# new strategy



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

Alright, I have done some reading on million dollar journey and given thought to a new strategy. I am relatively young and have time on my side but have had poor returns (and high fees) the past 10 years and want to start seeing some growth in my RRSP and not lose hundreds at a time the way I do now. I'm thinking that dividend stocks might be a good answer. I've reviewed a list that was posted in a thread from 2007 and it identified the top 20 CDN dividend payers. These seem to be paying about 5% a year. So if I grab something like perhaps BMO and CNR just to take two examples, and move the money I have in those high-fee mutual funds (that we discussed earlier) I currently have, would that work? Would this result in lower fees for me and more predictable, modest growth?

Another idea I read about was a grouping of these dividend payers...I believe this is called an ETF? Would this be better than just choosing 1-2 stocks?

Also, I'm guessing the procedure for this is as straightforward as calling up my bank (the # on my RRSP investment report) and having them switch the investments?

How does this sound?


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## Jon_Snow (May 20, 2009)

As a matter of fact, I just made a sizable purchase of a dividend based canadian ETF just yesterday... nice gain on my first day. 

The more I think about it, dividend investing just seems to match my investing personality.

Check out CDZ and the stocks this ETF holds - a very nicely diversified group of canadian companies. Buying individual dividend stocks seemed like too much hassle to me.


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

Thanks Jon. I read about this claymore site as well.

http://www.claymoreinvestments.ca/e...ed-funds/fund-details/fund-summary?ticker=cdz

0.6% mgmt fee, quite a bit less than the 2-3% MG earlier calculated that I was paying now for my mutual funds. If I'm reading this right, the distributions are paid monthly and seem to be bringing in about 4.42%. So does this mean if I invest $x I will receive a 4.42% (or whatever the distribution % is) payout every single month? That means after 12 months I would receive a 48% distribution/increase in account value, assuming the 4.42% rate stays constant over that 12 months?

Am I understanding this right?


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## HaroldCrump (Jun 10, 2009)

the-royal-mail said:


> 0.6% mgmt fee, quite a bit less than the 2-3% MG earlier calculated that I was paying now for my mutual funds.


True, but you are comparing ETF MER with active MF MER.
Some might argue that 0.6% is a tad high for an ETF.



> If I'm reading this right, the distributions are paid monthly and seem to be bringing in about 4.42%. So does this mean if I invest $x I will receive a 4.42% (or whatever the distribution % is) payout every single month? That means after 12 months I would receive a 48% distribution/increase in account value, assuming the 4.42% rate stays constant over that 12 months?
> 
> Am I understanding this right?


No, the 4.42% is annual, not monthly compounded.
If there were an ETF that paid 48% annualized returns, oh boy, would there be a riot


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

Thanks Harold, that makes perfect sense.

Now, this 4.42% is based on the share price/value is it not? So if I have share value of $5K then my annual average payout would be 4.42% of $5K, right? Then if the share value goes up to $10K (regardless of my initial $ investment), I would get 4.42% of this new value plus a cool $5K extra in my pocket if I cash out at that point. Is this correct?


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## HaroldCrump (Jun 10, 2009)

the-royal-mail said:


> Now, this 4.42% is based on the share price/value is it not?


Yes, yield is usually calculated based on previous closing price.
As unit price changes, yield rises/falls assuming payout stays the same.



> So if I have share value of $5K then my annual average payout would be 4.42% of $5K, right?


Not quite. Payout is whatever the management decides to pay out and is a specific, fixed amount.
The 4.42% is your yield.
On the day you purchase the security, the yield and payout match up.
But next day onwards, the yield will change based on daily closing price, but nominal payout will remain same (until management changes it).



> Then if the share value goes up to $10K (regardless of my initial $ investment), I would get 4.42% of this new value plus a cool $5K extra in my pocket if I cash out at that point. Is this correct?


No, if the unit price doubles, your yield would reduce.
Nominal payout (in $$) would remain the same.
You will have $5K of capital gains if you choose to sell.

Mind you, I don't know any specifics of this particular security.
These are just general concepts on how yield works.


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

Thanks Harold, I understand what you have said. Makes perfect sense the way you answer my questions. I also spent some more time on that claymore site, it's a great one, appears very to-the-point and factual. Using their handy Portfolio Index Allocator I was able to look at the performance of this and one other ETF over the past 10 years and CDZ has done remarkably well, 2008 excepted.

Anyway, their report says "It is not possible to invest directly in an index." Does this mean I cannot buy this ETF fund by calling my bank and asking them to buy this in my RRSP?


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## andrewf (Mar 1, 2010)

Royal Mail: Don't do anything hasty. Sounds like you have some research to do before you should start making investment decisions without advice from an investment advisor. The difference in MER for now will probably be nothing when compared to what a few mistakes caused by misunderstanding. No hurry!

