people directly, then there is no conflict of interest. They very happily will recommend ETFs and no-load funds since they won't be earning any commissions from what you buy. The commission based investors earn their money from the mutual fund companies. Mutual fund companies pay trailers to advisors who send them business. As you can see, there is a potential for a conflict of interest. Do they recommend what is best for the client or for the advisor? You should read The Naked Investor by John Lawrence Reynolds. Great book. You should always ask your advisor how they get paid. Fee based advisor charges you a fixed amount of money. Either they charge you a fixed amount per hour, or possibly charge you a certain amount to set up your finances.

Since you pay these people directly, then there is no conflict of interest. They very happily will recommend ETFs and no-load funds since they won’t be earning any commissions from what you buy.

The commission based investors earn their money from the mutual fund companies. Mutual fund companies pay trailers to advisors who send them business. As you can see, there is a potential for a conflict of interest. Do they recommend what is best for the client or for the advisor? You should read The Naked Investor by John Lawrence Reynolds. Great book.

You should always ask your advisor how they get paid.

]]> By: Dave http://www.investingintelligently.com/2006/03/05/portfolio-update/#comment-194 Dave Mon, 06 Mar 2006 18:27:45 +0000 http://www.investingintelligently.com/2006/03/05/portfolio-update/#comment-194 According to Morningstar, "Don Reed has been managing this fund since its January 1989 inception." But thanks for bringing these things up. I will look into this fund a little more. My advisor is at Clearsight and as far as I know, the advisors do not get commissions directly. The company obviously makes money somehow and more commissions for the company will trickle down to the advisors. I guess they are not fee-only advisors, for the reason that you said, but I do not really understand what fee-only means... I know that you can be a fee-based client, where you pay a percentage of your assets (or something like that) and nothing else. According to Morningstar, “Don Reed has been managing this fund since its January 1989 inception.” But thanks for bringing these things up. I will look into this fund a little more.

My advisor is at Clearsight and as far as I know, the advisors do not get commissions directly. The company obviously makes money somehow and more commissions for the company will trickle down to the advisors. I guess they are not fee-only advisors, for the reason that you said, but I do not really understand what fee-only means… I know that you can be a fee-based client, where you pay a percentage of your assets (or something like that) and nothing else.

]]> By: Average Joe http://www.investingintelligently.com/2006/03/05/portfolio-update/#comment-193 Average Joe Mon, 06 Mar 2006 17:25:41 +0000 http://www.investingintelligently.com/2006/03/05/portfolio-update/#comment-193 For Templeton International, I was just looking at <a href="http://www.morningstar.ca/globalhome/QuickTakes/Fund_Overview.asp?fundid=4165">the information from Morningstar.ca</a>. They only show history going back 5 years. They have it rated as a 3 star. I thought it seemed a high MER for an average performer. Since it hasn't performed well in the last 5 years, it must have obviously performed well before that. You should do a little research. Maybe the manager has changed and that is why the last 5 years have been average. Personally, I prefer and use no load funds. That is just me. I assume that your advisor is not a fee-only advisor? If so, he would never recommend no load funds since then he wouldn't get paid. Keep doing your research and remember, nobody cares about your money as much as you do. For Templeton International, I was just looking at the information from Morningstar.ca.

They only show history going back 5 years. They have it rated as a 3 star. I thought it seemed a high MER for an average performer. Since it hasn’t performed well in the last 5 years, it must have obviously performed well before that. You should do a little research. Maybe the manager has changed and that is why the last 5 years have been average.

Personally, I prefer and use no load funds. That is just me. I assume that your advisor is not a fee-only advisor? If so, he would never recommend no load funds since then he wouldn’t get paid.

Keep doing your research and remember, nobody cares about your money as much as you do.

