# CIBC Precious Metals Fund (CIB497) and Gold/Silver related



## Killer Z (Oct 25, 2013)

Hi all, I am a long time reader, first time poster. I really value a lot of the opinions I have read on this forum, so I thought I would inquire with respect to the above noted fund.

This fund is currently made up of:
Primero Mining Corp (PPP) 
5.77% 
B2Gold Corp (BTO) 
5.73% 
Silver Wheaton Corporation (SLW) 
5.39% 
Tahoe Resources, Inc. (TAHO) 
5.21% 
Agnico Eagle Mines Ltd (AEM) 
4.93% 
Yamana Gold Inc (AUY) 
4.73% 
Goldcorp, Inc. (GG) 
4.56% 
Randgold Resources Ltd ADR (GOLD) 
4.47% 
Nevsun Resources, Ltd. (NSU) 
4.25% 
Franco-Nevada Corp (FNV) 
4.23% 

The fund itself makes up approximately 8% of my RRSP portfolio, and 6% of my entire investment portfolio. I have been dollar cost averaging by making steady monthly contributions to it since 2008. I am currently down 45%.

I am in my early 30s, I have a strong/steady income, and do not plan to access my RSP portfolio until my late 50s or early 60s.

Should I:

1) Stay the course and continue contibuting to this fund?
2) Hold, with no additional contributions?
3) Sell, and invest the proceeds in something else that can regain my losses?

I really appreciate any thoughts or advice you all might have. Cheers.


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## Killer Z (Oct 25, 2013)

Sorry to bump this thread, but could really use some advice. Lots off great minds on this forum. From the research I've done, the top 3 holdings appear to be "Buys" .....just not sure whether to sell/hold/buy


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## londoncalling (Sep 17, 2011)

Hi Killer,

I would follow my Investor Policy Statement. Do you have one of these?
Also, what are your reasons for buying, selling or holding? Are you questioning the fund? its management? the holdings? or the general sentiment of precious metals? 
I will throw out a couple clichés

"buy low sell high'
"be fearful when others are greedy and greedy when others are fearful"

There is lots of discussion on other threads about the direction gold/precious metals are headed.
Disclosure: I do not hold any pm stocks or etf's.


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## GoldStone (Mar 6, 2011)

Killer Z said:


> The fund itself makes up approximately 8% of my RRSP portfolio, and 6% of my entire investment portfolio.


How the rest of your portfolio looks like?

I don't like precious metal stocks and I don't own any. But I will be the first to tell you that 6% of portfolio in precious metals is not unreasonable, if the rest of your portfolio has zero exposure to PMs. Your PM fund is down 45% but hopefully the rest of your portfolio is up nicely. The idea of asset allocation is to combine multiple building blocks that don't move up and down together.


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## moose (Nov 19, 2013)

Hi Killer, 

I'm in the same position as you in the sense that I've been lurking some time and just new to posting. Your are 100% right about the opinions on this forum. Mine doesn't deserve much weight. For the sake of starting a discussion I write this reply. I'll start with my disclaimer: *I own shares in Goldcorp and I'm -26% on them at the moment*. I personally believe that gold/silver will make a modest comeback starting _relatively _soon, but can't base this on too much fact. My plan going forward in my _very _modest portfolio (I just started investing) is to pump my dividends (which are not high enough to get working in a DRIP) into a precious metal/gold ETF (since its a free buy for me) slowly over the next year or so. 

What I think about your situation? I like that 6% of your portfolio is in precious metals. It was suggested somewhere that 5% is a good target (for gold alone), but I can't for the life of me fine that citation. I think you've done fine, but metals have been hit lately. I assume the mutual fund is paying dividends and these are being used to DRIP (please correct me if I'm wrong), in which case the fund is cost averaging itself, probably quarterly. So my advice (again, I'm a rookie here, so please be weary and see what others have to say and most importantly, think it over yourself) is that you maybe put the monthly contributions on the back burner if you feel weary and if you think the money could go to better use somewhere else, hold the fund and let it average itself down for the next year or two. Since you have the strong income and are planning only to harvest the portfolio in ~20 years, let it steer the course for now and reassess later. Focus your energy on perhaps the other 94% of your portfolio. 