Now, on the dividend yield of CDZ. It holds a portfolio of dividend paying stocks, and pays that dividend to shareholders on a monthly basis. This is not a fixed % yield on the price, but more a fixed payment amount. Of course, the dividend is not guaranteed. If any of the constituents of the index decrease or eliminate their dividend, your payout will similarly decrease. The dividend ought to grow gradually over time as the constituent companies raise their dividends.


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## andrewf (Mar 1, 2010)

To buy CDZ, you need to open a brokerage account. Many banks offer this service, but they typically won't perform the transactions for you, but it's relatively straightforward.


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

Thanks andrewf. I understand and agree. Except what's a brokerage account? I'm with the-royal-bank. What would my part in this be?


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## MoneyGal (Apr 24, 2009)

A "broker" is an intermediary between a buyer of securities and a seller of securities. A brokerage account is simply an account for the purchase and sale of securities. 

You can have a brokerage account through a bank's investment side, a "discount brokerage" (like an online discount brokerage - I use TDWaterhouse although I have no other business with them), or an investment advisory shop (largest one in Canada is Investors Group).


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

I see. How about this?

http://www.rbcdirectinvesting.com/

And I see there's a nifty practice account. Hmmmm...

http://www.rbcdirectinvesting.com/services/practice-accounts/winter-practice-accounts-general.html


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## dilbert789 (Apr 20, 2010)

I have shares in CDZ, I think buying an ETF is a better idea than buying 1 or 2 stocks. The ETF will buy you a small part in a lot of stocks so one dropping won't totally kill you. At the same time, one going up will be hidden partially also though. 

If you are just buying an ETF I would look at what your commissions are and see how much benefit you get from RBC. Questtrade's about $5 a trade.


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## bean438 (Jul 18, 2009)

Royal, get a copy of "The single best investment" by Lowell Miller, and "the investment zoo" by Stephen Jarislosky.

Both excellent books. The 1st book is all about dividend growth investing.

Growing income is what you are after and price fluctuation is the cost of the ride.

Since you are focused on the income stream, you can ignore the market fluctuations, and thus not worry that you are getting "killed" when prices drop.

You would focus on markets drops as an opportunity to make a killing, not get killed.


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## Belguy (May 24, 2010)

When looking for income, consider a ladder of GIC's, bonds, real estate income trusts, preferred shares and dividend-paying stocks.


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## Mike59 (May 22, 2010)

the-royal-mail said:


> So if I grab something like perhaps BMO and CNR just to take two examples, and move the money I have in those high-fee mutual funds (that we discussed earlier) I currently have, would that work? Would this result in lower fees for me and more predictable, modest growth?


Your plan is a reasonable one, but there are few downsides I see to the the approach:
- you will minimize your exposure to potentially large capital gains by focusing and relying on companies who give you the predictable 3-5% annual dividend payout. That of course depends on how you are structuring for tax and estate planning.
- Although tax-sheltered in your RRSP, I believe that RRSPs are probably one of the worst places to hold your dividend-paying investments, as your entire dividend is subject to taxation in retirement. Holding CDZ in your TFSA would make more sense to me, but that leads to another question...
- Have you calculated the fees/commissions to make such a move? Until you portfolio is very large, it may not be worth buying individual stocks or even ETFs until you reach the right level (which is why I'm still using Bank Index funds with lowest possible MER)
- Giants can/will fall: What if you had 10% invested in oil, and chose BP as your oil play? Unless one is paying very close attention, things can get ugly in a hurry when you only have a narrow set of investments

I don't see a 3-5% dividend as being desirable for all the risk one takes when in the stock market. There will come a time again when interest rates on bonds/GICs will far exceed 5%, with less risk and it may be worth trying to plan ahead. 

The general theme of your direction is a positive step , downsizing those high-MER mutual funds in favor of a self-directed approach is almost always a good thing.


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## Cal (Jun 17, 2009)

For now, it seems that the ETF's would be the best step, until you gain a little more knowledge about the dividend paying stocks. They would give you some diversity as well, as opposed to putting all of your eggs in a few stocks.

The book mentioned by Lowell Miler is good. As well as 'The little book of big dividends'. It is american, but those are the dividend paying stocks that you would want to hold in your RRSP b/c of the foreign with-holding tax rules.

As for the CDN dividend paying stocks....'the lazy investor' is a simplified book on non-RRSP holdings. And if you are more interested in accumulating more shares, rather than cash flow to re-allocate, I would check out www.dripinvesting.org.


