# advice for beginner please, mostlly mutual funds



## beginner (Jul 29, 2011)

hello dear friends, 

As you see from my name, I know almost nothing about investing. I started to know the difference between equity and bonds one week ago when I opened RESP account. For the last 10 years, my RSP goes to GIC and one franklin mutual fund and some RBC portofolio. 

Now I want to be more active in investment  I want to try TD e-series, and so on. but my friends scared me by telling that US market is about to crash, Japan's debt is equal to 2 times GDP, etc. 

The very first question is: should I keep my investment to cash during the coming 6 months? Or it is still okay to purcahse index funds, giving the condition that I will not need the money in 5 to 10 years. I won't be happy to buy the index funds at the peak and then seeing the price dropping all the way ...

Many thanks in advance.


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## tombiosis (Dec 18, 2010)

No one can predict the markets. If you have zero risk tolerance, then stick to GIC's...or HISA...You won't make much return, but you "shouldn't" lose any money either.
In the meantime, continue reading up on investing.


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## the-royal-mail (Dec 11, 2009)

Welcome to the topsy-turvy world of investing. And CMF. 

If there is one piece of advice I can give you, it's NOT to rush into anything. We're in a period of high volatility right now. This has been going on for most of the past 10 years and no one really knows when is the best time to invest. So as suggested above, there is definitely no harm in keeping a cash balance in your TFSA and buy some GICs or simply enjoy the cash balance interest rate of 1.25% (same as what GICs pay, if you compare rates on the RBC website).

Feel free to talk to us before being sold some funds by your "adviser" or "manager". Don't be pressured. You have all the time in the world. Measure twice, cut once.


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## Abha (Jun 26, 2011)

Go invest in a practice account. Measure your performance on a 30, 60 and 90 day time frame. 

If you don't blow up your account in that time, start taking positions in small increments in whatever strategy and asset allocation you adopt.

This is too volatile a market for a beginner. You won't miss out on anything by waiting 3 or 6 months if your time frame is many years or decades. 

Take your time and learn what you are comfortable with.


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## sensfan15 (Jul 13, 2011)

On the contrary, now it is beginning to look like a fantastic buying opportunity. It may be a good time to put in money as markets slide like they have as of late. Having a significant amount of cash in the market is like being on a rollercoaster haha. I beleive a lot of humans have an emotional attachment to money!


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## Toronto.gal (Jan 8, 2010)

sensfan15 said:


> On the contrary, now it is beginning to look like a fantastic buying opportunity.


What you say is true, however, the OP said "I know almost nothing about investing". In that case, I would not invest a penny yet. Read a few basic investment books first and don't invest in anything that you don't fully understand. I would start with: Investing for Canadians for Dummies & The Lazy Investor, which you can get at the library. After that, you can graduate to 'The Intelligent Investor' & many other great books about investing, taxes, etc.

A practice account is a very good idea; I did that myself when I was the 'beginner'.


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## beginner (Jul 29, 2011)

*Family RESP*

My home internet was off during the weekend so I just read all these precious suggestions. Thank you very much. Yes I have been thinking to read a few books including the one for dummies, I remember seeing it in Chapters a few years ago. 

I have two more questions, with more details:

(1) This year I plan to put 8-10 K this year into the family RESP account (In spring we finished mortgage so I got some cash). Can you please suggest me which bank gives good choices? I talked to RBC and was suggested RBC balanced fund (60% equity, CA/US/International=37.2/12.5/10.9. The advisor told me it was a good choice. But it has only 2 star from morningstar .... For RESP, I would not want to play too much, just hope it gives more than GIC 

By the way, I bought RBC monthly income fund in my RSP back 10 years ago It seems steady and I am generally happy with its performance. But RBC no longer offer it for registered account. Should I find I bank offering similar fund for my RESP? 

(2) Last week I opend new RSP account with TD mutual funds. I authorized to transfer my RSP-GIC from another bank to TD. Advisor suggested me "TD comfort balanced growth portfolio",(stocks CA/US/International=28.9/15.3/15), with one star rating from morning star. 

When I decided to transfer my GIC to TD, I wanted to change it to e-series later. ---- Now have reading all your suggestions, I guess it is better not to try with e-series right now. I wonder, however, is this portfolio a good choice for me? I used to be very conservative but now would like to take more risk. --- in year 2008/9, when I saw my mutual funds dropping a lot, I got panicking and sold some to cash  --- I feel I grow up a bit after that and won't be so nervous if similar things happening.