I hope to hear what others have to say on the topic as well


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## james4beach (Nov 15, 2012)

I think it's much better to own precious metals (as in bullion) rather than miners. The large cap miners have a long track record of under-performing bullion; the smaller cap miners can exhibit better returns but they're tremendously volatile and generally quite risky.

I prefer either holding physical bullion, or CEF.A (gold & silver bullion fund with track record back to the 1980s).

I do hold CEF.A


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## Killer Z (Oct 25, 2013)

londoncalling said:


> Also, what are your reasons for buying, selling or holding? Are you questioning the fund? its management? the holdings? or the general sentiment of precious metals?


Thanks for the reply london, my main reason would be the general sentiment of precious metals. There just appears to be so much negativity surrounding this sector.




GoldStone said:


> How the rest of your portfolio looks like?
> 
> I don't like precious metal stocks and I don't own any. But I will be the first to tell you that 6% of portfolio in precious metals is not unreasonable, if the rest of your portfolio has zero exposure to PMs. Your PM fund is down 45% but hopefully the rest of your portfolio is up nicely. The idea of asset allocation is to combine multiple building blocks that don't move up and down together.


Thanks for the reply Goldstone. The rest of my portfolio is PM free, and yes, the rest of my portfolio is doing great. I agree with what you are saying regarding the building blocks, that's why selling it does not appear to be the route to take.




moose said:


> Hi Killer,
> 
> I'm in the same position as you in the sense that I've been lurking some time and just new to posting. Your are 100% right about the opinions on this forum. Mine doesn't deserve much weight. For the sake of starting a discussion I write this reply. I'll start with my disclaimer: *I own shares in Goldcorp and I'm -26% on them at the moment*. I personally believe that gold/silver will make a modest comeback starting _relatively _soon, but can't base this on too much fact. My plan going forward in my _very _modest portfolio (I just started investing) is to pump my dividends (which are not high enough to get working in a DRIP) into a precious metal/gold ETF (since its a free buy for me) slowly over the next year or so.
> 
> What I think about your situation? I like that 6% of your portfolio is in precious metals. It was suggested somewhere that 5% is a good target (for gold alone), but I can't for the life of me fine that citation. I think you've done fine, but metals have been hit lately. I assume the mutual fund is paying dividends and these are being used to DRIP (please correct me if I'm wrong), in which case the fund is cost averaging itself, probably quarterly. So my advice (again, I'm a rookie here, so please be weary and see what others have to say and most importantly, think it over yourself) is that you maybe put the monthly contributions on the back burner if you feel weary and if you think the money could go to better use somewhere else, hold the fund and let it average itself down for the next year or two. Since you have the strong income and are planning only to harvest the portfolio in ~20 years, let it steer the course for now and reassess later. Focus your energy on perhaps the other 94% of your portfolio.


Great advice Moose, thank you. Unfortunately this particular fund does not pay dividends. I like your advice on continuing to dollar cost average the price down in the interim, and focusing on the remainder of my portfolio.


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## Spudd (Oct 11, 2011)

Actually according to the prospectus, it pays annually in December:

The Fund intends to distribute net income and net realized capital gains annually in December. 
Distributions are automatically reinvested in additional units of the Fund unless you tell us otherwise. Refer to Distribution
Policy on page 33 and Distribution Options under Optional Services on page 18 for more information.

So the value of your funds should be increasing by the amount of the dividends, although it will be somewhat transparent to you.


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## humble_pie (Jun 7, 2009)

spudd i haven't looked at this fund or its history - ie i'm winging this - but i'd be surprised if fund had managed to distribute anything in december 2013 ... any low dividends paid out by the holdings would have been eaten up by fund management fees ... plus we didn't really see capital gains among pm stocks in 2013 ... my guess would be that this fund management team had to invade the capital of the fund in order to pay themselves their traditional high fees ...

(aside to killer the OP) i'm glad that this is the full extent of your pm exposure, in both reg'd & non-reg'd accounts. Me i would not sell but i absolutely would stop contributing. Gold & gold stocks have long cycles, perhaps once or at the most twice a decade. We're into a drought period here.