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

Thanks all. Thus far I have learned that the ETF via a brokerage account such as questrade is probably the best way. I imagine the-royal-bank will charge me some sort of a fee to transfer the $ out of my mutual funds and into the questrade brokerage account. Only concern I might have is on ensuring that the transfer is done correctly as a transfer, so I avoid the TFSA situation we were discussing this morning.

I'll try to check out those books next time I'm in a library or book store.

Regarding the 3-5% rate as mentioned by 59, that's a good point. In better times I (like everyone else) might have access to better returns, though the cost of the CDZ ETF (for example) hasn't really changed much over the past 10 years. This would be a good thing to consider for stable growth at any time really, but if a better future investment opp should arise, then I would want to move around the money at that time.

I am wondering about something else though. The monthly dividends that are paid out -- if this ETF purchase was in my RRSP would the money remain in the account? It seems that Questrade will re-invest into my ETF (DRIP? DPP?) but only if the dividends from individual companies are enough to buy at least one share. I wouldn't have quite that much money for quite a ways off, so in the meantime where would the dividend cash end up? Remember my goal with this money is to save for retirement, so I don't need it now, just want to see results on paper for now.


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## Four Pillars (Apr 5, 2009)

If you have any decent amount of savings, you should be able to get Questrade (or whoever) to cover the transfer fee.


One downside with ETFs is that you can't automate transactions. This may not apply to your situation, but my suggestion for anyone with less than $100k is to use TD e-funds. They are similar to ETFs, but you can set up a monthly purchase plan if that is what you want to do.

They have slightly higher fees than the cheapest ETFs but are more convenient.


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

Hi Four, I took a look at the TD e-series funds as you suggested. I don't exactly understand why I would want to automate transactions...can you tell me more? I do have less than $100K but have no desire to setup a monthly purchase plan. I want to come in with a chunk of money from my existing bank mutual funds rrsp and transfer that money to dividend stocks. The CDZ ETF seemed to be the best deal and as you say I could get the transfer fees paid by the destination company. One of the ones I found on TD's site had a MER of 0.48%, quite reasonable.

http://www.tdassetmanagement.com/Co...undCard.asp?FID=4817&TAB=OVERVIEW&PID=10&SI=4


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## MoneyGal (Apr 24, 2009)

The issue is what you do with the dividends when they are paid. They will sit in your account in cash unless and until you reinvest them, and there will be a trade fee to reinvest. In contrast, using some index funds will allow you to have the dividends reinvested at no charge, keeping you (relatively) continuously in the market, without any cash drag (or protection! ) in your account.


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

Hmmm. So if I buy CDZ through my bank or Questrade, are you saying that the dividends won't be reinvested for free? It would be silly to have to continually and manually reinvest the $35-50 or so per month in dividends I would get out of CDZ.


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## Underworld (Aug 26, 2009)

There are some immediate benefits that I know of, of holding dividends directly with the company itself, rather than going through a third party such as discount broker:

+ If the company offers DRIP, your re-investment can be re-invested to buy a fraction of a share. Say you get $0.50 back as a dividend payout. It can be used to buy a % of a share, that you would otherwise would have to save up to buy.

+ By directly holding your shares with the company they sometimes offer discounts on the cost of the dividend yielding stock! Take for example Telus offer 3% discount on normal price with its Drip. http://about.telus.com/investors/en/investor/shareholder.html

If you couple that with dividend payout, plus dividend growth, plus discount. Epic win.


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## dilbert789 (Apr 20, 2010)

I believe with Questrade you can drip CDZ. There's just a bit of paperwork you need to do. Remember that you need enough dividends paid to you to pay for at least one full share for the drip to actually happen. You'll need a lot of cash in CDZ before it'll actually drip.


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

Thanks 789, you're right. I was on their site this morning and I think they said the dividend needed to be from a particular company. Given my investment amount ($10K), the dividend payment of 6 cents per share would not add up to enough in any given company, to allow a stock purchase. I like what underworld mentioned in point 1, but given that CDZ seems to be the only CDN dividend stock ETF out there and that only a few of the company stocks offer DRIP (and discounts!) I will be quite limited.

So I guess the unavoidable downside of this whole thing is that the actual dividend amounts will sit in my account in cash until I have enough to reinvest in additional ETFs. So, I would want to keep an eye on the cash account and be ready to keep buying more of those ETFs with that dividend $ on a regular basis. At about $18.50 for one CDZ ETF, I could buy two per month or 24 per year based merely on the dividend payouts which I roughly calculate at $35-50 per month for a $10K investment. Hope my math and understanding are correct.


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## rookie (Mar 19, 2010)

Underworld said:


> There are some immediate benefits that I know of, of holding dividends directly with the company itself, rather than going through a third party such as discount broker:
> 
> + If the company offers DRIP, your re-investment can be re-invested to buy a fraction of a share. Say you get $0.50 back as a dividend payout. It can be used to buy a % of a share, that you would otherwise would have to save up to buy.
> 
> ...


how do you hold the investment directly with the company? by a physical share certificate?if not, where or who is holding the paperwork?