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## Belguy (May 24, 2010)

You might want to consider the RBC Equity Income Fund D which is a Morningstar 5-star rated fund.

http://funds.rbcgam.com/pdf/fund-pages/monthly/rbf1018_e.pdf

Also, if you haven't done so already, take a look at the model portfolios at www.canadiancouchpotato.com


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## Abha (Jun 26, 2011)

You can do much better than that RBC fund. Isn't the MER on that somewhere in the 1 - 2% range. 

XDV might be a good fit but others will be better able to advise you on Canadian dividend ETF's.


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## Belguy (May 24, 2010)

And so, which Canadian Dividend ETF's, or Canadian Dividend Mutual Funds, would you recommend ahead of the RBC Canadian Equity Income Fund D


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## Abha (Jun 26, 2011)

*Vanguard Dividend Appreciation ETF

Claymore International Fundamental Index ETF

iShares Canadian Dividend ETF

BMO High Yield U.S. Corporate Bond Hedged to CAD ETF*


These are just four that I can think of at the moment for yield plays. But please do your own homework on these as they are not recommendations. 

The only thing that annoys me more than Tea Partiers are MER fees.


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## Jon202 (Apr 14, 2009)

Abha said:


> The only thing that annoys me more than Tea Partiers are MER fees.


Gold!


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## Belguy (May 24, 2010)

Abha, you'll have to come up with some better examples than the ones that you provided to convince me to switch out of the RBC Canadian Equity Income Fund D.

Here are some comparative one year returns as of June 30: 

RBC Canadian Equity Income Fund: +37.69% (3 Yr.: +16.68%)
Vanguard Dividend Appreciation ETF: +17.94% (3 Yr.: +4.60%) (as of July 30)
Claymore International Index ETF: +18.92% (3 Yr.: -2.80%!!!)
iShares Canadian Dividend ETF: +21.46% (3 Yr.: 6.47%)
BMO High Yield U.S. Corporate Bond Hedged ETF: +14.62%

Do you have any other possible choices? By the way, to be fair, just so that we are comparing apples to apples, perhaps we should stick to Canadian Equity Income Funds for these comparisons.


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## Abha (Jun 26, 2011)

I don't follow dividend stocks too closely but I'll get back to you a little later. 

I'm sure some of the individuals on this site can do far better than me in providing quality names with low fees.

I'll do some research tonight


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## OhGreatGuru (May 24, 2009)

Belguy said:


> And so, which Canadian Dividend ETF's, or Canadian Dividend Mutual Funds, would you recommend ahead of the RBC Canadian Equity Income Fund D


RBC Canadian Equity Income Fund used to be Diversified Income Trust Fund. The CDN Investment Funds Standards Committee (CIFSC) has changed the "Dividend" classification to Dividend & Income Equity Fund". With the change in tax treatment of income trusts, they say many trusts are reverting back to corporations (although Income Trusts still exists as a classification).

I'm not quite sure how to compare this Equity Income Fund to Dividend Funds, except to offer the observation that Income Trusts were actually doing what dividend-paying corporations are theoretically supposed to do - returning operating profits to shareholders. But by merging the two, now you are comparing the past performance of funds that used to be in separate classes. 

Mind you the CIFSC definition does finally require that the holdings meet some minimum yield criteria.

Maybe some of the old Dividend funds will be reclassified as CDN Large Cap. Funds if their yields do not meet the crieria. I know Pape complained a number of years ago that many Dividend funds should be thus reclassified beause they in fact did not earn a lot in dividends.

PS: To illustrate the problem, the CDN Dividend Funds by the Big 5 banks used to rank pretty consistently in the top 10-20% of this class. Usually the were all rated 4 or 5 stars. But now that they are grouped with a number of funds that used to be Income Trust Funds, their performance and ratings suffer by comparison.


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## Belguy (May 24, 2010)

Thank you, OhGreatGuru for useful information that I was not aware of.

Do you have any opinions on the RBC Canadian Equity Income Fund D or any preference for an alternative fund in the same category? Which ETF's would fit into the same category as this fund so that I can compare their relative performances?