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## Killer Z (Oct 25, 2013)

Spudd said:


> Actually according to the prospectus, it pays annually in December:
> 
> The Fund intends to distribute net income and net realized capital gains annually in December.
> Distributions are automatically reinvested in additional units of the Fund unless you tell us otherwise. Refer to Distribution
> ...





humble_pie said:


> spudd i haven't looked at this fund or its history - ie i'm winging this - but i'd be surprised if fund had managed to distribute anything in december 2013 ... any low dividends paid out by the holdings would have been eaten up by fund management fees ... plus we didn't really see capital gains among pm stocks in 2013 ... my guess would be that this fund management team had to invade the capital of the fund in order to pay themselves their traditional high fees ...
> 
> (aside to killer the OP) i'm glad that this is the full extent of your pm exposure, in both reg'd & non-reg'd accounts. Me i would not sell but i absolutely would stop contributing. Gold & gold stocks have long cycles, perhaps once or at the most twice a decade. We're into a drought period here.


Thanks Spudd and Humble. I did a review of the fund's history, and although many of the stocks that make part of the fund pay dividends, there have been no dividend payments to me in 2013 .....I believe the same can be said for 2012 although I have not searched that far back. I believe Humble is correct as the MER is 2.57%.

I was also considering exchange this fund for an ETF to at least dodge the heavy MER. Is there a PM ETF that anyone would recommend? Perhaps from iShares or Vanguard?


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## GoldStone (Mar 6, 2011)

Killer Z said:


> I was also considering exchange this fund for an ETF to at least dodge the heavy MER. Is there a PM ETF that anyone would recommend? Perhaps from iShares or Vanguard?


iShares XMA - Materials including gold/silver.
iShares XBM - Base metals. Not as much in gold/silver as XMA.
BMO ZGD - Global gold miners.

Lots more options in the US. Search etfdb.com.


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## humble_pie (Jun 7, 2009)

iShares has XGD, which holds global golds, not just canadian golds. I actually have some of this myself. Although i also sell options on it & would not hold it without this feature.

zero distributions are characteristic of many gold stock funds. The companies being held may pay out divs, but these are typically so low that their aggregate is often gobbled up by management fees. It's really only in a bonanza year for gold stocks that management will be able to realize enough capital gains that they can pay out something to the shareholders.

the 2.57% MER is actually higher if one includes what analysts now refer to as the TER, or trading expense ratio. These are the commissions paid to buy & sell the securities in the portfolio. They are not included in the MER & typically range roughly around .50%, although a highly aggressive fund will have a higher TER while that of a sleepy balanced fund will be lower.

you could find disclosure of the dollar amount of aggregate portfolio commissions in the Notes to the financial statements. You'd have to roughly compare the dollar amount to the money-under-management to get an idea of what percentage of portfolio value goes for trading commissions. This would be the TER. My guess is your CIBC fund, with the TER added, might be running you 3% per annum.

i'm not sure what to suggest if you were to dispose of this CIBC fund. Would it be a good idea to go immediately into XGD? is there a better precious metals ETF? BMO, i know, has a pm ETF that holds junior golds.

also, might one commence a wait-and-see approach that would include the selling of slightly OTM puts in the meantime? in case the pm drought lasts a long time? in such a case, one would have to stick with XGD puts since no other canadian etf has any decent option market.

in US market, among US $$ pm etfs, there is well-known GDX, which holds medium-sized global gold miners; plus GDXJ, which holds juniors. The BMO junior fund is said to be similar to GDXJ but - last i looked - the actual holdings were not the same.


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## Synergy (Mar 18, 2013)

Killer Z said:


> Is there a PM ETF that anyone would recommend? Perhaps from iShares or Vanguard?


I'm holding XGD - ishares. I've been accumulating a small position over the last few months and I have it on a DRIP - it has been paying a small distribution. It has a 0.60% MER. However, it appears to have underperformed CIB497 over the past 5 yrs (-12% vs -39% for XGD).

http://ca.ishares.com/product_info/fund/overview/XGD.htm


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## Killer Z (Oct 25, 2013)

GoldStone said:


> iShares XMA - Materials including gold/silver.
> iShares XBM - Base metals. No as much in gold/silver as XMA.
> BMO ZGD - Global gold miners.
> 
> Lots more options in the US. Search etfdb.com.