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## Four Pillars (Apr 5, 2009)

Royal - I only mentioned the automated aspect of index funds because a lot of investors like to save/buy on a regular basis ie monthly.

However, this is not your situation.


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## andrewf (Mar 1, 2010)

A brokerage can hold the certificate for you. This is generally pretty costly and not worth it.

What I would suggest is not worrying about reinvesting monthly, per se. What you want to do is invest frequently enough that the foregone dividends roughly match the transaction cost. It may make sense to reinvest quarterly, biannually, etc. or whenever you make new contributions. There's no real need to slavishly invest weekly, biweekly or monthly. I do agree though, that if you have a small amount invested, those TD efunds might be slightly cheaper. The difference is so small, however, that I wouldn't worry about it. Since you didn't let us know how much you plan to invest, it's hard for me to tell you what the indifference point is (how often it would make sense to reinvest given $5 transaction cost).


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## Jon_Snow (May 20, 2009)

I was invested heavily in TD e-series fund for quite a while... but I have to say ETFs are much better for me. The fact that you had to hold the e-series funds for a minimum of 3 months or else pay an early redemption fee of 2% really irked me... I want the ability to SELL anytime the mood strikes...


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## Toronto.gal (Jan 8, 2010)

andrewf said:


> A brokerage can hold the certificate for you. This is generally pretty costly and not worth it.


I suppose it depends on the person's particular goals & situation, but it was worth it for me! 

Regardless of market conditions, I wanted to maximize the benefits of dollar cost averaging & for 9 months now, I have, in addition to dripping, been purchasing additional shares on a monthly basis for just 5 of my long term investments at *zero commission/transaction costs* and getting a discount on the dividend reinvestment portion as well!. For most of the companies in question, a low monthly minimum of $100 applied.

Here is the math & what I would have paid my discount broker had I purchased the additional shares through them:

5 companies x 9 months thus far = 45 transactions at $6.95 each = $312.75 
In one year, the commission fee would amount to: $417; in 5 years: $2,085; in 10 years: $4,170 and this is not taking into account any potential commission fee increase in all those years!.


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## drdtyc (Mar 23, 2010)

the-royal-mail said:


> CDZ seems to be the only CDN dividend stock ETF out there


Hi Royal,

You may like to check out iShare Dow Jones Canada Select Dividend Index ETF (XDV). 
It pays quarterly distribution. 
Its MER is 0.5%.


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## andrewf (Mar 1, 2010)

Toronto.gal said:


> I suppose it depends on the person's particular goals & situation, but it was worth it for me!
> 
> Regardless of market conditions, I wanted to maximize the benefits of dollar cost averaging & for 9 months now, I have, in addition to dripping, been purchasing additional shares on a monthly basis for just 5 of my long term investments at *zero commission/transaction costs* and getting a discount on the dividend reinvestment portion as well!. For most of the companies in question, a low monthly minimum of $100 applied.
> 
> ...


You're assuming you would otherwise be making such frequent and irrational share purchases. I hope that's not the case!


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

drdtyc said:


> Hi Royal,
> 
> You may like to check out iShare Dow Jones Canada Select Dividend Index ETF (XDV).
> It pays quarterly distribution.
> Its MER is 0.5%.


Thanks!!


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## Toronto.gal (Jan 8, 2010)

andrewf said:


> You're assuming you would otherwise be making such frequent and irrational share purchases. I hope that's not the case!


Frequent and moderate contributions, yes! Irrational? I don't think so; I only do this with 5 top defensive stocks. At any rate, thanks for your concern.


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## dilbert789 (Apr 20, 2010)

drdtyc said:


> Hi Royal,
> 
> You may like to check out iShare Dow Jones Canada Select Dividend Index ETF (XDV).
> It pays quarterly distribution.
> Its MER is 0.5%.



I was going to mention the ishares -> XDV ETF also. Be aware that these guys JUST released that they will be doing monthly dividend payouts from now on, so you're in the same boat of needing 3x the shares to get it to actually drip vs a quarterly payout.

Unless you can get your commissions waved I probably wouldn't buy new shares till you had like $500 between your dividends and new investment money. This would make your Commission about $5 through questrade or 1% of your investment. Therefore the stock only has to go up 1% to make it back where if you deposit $50 at a time your stock needs to go up 10% just to make back that commission! OR another way to look at it is it'll take away almost 2 years of dividend payouts on those shares(assuming ~5% /year div yield).