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## andrewf (Mar 1, 2010)

I don't think there are any real high dividend yield ETFs. CDZ uses the Dividend Aristocrat methodogy of selecting companies that meet certain metrics and have increased dividends each of the last five years.


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## alphatrader2000 (Aug 18, 2010)

beginner said:


> hello dear friends,
> 
> As you see from my name, I know almost nothing about investing. I started to know the difference between equity and bonds one week ago when I opened RESP account. For the last 10 years, my RSP goes to GIC and one franklin mutual fund and some RBC portofolio.
> 
> ...


Your portfolio allocation depends on many personal criteria. Timing the market also is very dangerous. I suggest reading some books before you start investing by yourself. There are many great books. Once you feel comfortable then you should probably consider ETFs. Open a discount broker to reduce your cost, there are many good ones. I would suggest looking at Rob Carrick's list from Global and Mail.


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## beginner (Jul 29, 2011)

Belguy said:


> You might want to consider the RBC Equity Income Fund D which is a Morningstar 5-star rated fund.
> 
> http://funds.rbcgam.com/pdf/fund-pages/monthly/rbf1018_e.pdf
> 
> Also, if you haven't done so already, take a look at the model portfolios at www.canadiancouchpotato.com


Thank you very much Belguy! --- For sure this RBC equity income fund looks much better than the one I got. I don't know why my advisor did not recommend this to me. --- And, I just went to the couchpotato website and found the model portfolios with e-series. That was pretty easy to understand and attractive as well. I remember one comment I have heard more than once: index funds beats 80% of most of funds. So for my RSP account with TD, I plan go with this portofolio now.


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## beginner (Jul 29, 2011)

*A big thank- you*

Hello, alphatrader2000,andrewf, Belguy again, OhGreatGuru,Abha and Jon202, thank you all so much. Many of your jargons are still new to me and that used to scare me a bit  But I will read more posts and books later on to get myself wet on this .. 
Have a great week ...


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## OhGreatGuru (May 24, 2009)

Belguy said:


> Thank you, OhGreatGuru for useful information that I was not aware of.
> 
> Do you have any opinions on the RBC Canadian Equity Income Fund D or any preference for an alternative fund in the same category? Which ETF's would fit into the same category as this fund so that I can compare their relative performances?


I have no comment on ETF's. And as noted in the PS to my post, I don't quite know how to compare funds that used to be Income Trust Funds to classic CDN Dividend funds. I would have recommended RBC Dividend or TD Dividend, or almost any other CDN Dividend fund by the Big 5 as having reliable, long-term performance and reasonably well-rated for their class. But their ratings have dropped because they are now being compared to a number of funds that used to be Income Trust funds. I would be interested in seeing some opinions from some knowledgeable analysts as to how this will all shake out. 

_RBC CDN Equity Income Fund invests primarily in a diversified portfolio of Canadian securities, including, but not limited to, common and preferred shares of Canadian companies that pay dividends, real estate investment trusts, and income trusts._

The fund is considered to have "Trust Investment Risk". "Small Cap Risk" is not listed amongst its risks in the prospectus, but I think it likely that the average size of companies it holds would be smaller than the Dividend fund, whith its emphasis on "major" corporations. It also can have turnover rate up to 70%. This leads to higher management fees, and can generate more taxable distributions. Long-term investors usually try to avoid this kind of "churn" rate.

_RBC Dividend Fund invests primarily in common and preferred shares of *major *Canadian companies with above average dividend yields._

It may also invest in Income Trusts, and is therefore considered to have "Trust Investment Risk", but I believe its exposure to this is much less than the Equity Income Fund. It does not have the same high turnover rate as the Equity Income Fund.

Sometimes I suspect the CIFSC's classification changes create more confusion than clarity.


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## OhGreatGuru (May 24, 2009)

beginner said:


> ...
> 
> ...
> By the way, I bought RBC monthly income fund in my RSP back 10 years ago It seems steady and I am generally happy with its performance. But RBC no longer offer it for registered account. Should I find I bank offering similar fund for my RESP?
> ...


A 50/50 split between RBC CDN Bond Index and RBC Dividend will emulate the RBC Monthly Income Fund very closely, if you rebalance it periodically. If you really want to change banks, TD's Monthly Income Fund is well-rated too - it has a slightly higher equity % than RBC's.


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