Thanks for the info. XMA appears to be a good candidate as it has similar holdings with the addition of POT, a much lower MER and it outperformed my CIBC PM Fund this past year, past 3 years and past 5 years.


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## fatcat (Nov 11, 2009)

i would do nothing ... just sit tight

if you sold, it would presumably be to buy something better
like what ?

everything is expensive

the only things that are cheap are metals and commodities
which is what you have

there is a good chance they are bottoming and that everything else might be do for a correction

at your age you have options as long as you are managing your cash needs well

i would wait and see if they make a move to the upside and then begin to shift into lower cost, lower mer funds

unless you really need the money i would not lock your losses given the lack of good re-investment options


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## GoldStone (Mar 6, 2011)

fatcat said:


> i would wait and see if they make a move to the upside and then begin to shift into lower cost, lower mer funds
> 
> unless you really need the money i would not lock your losses given the lack of good re-investment options


Shifting to something like XMA makes perfect sense. He ends up owning the same basket of stocks, at a much lower ongoing cost.

Locked losses vs. unlocked losses doesn't make an iota of difference when you shift to a very similar fund.


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## james4beach (Nov 15, 2012)

humble_pie said:


> i'm not sure what to suggest if you were to dispose of this CIBC fund. Would it be a good idea to go immediately into XGD?


Why not ditch the stock-based fund and go instead into a pure bullion fund? You're keeping your exposure to precious metals fundamentally but ridding yourself of corporate exposure.

Here is a google chart of the CIBC Precious Metals fund versus CEF.A (there are other bullion funds too, but I'm using it to illustrate performance differences)
http://tinyurl.com/nszbwco

Play with the time frames and you'll see that in most time frames, the CIBC Precious Metals fund under-performed bullion. That chart shows the comparison back to October 2007 and the performance difference is huge over the 6 years:
CEF.A +50%
CIBC Precious Metals -50%


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## Killer Z (Oct 25, 2013)

My apologies for bumping my own thread, but I am really struggling here and could use some advice from the CMF brain trust. I have decided to essentially transfer my position in precious metals from my CIBC Precious Metals mutual fund (transitioning out of all my mutual funds) to an ETF holding something similar. I am not crazy about this sector, but I would rather park what I have invested and see what the future brings .....and of course save myself the 2.5% MER I am currently paying.

When examining XMA and XGD, I noticed that both hold a large amount of ABX. My mutual fund did not include any ABX, and my preference is to avoid it if I can. I cannot find any other comparable ETF options, thus I am struggling with the decision of:

1) Going with XMA;
2) Going with XGD; or
3) Splitting the amount (approx $20k) amongst two or three of the best quality stocks in the category.

Any advice would be welcomed. Cheers.


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## underemployedactor (Oct 22, 2011)

I'm with J4B, just hold the bullion. Or have half your stake in bullion and then the other half split between Goldcorp and B2Gold - both have good management and are most likely to weather further decline in gold prices in MHO.


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## doctrine (Sep 30, 2011)

I don't own any precious metals stocks, although if the price was right, I might buy SLW (Silver Wheaton), as I like their business model. I like the Franco-Nevada Corp business model too, but they're far too expensive (and a rare dividend aristocrat in the sector). That being said, if gold or silver really fell through the floor, (like silver < $15/oz, gold < $800/oz), then I would probably make some kind of contrarian play in those sectors with a 5% weighting. I can't predict the price, but I believe both silver and gold production is at record highs so I'll stand by for now. But if I owned any, I wouldn't sell either, so I would hold on if I were you and/or maintain allocation.


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## james4beach (Nov 15, 2012)

I bought some physical gold bars this week. I paid only about 2% premium to the spot price.

That's a one-time 2% cost as opposed to a yearly MER fee. Very attractive in my opinion!