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## Belguy (May 24, 2010)

You get better diversification by sector with the iShares Dow Jones (U.S.) Dow Jones Select Dividend Index Fund (DVY) than with the Canadian version XDV).

There are also many more U.S. based dividend ETF's including the SPDR Dividend (SDY), the Vanguard Dividend Appreciation ETF (VIG), or any of a number of PowerShares dividend ETF offerings including the PowerShares Dividend Achievers Portfolio (PFM), the PowerShares High Yield Equity Dividend Achievers Portfolio (PEY), and the PowerShares High Growth Rate Dividend Achievers Portfolio (PHJ).

Or, you might go with the PowerShares International Dividend Achievers Portfolio (PID).

Reference: 'Exchange-Traded Funds for Dummies'

Note: I personally invest in the DVY.


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

I am partial to Canadian stuff right now given all the bad news in the US and around the world. That's why I favour the stability of the CDN stocks. I certainly can't see anyone else increasing dividends anytime soon. Heck, I just heard yesterday that BP is suspending dividends. Not good.


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## Cal (Jun 17, 2009)

Toronto.gal said:


> I suppose it depends on the person's particular goals & situation, but it was worth it for me!
> 
> Regardless of market conditions, I wanted to maximize the benefits of dollar cost averaging & for 9 months now, I have, in addition to dripping, been purchasing additional shares on a monthly basis for just 5 of my long term investments at *zero commission/transaction costs* and getting a discount on the dividend reinvestment portion as well!. For most of the companies in question, a low monthly minimum of $100 applied.
> 
> ...


There is definitely a place for traditional dripping in non-registered accounts as a part of in a balanced portfolio.

If you decide to buy and hold a dividend paying stock, dripping will definitely save on fees.


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## andrewf (Mar 1, 2010)

Toronto.gal said:


> Frequent and moderate contributions, yes! Irrational? I don't think so; I only do this with 5 top defensive stocks. At any rate, thanks for your concern.


There's nothing wrong with it, so long as you have no transaction cost, but it's not necessary to purchase stocks so frequently. I'm saying that a $5 transaction cost would lead to a different purchasing strategy, and this strategy is not necessarily any worse than what you're following. In other words, you're comparing apples and oranges, in part to make your strategy look clearly superior, which I'd say is not necessarily the case.


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## dilbert789 (Apr 20, 2010)

Belguy said:


> You get better diversification by sector with the iShares Dow Jones (U.S.) Dow Jones Select Dividend Index Fund (DVY) than with the Canadian version XDV).
> 
> There are also many more U.S. based dividend ETF's including the SPDR Dividend (SDY), the Vanguard Dividend Appreciation ETF (VIG), or any of a number of PowerShares dividend ETF offerings including the PowerShares Dividend Achievers Portfolio (PFM), the PowerShares High Yield Equity Dividend Achievers Portfolio (PEY), and the PowerShares High Growth Rate Dividend Achievers Portfolio (PHJ).
> 
> ...


But now you are investing on the NYSE, my belief was that investing outside of Canadian stocks you lost the dividend tax benefits which can be substantial. I'd rather have less diversification and pay less tax.


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

Alright I have digested all of the info provided to date as well as to re-read every post in this thread. Great stuff. 

The best deals for me seem to be CDZ and XDV ETF's. I would like to switch all of my RRSP $ to one or both. Can I call my bank and ask them to switch everything over to one or both of these ETF's? Do they have access to these?

Also, one of the things questrade asked me about was an investor profile. I answered the questions but the system decided for me where it was putting about 60% of my money, and I only had about 40% "left" to invest on CDZ or otherwise. WTH? As a customer, don't I have the final say about where the money goes? Does it have to be justified by my investor profile? I'm not sure I like the idea of middlemen forcing my decisions based on the answers I give, but maybe I'm missing something here. Is it just CYA for them?

Can they setup fractional share automatic DRIP on the dividends? Or will I have to call them pay a tx fee every time I want to reinvest the dividend to buy more stocks?

Later, I will probably consider switching to $ over to a cheaper mgmt fee structure such as questrade or others suggested to in a locked thread here. If I'm understanding correctly, I have to pay them 0.6% per year mgmt fee PLUS a tx fee of about $5 per trade. So the cost with them initially would be $5 for just CDZ or $10 for both CDZ and XDV. Is my understanding correct? Any other hidden costs I am not aware of now? (other than the transfer-out fees from the royal bank)

Hopefully I've understood everything.


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## Dr_V (Oct 27, 2009)

the-royal-mail said:


> The best deals for me seem to be CDZ and XDV ETF's. I would like to switch all of my RRSP $ to one or both. Can I call my bank and ask them to switch everything over to one or both of these ETF's? Do they have access to these?