]]> By: Investorial » Blog Archive » Portfolio Update http://www.investingintelligently.com/2006/03/05/portfolio-update/#comment-192 Investorial » Blog Archive » Portfolio Update Mon, 06 Mar 2006 06:09:45 +0000 http://www.investingintelligently.com/2006/03/05/portfolio-update/#comment-192 [...] I haven’t gone off the deep end yet. Investorial is not a Blog about my own portfolio. I also don’t share the propensity to divulge my investment practices as other bloggers do. But I did enjoy reading The Dividend Guy and Investing Intelligently provide updates about their portfolio decisions. [...] [...] I haven’t gone off the deep end yet. Investorial is not a Blog about my own portfolio. I also don’t share the propensity to divulge my investment practices as other bloggers do. But I did enjoy reading The Dividend Guy and Investing Intelligently provide updates about their portfolio decisions. [...]

]]> By: Dave http://www.investingintelligently.com/2006/03/05/portfolio-update/#comment-191 Dave Mon, 06 Mar 2006 04:51:04 +0000 http://www.investingintelligently.com/2006/03/05/portfolio-update/#comment-191 If you look at Templeton International Stock fund's long-term performance you will find it has outperformed its benchmark index. You can find quotes like this: "Of the six International Equity funds with 15-year records, Templeton International Stock ranks second with a compound annual return of 8.2% for the period ending Nov. 30, 2004. This is 3.6 percentage points per year higher than the MSCI EAFE Index (C$)." I really know very little about international mutual funds but it sounds like my advisor has been using this one for quite a while and is happy with it. It has also had the same manager for a long time. I had assumed these funds were all no-load but they are not, as you have pointed out. I went and looked at the prospectuses (sp?) and here's what I found: -CI Value Trust can be purchased and sold after 3 years for free with the low-load option. If you sell before the 3 years are up, the sales charge is 3%. -Templeton International Stock fund can be sold after 2 years for free with the low-load option. If you sell before the 2 years are up, the sales charge is 2%. -E&P Growth Opportunities fund can be sold after 2 years for free with the low-load option. If you sell before the 2 years are up, the sales charge is 3%. This does not concern me too much. I would much rather be locked in to something as it will force me to stay invested, at least on the 2-3 year time scale. The only fund where the high MER is a bit disconcerting is Value Trust which (after the MER) has not managed to do any better than the S&P 500 Equal Weight Index. I would much rather go for the index which is much lower risk being spread over the 500 largest market-cap companies. The other 2 mutual funds (Templeton International Stock fund and E&P Growth Opportunities) warrant the high MER because even after the MER, they seem to have done really well. If you look at Templeton International Stock fund’s long-term performance you will find it has outperformed its benchmark index. You can find quotes like this: “Of the six International Equity funds with 15-year records, Templeton International Stock ranks second with a compound annual return of 8.2% for the period ending Nov. 30, 2004. This is 3.6 percentage points per year higher than the MSCI EAFE Index (C$).” I really know very little about international mutual funds but it sounds like my advisor has been using this one for quite a while and is happy with it. It has also had the same manager for a long time.

I had assumed these funds were all no-load but they are not, as you have pointed out. I went and looked at the prospectuses (sp?) and here’s what I found:

-CI Value Trust can be purchased and sold after 3 years for free with the low-load option. If you sell before the 3 years are up, the sales charge is 3%.
-Templeton International Stock fund can be sold after 2 years for free with the low-load option. If you sell before the 2 years are up, the sales charge is 2%.
-E&P Growth Opportunities fund can be sold after 2 years for free with the low-load option. If you sell before the 2 years are up, the sales charge is 3%.

This does not concern me too much. I would much rather be locked in to something as it will force me to stay invested, at least on the 2-3 year time scale.

The only fund where the high MER is a bit disconcerting is Value Trust which (after the MER) has not managed to do any better than the S&P 500 Equal Weight Index. I would much rather go for the index which is much lower risk being spread over the 500 largest market-cap companies. The other 2 mutual funds (Templeton International Stock fund and E&P Growth Opportunities) warrant the high MER because even after the MER, they seem to have done really well.

]]>