# BMO Mutual Funds for Retired Mom



## 424GME (Jun 26, 2010)

Hi, this is my first post on this site, though I have spent hours reading. 

My retired mother and i went to BMO to set up a TFSA for her. I first thought that the BMO Monthly Income would be good for her, as she is 71 and would benefit from the income stream. 

The bank employee quickly said that you can't have that fund in a TFSA and pushed the BMO SelectClass Security Portfolio.

My thoughts were because she is on a fixed income of CPP, OAS, and a modest Gov Pension, that another monthly check coming in would benefit her.

Thank you for taking the time to read this, I greatly respect and appreciate any advice and feedback.


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## andrewf (Mar 1, 2010)

You can set up a TFSA brokerage account and buy whichever mutual funds you like. Questrade, for example. You also get fee rebates on the MER (which can be substantial). You can also set up periodic transfers to her bank account.


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## 424GME (Jun 26, 2010)

andrewf said:


> You can set up a TFSA brokerage account and buy whichever mutual funds you like. Questrade, for example. You also get fee rebates on the MER (which can be substantial). You can also set up periodic transfers to her bank account.



My first thought was just that, but I realized that she is comfortable with BMO and has banked there for some time. 

I am very comfortable managing my own money, but when it comes to someone else, not so much.

I guess what I am really asking is would a monthly income fund be good for a Lady in her situation. Put 10,000 in it, in a TFSA and get the bank to transfer the monthly contribution to here chequing account.


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## jamiechese (Jul 13, 2010)

Hey 424GME
I am fairly new to investing aswell and as most other people on this forum will push the fact that you should use a discount brokerage firm to invest money. That way there wont be any sales pressure via "Professional Managers". In all honesty they are just basically sales people.

Here is my reccomendation, atlhough it really does depend on what you like.
1) Look for a Mutual Fund with no-load and low MER.
2) Look for a ETF with low MER/MF's

Now it depends what brokerage you go to but if you go Mutual Fund way the trades usually (I know with Qtrade) they are free. If you go with ETF's there would be a one time commission but afterwards you could setup a PAC (Pre-Authorized Contribution Plan) although the only ETF company I know that offers this is Claymore Investments.

Here are some possible options...
ETFS: (Just a note these two ETFs are under "Growth/Income". I honestly am not encouraged 
by bonds mostly because their returns aren't the greatest.

Claymore Canadian Financial Monthly Income ETF
- This is a fairly new ETF from Claymore although I personally like the idea of it because its mostly Canadian Financial Institutions and for the most part they are stable financially. Also they offer a set monthly distribution amount.

Claymore S&P/TSX Canadian Dividend ETF
- I like this ETF because it tracks all sectors of the market and invests in strong dividend paying companies.

Mutual Funds: (I personally would not go for Mutual Funds as their MER's can be a decent amount over time although
there are a few decent ones out there). Although I honestly cannot reccomend any as I have not looked thoroughly
into them.

In the end make sure you do your own research and look for ones that offer a decent dividend and the MER's arent above ~1.3% depending on whether you go for Mutual Funds or ETF's.

EDIT: I also like ETF's because I can always see how its performing, whereas a Mutual Fund usually you have to wait until the end of the month or end of the year to see its performance.


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## 424GME (Jun 26, 2010)

My thoughts were that if we opened up a self directed TFSA for her, that we would buy a lower risk reit. 

But she is comfortable with bmo and has been with them for some time now. So leaning towards a bmo mutual fund was what I was after. Could we not buy 10,000$ in a monthly income fund and have the distibutions paid to her chequing account


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## OptsyEagle (Nov 29, 2009)

It may not have been the fund that was the problem, but the income stream. Most TFSAs do not allow for automatic money to be paid out of them. Probably because this money needs to be tracked so as to increase your TFSA room in the future and the banks are not set up for this yet. I would think that holding that fund with reinvested dividends would be OK. You can ask.


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## OhGreatGuru (May 24, 2009)

BMO's Prospectus says its Monthly Income Fund is eligible for registered plans. But it qualifies that by saying: _This fund is more suitable for non-registered accounts because it’s designed to pay out regular monthly income. Distributions paid on funds you hold in a BMO registered plan must be reinvested in the fund._

So, if you want the distributions paid out in cash monthly, you can't hold it in a TFSA.


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## Rox (Oct 17, 2010)

OhGreatGuru said:


> BMO's Prospectus says its Monthly Income Fund is eligible for registered plans. But it qualifies that by saying: _This fund is more suitable for non-registered accounts because it’s designed to pay out regular monthly income. Distributions paid on funds you hold in a BMO registered plan must be reinvested in the fund._
> 
> So, if you want the distributions paid out in cash monthly, you can't hold it in a TFSA.


That's the idea,... in TFSA, it is not meant to be taken out easily, this account is meant to be accumulated and only for very critical reasons is the money to be taken out for use, and then work has to be done to re-calculate the "room" vacated, for future refills.

For monthly usage, there is no other choice but just to take out from a normal non-registered account, I presume,... and get taxed along the way.


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## andrewf (Mar 1, 2010)

Withdrawals from TFSA are not complex or difficult. Just making withdrawals in nice $100 increments and the math is easy to track. No sense in paying tax when you have excess TFSA room.


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## kcowan (Jul 1, 2010)

I agree with andrew. Taking the distributions is not allowed by BMO but selling off a bit of the accumulated principal now and then is perfectly OK.


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## Rox (Oct 17, 2010)

Guys, taking the distributions out every month for food and lodging is the same as selling off a bit of the accumulated principal now and then - the determinant is the time interval between successive executions for the above two activities. 

The first one is every month.

The second one could be spaced out every three, or more months, ie after the distribution has accumulated over the said three or more months, then take out everything at one go.

Perhaps the TFSA is more suitable for the second activity. Still, I feel it's better to leave the investments in TFSA, if they are meant for TFSA. Use other dividends or interests (outside of TFSA) for the regular income. 

Let TFSA run as fast as it could to make tax-free money for us. Let's not spend the time taking out and putting back in the money, for the time lapse between the taking-out and the putting-back-in incurs time, and time is money.


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