ETFs are basically stocks -- they trade on a stock exchange, and you (generally) buy them from a brokerage account (like TD Waterhouse -- at least, that's what I use).

Based on other things you've written, I suspect that you have a "mutual fund" RRSP account. This is usually held, for instance, at your bank, and it allows you to buy any of the mutual funds that your bank sells. If this is the case, you probably won't be able to purchase ETFs from that account. 

In this scenario, you'd have two ways to go.

(1) You can open an RRSP trading account, and fill out the paperwork to request that the bank sell your mutual funds and move them to the trading account. This isn't that hard, it just takes a bit of time. (Years ago, I consolidated all of my RRSPs from literally all over the place -- Altamira, ING Direct, CIBC, TD e-Funds -- into my TD Waterhouse account.)

(2) You don't necessarily have to buy an ETF. You can buy a low-cost "index mutual fund". There are pros and cons. The pro is simplicity (you don't need to trade stocks), and the fact that you can setup regular payments of even very small amounts for no fees. With an ETF, you're going to want to buy them in larger chunks of probably $2500+ in order to keep the overhead of the stock trading fees to a small percentage. The con is that the index funds have slightly higher MERs than ETFs, but if you look hard enough, you should be able to find low-cost index mutual funds which are pretty close.

I used to have index funds from TD e-Funds (www.tdefunds.com) and from Altamira (www.altamira.ca). This was years ago; I don't follow them closely enough to say whether they're still around or whether they remain good by today's standards. It would seem that Altamira got bought along the way by National Bank; I think that this dates me.


K.


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## andrewf (Mar 1, 2010)

royal mail: if you care that much about dripping, go with the TD index mutual funds. 

In my opinion, I think you should be cautious about making changes to your investments without fully considering them and understanding how everything works. I don't know how much money we're talking about here, but even if its only $50,000, it warrants some care. Investing 100% in Canadian dividend payers doesn't give you particularly good diversification. You're left exposed to banks, telecoms, and oil. If any of those industries get whacked by changes in the economy or government regulation (and they are all highly exposed to government regulation), you could get a nasty surprise.


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

For the record we're talking about $11K that includes gains of 5% over the past 10 years. I'll take another look at those TD e-funds. I had read up on them initially but there was something about them I didn't like. I have mutual funds now and would like to get out of them for a while for the aformentioned reason. Are the TD e-funds dripping CDN dividend payers? I'll have another read.


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## Belguy (May 24, 2010)

From the Globe and Mail: To generate $2,000 a month (or $24,000 a year) in total income, you would need to invest about $270,000 in each of the XDV and CDZ, or $540,000 in total. That is assuming distributions continue at the same rate as the previous 12 months, which is by no means guaranteed. Plus, you assume risk of possible capital losses and dividend cuts.

Therefore, to obtain an annual income of $48,000 from this method, you would need to invest $1,080,000.


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

That sounds like slicing and dicing the numbers to make a point. Does the Globe and Mail have it out for these dividend payers? The average yield of CDZ is 4.42% based on the past 10 years which is 44% over that time vs. 5% with what I have now. 

Do you know of something which has generated such yields or better over that time?


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## Belguy (May 24, 2010)

Heh, I don't make the news--I only report it!!!!


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## andrewf (Mar 1, 2010)

the-royal-mail said:


> For the record we're talking about $11K that includes gains of 5% over the past 10 years. I'll take another look at those TD e-funds. I had read up on them initially but there was something about them I didn't like. I have mutual funds now and would like to get out of them for a while for the aformentioned reason. Are the TD e-funds dripping CDN dividend payers? I'll have another read.


You can get the dividend distributions automatically reinvested in new mutual fund units. You don't get a DRIP discount, but you won't get that with ETFs either.

You seem to dislike mutual funds due to high fees. The fees on the the TD funds are pretty reasonable.


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

Alright, let's put aside CDZ and XTV ETF's for now and take a closer look at the TD E-funds that have been suggested. The Canadian Index TD e-fund has an MER of 0.31% and performance of 46.7% over the past 10 years or an annual equiv of 3.9%. That's good and significantly better than the 5.1% I've gained elsewhere over the past 10 years. 

I see that this is a self-directed thing. Online only. If I'm transferring money out of my current bank's mutual funds and into this account (which is meant to be RRSP) would I not need to speak to an operator to get that done? If I run into trouble or need to speak to someone about this at TD will they talk to me? Or will I have to pay for them to talk to me and answer questions/concerns/problems?


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## MoneyGal (Apr 24, 2009)

Here's what you need to do:

Initiate the paperwork to transfer your holdings over to TDW. On the transfer paperwork, you can check either "in kind" or "in cash" for the transfer. Transfer everything over "in kind." 

