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Thread: RBC Monthly Income Fund?

  1. #21
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    And then there is something called the Mawer Tax Effective Balanced Fund. Is this potentially a better choice, than say either the straight Mawer Balanced Fund or the RBC Monthly Income Fund, to buy and hold in a non registered account?

    Last edited by Belguy; 2015-10-23 at 03:35 PM.

  2. #22
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    Quote Originally Posted by Belguy View Post
    And then there is something called the Mawer Tax Effective Balanced Fund. Is this potentially a better choice, than say either the straight Mawer Balanced Fund or the RBC Monthly Income Fund, to buy and hold in a non registered account?
    It is probably not much different than the Balanced fund, except for the tax efficiency. It does seem to be well thought of for taxable accounts - IF you don't need and income stream. I did a quick scan and could not find an explanation as to how they achieve the tax efficiency. Perhaps they have a way of converting capital gains into ROC? That way CG tax would be deferred until the fund is sold. Otherwise CGs even if re-invested would attract annual tax.

  3. #23
    Senior Member zylon's Avatar
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    off topic - deal with it

    7 minute discussion of Mawer Tax Effective Balanced Fund
    with manager Craig Senyk. (March 2015)

    http://www.bnn.ca/News/2015/3/18/Fun...s-pockets.aspx

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  5. #24
    Senior Member dubmac's Avatar
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    I hold Mawer Tax-effective Balanced (MAW105) & have been very happy with it Belguy. I'll buy more going fwd.

  6. #25
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    Quote Originally Posted by james4beach View Post
    It's just another balanced fund, basically. What is the advantage of buying one of these 'monthly income' funds rather than just 50/50 canadian index and bonds, such as the XIU & XBB combo?

    The only reason I can see is the return of capital, which is automatically "selling off" assets internally. If you did XIU & XBB, you'd have to sell shares manually to create the same cashflow.

    However if you don't need the cashflow and regular payout, then I don't see any advantage versus XIU & XBB.

    Even for the advantage of the regular cashflow, is that really worth the approx 1.1% extra annual fees versus using index ETFs?
    I feel the same James. I wrote as much when a reader asked for my perspective as well:
    http://www.myownadvisor.ca/alternati...-income-funds/

    Besides, XIU is very tax efficient in a non-registered account.
    Hidden Content - Working on a $1 million portfolio and $30k per year from it.

  7. #26
    Senior Member humble_pie's Avatar
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    Quote Originally Posted by agent99 View Post
    I did a quick scan and could not find an explanation as to how they [mawer tax effective balanced fund] achieve the tax efficiency. Perhaps they have a way of converting capital gains into ROC? That way CG tax would be deferred until the fund is sold. Otherwise CGs even if re-invested would attract annual tax.



    the tax strategy that Mawer manager Craig Senyk is describing in the BNN video referenced upthread is, unfortunately, not discussed in the text portions of their website. It was discussed in a video on the tax effective balanced fund that's on the mawer website. The fund company has updated the video since i viewed it a year ago, so i don't know if the present version continues to explain the tax avoidance strategy.

    nevertheless it's a strategy that's familiar to many cmffers. First of all, it's buy and hold. Holding means no capital gains, at least not this year.

    but of course there are always *some* capital gains. So the next part of the tax strategy is how to offset or neutralize these.

    suppose investor would have a capital loss from selling company A but does not want what A represents to permanently disappear from the portfolio. Investor therefore identifies a closely correlated company in the same sector. Call that company B.

    taxpayer sells company A to crystallize the loss & simultaneously buys either company B's shares or else its call options. Myself, i greatly prefer the options in this situation.

    the reason for company B is the 30-day wash rule that applies following a declared loss. There is a risk that, during the 30 days, the share price of dumped company A will rise. But in the above scenario, investor has sidestepped into a proxy for company A by buying company B or its options. If company A goes up, so will company B, goes the thinking.

    it's not an exact science but it's pretty good. The reason i prefer call options in company B rather than actual shares is that the options are so much cheaper.

    at Mawer, this tax-effective strategy means that the principal fund income is dividends & interest. From these streams, mawer management takes its fees.

    without looking at the financial statements, this is suggesting to me that distributions from this balanced fund must be on the low side. If it's yielding more than 2-2.5% on a current basis to investors, i'd be surprised.

    part of this fund's strong performance since 08/09 must be due to the bull market in general. I'm happy to believe that mawer's performance has outstripped competitors in the same niche over the past 5-6 years, but i don't see such a similar rosy future in store for it - or for its competitors - at the present moment.

    no rosy future, because there's no interest income anywhere. Not rosy because markets are flatlining or falling. Not rosy because european & emerging markets have significant problems.

    it's possible an investor could do slightly better with a mix of laddered GICs (investor would have to hunt for the best deals) plus XIU or its vanguard equivalent, plus an allocation of SPY or XSP or QQQ.
    ''bonté gracieuse et toute cette sorte de chose" - Astérix chez les bretons]

  8. #27
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    Quote Originally Posted by My Own Advisor View Post
    I feel the same James. I wrote as much when a reader asked for my perspective as well:
    http://www.myownadvisor.ca/alternati...-income-funds/

    Besides, XIU is very tax efficient in a non-registered account.
    Nice article, thanks! I'm going to send this to my parents.

    They're at a stage now where they have a large portfolio of very high MER mutual funds and are planning to live off it. Incredible how much fee waste there is. I already convinced them to put some into XIU and XIC, but I need to convince them to unbundle all of those high MERs (we're talking 1.5% to 2.5%) and distill it down to the basics using ETFs, or maybe e-series index funds.

  9. #28
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    As you know, simple is always better! Good on you to help your parents.
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  10. #29
    Senior Member GreatLaker's Avatar
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    Quote Originally Posted by humble_pie View Post
    without looking at the financial statements, this is suggesting to me that distributions from this balanced fund must be on the low side. If it's yielding more than 2-2.5% on a current basis to investors, i'd be surprised.
    I own Mawer Tax-effective Balanced. Its annual distribution is about 1.4%

    It owns securities directly, compared to the regular (non-tax effective) version of the fund which holds other Mawer funds. It seems to me that holding securities directly would enable the tax loss harvesting technique that H_P describes.

    Justin Bender published a blog post with regression analysis that says this fund's out-performance is due to its value tilt, not due to any superior management techniques:
    Active Funds Exposed

    "Once the returns are put through a 3-factor analysis, most of the funds’ alpha disappears and even turns negative. Even though this analysis may seem somewhat sophisticated, it serves no useful purpose in determining which funds or risk factors will outperform in the future. It does suggest that if you are looking to add a value tilt to your portfolio (in order to increase your expected returns), there are cheaper ways to do this using low-cost ETFs, rather than paying for traditional active management."

    Nonetheless, I have no plans to sell my holding.

  11. #30
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    What are the tax consequences of buying MAW108 - U.S Equity Fund in a non-registered account? Thanks


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