Share your investing wisdom: mutual funds

You could win a copy of MoneySense’s new retirement guide by sharing your investing tips.

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No financial product has had more impact on small investors than mutual funds. It’s easy to see why. They offer Joe and Jane Investor a chance to hold entire portfolios of stocks and bonds that they could never have assembled on their own. They’re easy to buy, either through your bank or through an investment adviser. And best of all, it’s a snap to set up automatic contributions to your funds every month, which makes saving almost painless.
Actively managed mutual funds also give investors the opportunity to earn market-beating returns and get protection from big losses during bear markets. This gives many people comfort—knowing that their money is being managed by a professional can make them less likely to bail during a downturn.
What are your tips for mutual-fund investing? We invite you to share one or two with our readers in the comments field below. The person with the best tip will get a copy of MoneySense’s new retirement book, Guide to Retiring Wealthy, when it comes out in mid-October. For the full story on investment strategies, pick up a copy of the September/October 2010 issue of MoneySense, on newsstands now.

7 comments on “Share your investing wisdom: mutual funds

  1. Pingback: Share your investing wisdom | MoneySense

  2. I have been investing in the BMO Monthly Income Fund and I really like it. Investing $50,000 at a unit price of approx $8.00 will get you 6250 units. Those 6250 units at 6 cents per unit will give you $375 per month every single month. What other fund or stock can get you a deal like that? It is not particularly high risk and you get an income every month with a very affordable and reasonable principal. You can choose to reinvest or take the monthly income as cash. I have not found another fund that matches this one.

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    • I also like this fund. I've been purchasing units over several years and feel comfortable with this fund.

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    • You are getting ripped off. And so was I, until I found the RBC Canadian Equity Income Fund, I know the fee is higher than the BMO fund but this is one of the very few funds in Canada that earns their fees. Go to globeinvestor.com and compare. This fund started in Aug. 2006 and I have not seen anything else like it!!. I have nothing to gain and I am not adverstising for RBC because out of all their funds, this one is the only one that makes you anything, and heaven help you if you signed up for their Target Education Funds for an RESP. This fund is the only thing you need. It has doubled since 2008. Name any other fund that you don't require $10,000 or more to sign up for. I wish you luck. Just compare any fund you find against the RBC Canadian Equity Income Fund (don't forget the "income" part because the rbc canadian equity fund sucks bad).

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  3. The prize giveaway is over, but feel free to share your own tips and strategies about mutual fund investing.

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  4. Investing is a process not an act, and choice of investments should be one of the last things that is decided upon. My point is this, a financial advisor you come to TRUST will help build the right program together with you. A good advisor will perform an analysis of your finances and you MUST expect that this person will concisely educate you how and why this will be done.

    What are your responsibilities, your income, savings, age, RRSP contribution limit, TFSA limit, risk tolerance etc…? Most importantly, a great advisor will help you articulate your goals and dreams and together will help make it come to fruition. And one last thing, your time in the market is always more significant than your timing in the market. Understand what you have, decide what you are willing to handle, decide what you want, then go for it and have the discipline to ignore the short term and enjoy your life…that is investing.

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  5. The prospectus for BMO Monthly Income Fund says that the Fund started the 2010 year at a share value of $8.09 and finished the year at $8.25. It shows that they distributed $0.72 per share made up of $0.31 from income and dividends plus $0.41 return of capital (ROC).

    At a MER of 1.51% the fund manager helped himself to about $0.12 per share. But what did he do to earn his fee?
    It seems he only produced real earnings of $0.43 per share (MER at $0.12 plus income and dividends at $0.31). So the real fee paid to the manager is actually 28% ($0.12 divided by $0.43) of what he produced.
    I don't think he deserves a fee for giving me back my money (the $0.41 ROC) does he?

    What is the yield of this fund?
    Friends rave about its great yield being 8% to 9% compared to 5 year GICs at 2%. They listen to comments like these from advisors who should know better:
    Boomerandecho July 2009: yield is 8.7% ($0.72 on $8.24)
    Milliondollarjourney July 2009: yield is 9.1% ($0.72 on $7.93)
    Investment executive Oct 2008 "Currently this works out to a yield of slightly less than 8%.
    Morningstar (O'Leary Oct 2008) "Currently this works out to a yield just under 8%.

    Investopedia says "Mutual fund yields are an annual percentage measure of income (dividends and interest) earned by the fund's portfolio, net of the fund's expenses." This definition excludes Return Of Capital from the calculation.
    So, the actual yield in the above example is 3.8% ($0.31 on a $8.25 beginning share value) in 2010. It was 4.0% in 2009 and 3.4% in 2008. A long way down from 9%!

    The above advisors ignore this definition and include ROC in the "yield". But that's like buying a $1,000 GIC that pays 6% then withdrawing everything after 2 years and celebrating a 50.6% yield. Just poor math and confusion between distributions, earnings, returns and yields.

    Over the 5 years ending in 2010, only 41% of the distributions consisted of earnings. Fully 59% was Return Of Capital. If this fund did not pay its investors with their own money, the distribution over the last 5 years would be $0.43 per share not $0.72. Why doesn't BMO raise the distribution to $1.60 a share, advertise a 20% yield and really fleece the lambs. Returning capital to investors at the annual rate of $1.17 per share should drive the share value to zero in less than 7 years.

    Not a good investment.

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