# RBC Mutual Fund investments



## c0r3a4 (May 22, 2011)

Hello everyone,

I need advice/ opinions on investing

Due to being a student, I dont have much money but i have been saving and investing into RBC mutual funds such as monthly income fund, 
Canadian dividend, Canadian equity, select balance and select growth. 

I was wondering if this is well diversified and i am able to contribute another $2000 into my TFSA and i was wondering which fund I should invest more into.

Also, is investing into RBC US monthly income fund worth it with $2000 US because the e-savings is only earning like less than .20 cents each month. would there any tax implications like reporting it during tax year or withdrawing the money out of mutual fund?

sorry for the first long post.

any suggestions is much appreciated.


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## OhGreatGuru (May 24, 2009)

I'm an RBC client, so I am prejudiced.

Most posters here will recommend you change to index investing (like Couch potatoa portfolio) for long-term investing, for lower MER's. But I believe balanced and managed funds still have a place in the market for some investors.

The funds you list are huge, and are each extensivley diversified in the Canadian equity & bond markets. The only further "diversification" you might need would be into more foreign equity if that is appropriate to yiur investor profile. 

But you have far too much overlap in your current funds. It does not make sense for you to have 2 balanced portfoilo funds- Select Balanced and Select Growth. They hold pretty much the same funds, just in different proportions. Determine what your taget asset allocation is, and pick the one closest to it. then add sector funds if you want to fine tune it or provide more diversification.

The Canadian Equity fund is a major constituent of the two Select portfolio fudns, so you are not adding any diversification with it. This fund is also a Closet Indexer (Like a lot of the core CDN equity funds of the banks) so why not just buy RBC CDN Index fund? If you wanto to diversify your CDN equity, try the O'Shaughnessy All-CDN Equity fund, because it has a different methodolgy for stock-picking.

I am a big fan of RBC Monthly Income Fund, provided it suits your investor profile. But the equity portion of it (~50%) will be virtually identical to CDN Dividend fund, so again you have overlap for no apparent purpose. Thsi Monthly Income fund is technically a CDN Income Balanced Fund, but there is a school of thought that argues that you can treat it as an Income Fund in determining asset allocation, because of the way it is structured. It is relatively tax efficient because distributions will be divided between interest income, dividends, and capital gains. With regard to tax consequences of selling any mutual fudnd in a non-registered account, you need to keep track of your Adjusted Cost Base for each fund, so you can determine your capital gain/loss on each such transaction.


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## KaeJS (Sep 28, 2010)

OhGreatGuru touched quite well on the overlap, so I won't mention it further. 

But, as an example,

I hold my entire TFSA in a Monthly Income Fund that returned 9.8% last year. I know I could have it in stocks, but 9.8% is good enough for me. 

I think it also depends on what kind of investor you are. I have my own stocks with Questrade, but I like to have my TFSA as a monthly income fund because (obviously) the distributions don't need to be accounted for. I'm currently getting about $40/month in distributions which keeps me satisfied.

The other thing you have to remember is that there is no fee for putting money into your RBC monthly income fund. If it were in stocks, you'd have to pay your commissions. And, as you said, you are a student so I'm sure this benefits you greatly.

If I were you, I would throw the entire $2k into your RBC Monthly Income Fund. Keep dripping the distributions.


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## dogleg (Feb 5, 2010)

c0r .. : You might like to look at imax Canadian Fixed Pay fund. It has a high MER but its performance is better than most in its class .


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## c0r3a4 (May 22, 2011)

Thank you for the great feedback OhGreatGuru and Kaejs. 

I choose Canadian equity, Canadian dividend, select growth and select balance because i wanted to make use of tfsa (RBC Monthly income fund cannot be in TFSA) and make it grow little more aggressively than monthly income fund for short term (2-3 years) for future tutition. i know the risk and i have some cash in e-savings on standby unless those mutual fund tanks for tutition. 

therefore, should i consolidate the mutual funds into 1 or 2 instead of having 4 overlapping ones? and which mutual fund would you recommend?

the $2000 extra cash, i want something more aggressive for long term
(3-5 yrs) mutual fund until i earn an actual income (not part time income) to make the switch to etf and couch potato.

sorry for saying this again but is investing approximately 2000 US dollar worth it investing into RBC US Monthly income?

thanks dogleg, i would look into it.


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## hypo (Aug 11, 2010)

The number of funds is a huge pain in the *** to try and analyze. I believe that they are purposely there to overwhelm you with the illusion of choice so that you'll go running to their financial advisor for guidance. Also, if you take a look at the fund managers on the prospectus, they typically also manage a dozen other funds in addition to the one you selected.

The one skill you need to know is how to properly assess the fund performance. Fund results are typically displayed to you in terms of absolutes because they know most of its customers are financially illiterate. What you need to assess is relevant performance. 

You do this by looking at the makeup of the fund (30% Canadian mining stocks, 70% European bonds? etc.). Then, you comprise a mock portfolio comprising of the appropriate ETFs or index fund (30% Canadian Mining ETF, 70% Euro ETF). Take the annual performance of the fund, minus the MER and see if the percentage is higher than your mock fund. If it is, then the fund beat the market and you can consider investing, if it did not, then the fund underperformed and its usually a sign to stay away.


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## OhGreatGuru (May 24, 2009)

c0r3a4 said:


> ..
> 
> I choose Canadian equity, Canadian dividend, select growth and select balance because i wanted to make use of tfsa (RBC Monthly income fund cannot be in TFSA) and make it grow little more aggressively than monthly income fund for short term (2-3 years) for future tutition. i know the risk and i have some cash in e-savings on standby unless those mutual fund tanks for tutition.
> 
> ...


You can emulate the return of the RBC Monthly Income fund pretty closely with 50% CDN Bond Index and 50% CDN Dividend Fund.

I can't advise on alternatives with the information provided.

"aggressive growth" and a 2-3 year investment horizon don't go together, unless you are into market timing.

3-5 years is not long term.


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## zylon (Oct 27, 2010)

*RBC US Monthly Income Fund, Series D - RBF 1503*

Thought I'd bump this thread, as in August 2014, RBC started the Canadian dollar version of RBC US Monthly Income Fund (USD).

The funds are identical, only RBF1503 can be pruchased in CAD.
Also available through PHN - the code there is 9564.

Fund profile from PHN: http://funds.rbcgam.com/pdf/fund-pages/monthly/rbf1503_e.pdf

Provides protection for a falling Canadian dollar.


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