I own a few gold bars and CEF.A shares, but don't own any miners. My combined bullion and CEF.A is up 47% versus its purchase cost


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## lonewolf (Jun 12, 2012)

Killer

Humble is spot on on this one. If you want to play a mutual fund go with a fund that tracks an index i.e., XAU


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## Spudd (Oct 11, 2011)

Killer Z said:


> When examining XMA and XGD, I noticed that both hold a large amount of ABX. My mutual fund did not include any ABX, and my preference is to avoid it if I can. I cannot find any other comparable ETF options, thus I am struggling with the decision of:
> 
> 1) Going with XMA;
> 2) Going with XGD; or
> 3) Splitting the amount (approx $20k) amongst two or three of the best quality stocks in the category.


What about just buying whichever 3 stocks are the top holdings of your mutual fund?


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## Synergy (Mar 18, 2013)

I still like the gold miners at these levels - XGD. I'm holding POT individually and have my eyes on TCK so I don't have any interest in XMA.

edit: you could hold POT and G and call it a day? Or POT,G, & TCK??


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## fatcat (Nov 11, 2009)

Synergy said:


> I still like the gold miners at these levels - XGD. I'm holding POT individually and have my eyes on TCK so I don't have any interest in XMA.
> 
> edit: you could hold POT and G and call it a day? Or POT,G, & TCK??


excellent except kill the G .... at least POT and TCK actually produce a useful product


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## underemployedactor (Oct 22, 2011)

james4beach said:


> I bought some physical gold bars this week. I paid only about 2% premium to the spot price.


Where, if I may be so bold, did you get for only a 2% premium?


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## Synergy (Mar 18, 2013)

fatcat said:


> excellent except kill the G .... at least POT and TCK actually produce a useful product


I'm not sure it's fair to say that Gold is useless or evil (edited post). The metal has many potential uses - cell phones, computers, jewlery, NASA (suits, statelites, etc.), dentistry, etc. It's a good conductor of electricity (cords, chips, etc.), it corrosion resistant (buildings, statues, etc.), can easily be sculpted and is inert / non toxic (dentistry). XGD is really such a small position for me and I only got interested a few months ago when the price seemed to have stabilzed / formed a bottom and there appeared to be some value.


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## james4beach (Nov 15, 2012)

underemployedactor said:


> Where, if I may be so bold, did you get for only a 2% premium?


At Scotia Plaza in downtown Toronto. This is the price if you go in person and pay with USD (I brought US$ cash). For 1 oz bars, they only sell Valcambi Suisse rectangular or circular bars which are stamped with the Scotia logo on one side. However they're real Valcambi Suisse bars, complete with the Valcambi markings as well as a Valcambi assay certificate. Pretty solid, though I don't like the Scotia logo on them.

As I walked in I checked spot market price which was 1255 usd. I paid a total 1285 after bar charges and fees, so that's 2.4% premium to spot for 1 oz. I have consistently paid that kind of premium in the past when buying bars at scotia plaza downtown going back many years so I expect it to be between 2% and 3% premium there


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## james4beach (Nov 15, 2012)

By the way if you pay CAD the premium ends up being much higher as you're also paying a forex spread. I enjoy the magic process of converting US dollar cash into gold... it's quite beautiful, I'll post a photo if I have time


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## lightcycle (Mar 24, 2012)

james4beach said:


> As I walked in I checked spot market price which was 1255 usd. I paid a total 1285 after bar charges and fees, so that's 2.4% premium to spot for 1 oz.


James, what is the premium for a 10oz bar? Also, is it the same premium to sell as well?


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## Killer Z (Oct 25, 2013)

This forum truly is terrific. Thank you for all the advice guys and gals. There were many great suggestions, however I decided to shift my Precious Metals Mutual Fund evenly amongst some of its top holdings: Goldcorp, Silver Wheaton, B2Gold and Primero. Had a nice first day with my new 4 positions today too. Thanks again everyone.


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## james4beach (Nov 15, 2012)

lightcycle said:


> James, what is the premium for a 10oz bar? Also, is it the same premium to sell as well?


I have no idea, different fee schedules apply to larger transaction amounts. I don't know how much you lose when selling to them, I've never sold any of my precious metals.


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