Why? Because your existing account will charge you for the sales, and I am virtually certain the sales will be cheaper at TDW.

Then, when the funds have all transferred over, you can sell them at your leisure (online - no operator required) and purchase whatever you want. 

There may be a transfer fee. TDW may pick it up. 

TRM: I'm still not sure you have a solid set of expectations about what a diversified portfolio of equities will give you over time. I am out of time, though; so that remains a conversation for another time.


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## HaroldCrump (Jun 10, 2009)

the-royal-mail said:


> Alright, let's put aside CDZ and XTV ETF's for now and take a closer look at the TD E-funds that have been suggested. The Canadian Index TD e-fund has an MER of 0.31%


IMO, you are not comparing exact apples.
The CDZ and XDV are dividend payment oriented stocks vs. the TD Canadian Index e-fund, which represents the S&P TSX index.
Granted, a lot of the individual stocks are the same these days, but there is a difference in the investing philosophy and goal of the ETFs/funds.


> and performance of 46.7% over the past 10 years or an annual equiv of 3.9%. That's good and significantly better than the 5.1% I've gained elsewhere over the past 10 years.


How is 3.9% better than 5.1%?


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

5.1% is my TOTAL gain. The total gains of the ETFs and e-funds being discussed here are nearly 10x that. A lot of valuable time has been wasted.


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## Belguy (May 24, 2010)

A fund to consider is the PH&N Canadian Income Fund Series D. 

One year return as of May 31: 31.4%

This makes it the top performing Canadian equity fund in a recent Globe and Mail survey.


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## MoneyGal (Apr 24, 2009)

This is my concern: I'm not sure TRM has really settled on an investing style or clarified what his investing goals and philosophy are. 

If you are satisfied with index returns, then index mutual funds/ETFs are the way to go. 

If you want returns which have the chance (low probability, but not zero) of outperforming the index, you are going to either need to pick stocks directly, or buy actively-managed mutual funds. Both choices will drive your costs up. 

It sounds to me as though you (TRM) made an implicit bet on outperforming the index - but that you walked away from the roulette table mid-spin without checking back to see how your bet played out. (One of the costs of opting for active management is your time - you must monitor and control your bets, and you must be willing to speculate on the possible outcomes of each spin of the wheel.)

I'm honestly not sure where the drive to individual dividend payers (whether wrapped in a MF or ETF or not) is coming from. What is your goal for this investment? When you look back at the returns you "lost" by not investing in the index over the past five years, what has you then say you don't want index returns in the future?


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## andrewf (Mar 1, 2010)

Belguy said:


> A fund to consider is the PH&N Canadian Income Fund Series D.
> 
> One year return as of May 31: 31.4%
> 
> This makes it the top performing Canadian equity fund in a recent Globe and Mail survey.


Please don't do this. You're cherry-picking returns. This return won't (cannot) be replicated this coming year, because the time frame you refer to is characterized by yields falling on debt from catastrophic levels. You also cherry-picked the return to exclude the preceding decline in the value of the fund.

Royal Mail:

When looking at returns, don't just consider the change in asset value. For instance, the XIU is currently 17.43% higher than where it was ten years ago. But this is not the total return of XIU. When dividends are included, the total return has been closer to 4% per annum. Also note that we're measuring 10 year return from the dot-com/Nortel peak to the recovery from the most recent correction. A more accurate reflection of long term returns is to look at returns from the same point in the cycle. This means looking at returns since 2003 or so. 7 year total return has been about 10% per annum (approx. 7.5% capital appreciation and 2.5% dividends).


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## HaroldCrump (Jun 10, 2009)

I guess we are all telling TRM (in different words) that he is "yield-chasing" - usually not a good idea.
An alternative approach may be top-down, instead of the bottom up.
Think about where the various sectors are headed, where the Canadian economy, US economy, world economy is headed and then pick a fund/ETF that is invested in those areas and provides reasonable diversification has a justifiable cost.
So for example if you think the US economy is about to begin a strong recovery, look for ETFs/funds investing in a diversified basket of US equities.
If you believe Gold is only just getting started, pick gold mining funds and so on.
In the end, your investing has to reflect what you believe in.

And if you can see or believe no clear direction, then you should seriously consider a couch-potato style portfolio.
It is ultra low cost, and distributes its bets across the 3 major geographical regions and across to two main asset groups (equities & bonds).

Some folks claim that they do couch-potato investing but then try to cherry pick ETFs and end up with scores of specialized, exotic ETFs.
IMHO, that defeats the purpose of passive, couch-potato investing.
The CP spreads the risk across geographies and asset classes and doesn't place bets on any specific sector.

And if you find yourself unsure of CP style investing at this time (nothing wrong if you do - lots of folks in that boat), you could simply do a ladder of GICs at your bank.
That'll beat the 0.50% annualized RoR that you are currently experiencing.


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

I am in my mid-'30s and disappointed in the performance of the money I've had in my RRSP the past 10 years. Heck, when I am better off with bank GIC's at my age, what I have invested in is clearly not working. So, I had done some research reading on sites such as this one and Couch Potato investing and that's what lead me to the dividend stock idea (after starting a thread about the topic earlier)...then on MDJ it was suggested to get an ETF rather than pick stocks. Cool.

I am watching and hearing what's going on around the world and it's scary. Canadian dividend payers (or even some of those e-funds) seem to be the most solid choice based on what I am seeing and hearing. I do not read the financial section of the newspapers. I'm an average working stiff who has worked hard to scrimp and save for retirement and have clearly failed miserably over the past 10 years. So I started this thread to figure this out. I can't imagine delving any deeper than this to determine a strategy as this is about as much as I can say. The results of an investor profile do not satisfy what I want to do, which is to have my money grow with a rate of at least 3-5% per year. After 10 years if current strategy can't accomplish that then I feel it is high time to try something else.

Oh yes and the money has to be eligible to be moved from my current RRSP account to the destination for the money. I mean it has to stay in the RRSP. I don't need the money for anything else. This is my retirement fund.


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## MoneyGal (Apr 24, 2009)

Friend:

Look, disregard this. You shouldn't take investing advice from people on the internet. 

But if you "can't imagine" delving deeper into developing a strategy than saying that you "think" Canadian dividend-paying stocks look like a good bet, and you can't and won't read the financial papers...you probably should not be in equities. 

Or, at least if you are going to be in equities, you should diversify away the diversifiable risk associated with equities and invest very broadly. Canadian markets represent a small total share of world markets and (as has been stated over and over again on this forum) represent only a fairly small band of investing sectors. 

What are you going to do in one year, or two years, or five years, or ten years if your strategy fails? Will you again say that you would have been satisfied with GICs, or index returns, or...?

This isn't about having the courage of your convictions and forging ahead with a strategy...at this point, I honestly believe your biggest goal would be to manage risk. And in your shoes, I'd do that by getting rid of all your diversifiable risk by (you guessed it) diversifying.


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## CrazyDink (May 10, 2010)

Here's how I think about it..... you will spend, on average, about 2000 hours in a year working, all to save just X dollars after expenses. Given how important these X dollars will be in the long term, doesn't it sound reasonable to spend at least a significant proportion of the 2000 hours learning about how best to deploy your X dollars?


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## Belguy (May 24, 2010)

After spending much time doing their 'due diligence', different investors will arrive at different conclusions.

There are many investment philosophies and many different investment personalities.

On this and other forums, one person will promote one method while another is equally convinced that their processes are the best.

Often, the more that you read these forums, the more confused that you get.

I am a 'buy and hold', broad-based, diversified ETF investor.

Is it the best method out there? Maybe not but it suits my own particular investment personality.

Maybe I am just too sensitive, but I have been heavily criticized for sticking with this investment philosophy and not being more open-minded about taking a more active roll in managing my portfolio and possibly achieving superior long term returns.

I'll leave more sophisticated and time-consuming investment methods to others and more power to them.

For me, the 'Couch Potato' formula forms the core of my portfolio but I also dabble in smallcap ETF's and prefer value ETF's for my long term holds.

I try not to criticize others for their investment decisions for, what is right for them, is not necessarily right for me.


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## cardhu (May 26, 2009)

CrazyDink said:


> ...you will spend, on average, about 2000 hours in a year working, all to save just X dollars after expenses. ... doesn't it sound reasonable to spend at least a significant proportion of the 2000 hours learning about how best to deploy your X dollars?


Depends who you ask ... if you asked your employer, I’ll bet he’d say that you should spend those 2000 hours doing the job you’re being paid to do, and that if you want to learn about how best to deploy your savings, you should do it on your own time.


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## Dr_V (Oct 27, 2009)

cardhu said:


> Depends who you ask ... if you asked your employer, I’ll bet he’d say that you should spend those 2000 hours doing the job you’re being paid to do, and that if you want to learn about how best to deploy your savings, you should do it on your own time.


I don't think that CrazyDink was suggesting that you spend you spend time at work on figuring out how to deploy money....

By my calculations, most people spend ~34% of their waking hours at work, spread over the entire year. So why wouldn't you devote at least some fraction of the other 66% of the time that you're awake to figuring out what to do with your money?


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## cardhu (May 26, 2009)

My comments were tongue-in-cheek, obviously … however, I was responding to what CD actually did write, not what he might have meant to write … 

I agree with you that one should learn how to manage their personal finances on their own time.


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