# Investing in 1 Fund for 2014



## newfoundlander61 (Feb 6, 2011)

I have selected 3 funds and plan to hold just 1 in my TFSA ($5000) min investment needed so 1 is all I can do for now. Looking for opinions of just a vote on my poll for your choice of which fund. Of course in the end I will have to make the decision but feedback will help with that. I only plan keeping one fund.


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## My Own Advisor (Sep 24, 2012)

Depends if you plan to keep only one fund or this is your first of a handful....

If you're seeking an all-in-one product, this is a good one:
http://quote.morningstar.ca/quicktakes/fund/f_ca.aspx?t=F0CAN05MRR&region=CAN&culture=en-CA


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## dubmac (Jan 9, 2011)

^agree with advisor

MAW104 contains a basket of Mawer funds - one of which is Mawer Cdn Equity. In other words you are comparing two very different funds in your poll. Mawer Cdn Equity is a MF that is composed of shares of Cdn companies - the other Mawer Balanced contains 6-7 different Mawer funds - each of which has their own collection of equities, bonds etc.

I have been VERY happy with MAW104 - it continues to perform exceptionally well - I have it in my own RRSP, my wife's and our spousal RRSP.


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## james4beach (Nov 15, 2012)

How does MAW104 (a fund-of-funds) only have a 0.98% MER when some of its main holdings have higher MERs? It contains

Mawer Canadian Bond @ 0.94%
Mawer US Equity Class @ 1.25%
Mawer International Equity @ 1.53%
Mawer Canadian Equity @ 1.25%

Just by virtue of holding those, it would suggest the Balanced Fund MER is more like 1.24% (a consolidated MER due to holdings)

The 0.98% on their web page is inconsistent with that. So are they packaging the funds together and giving you a rebate, costing you less in fees than holding the funds individually? That would be highly unusual and typically companies charge you more in fund of funds. Or do they mean that you're paying 0.98% on top of the underlying MER, resulting in a fund-of-funds total MER of around 0.98 + 1.24 = *2.22% ?*


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## GoldStone (Mar 6, 2011)

MAW104 owns institutional O-series funds.

0.98% is the all-in MER.


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## GoldStone (Mar 6, 2011)

For comparison, my wife owns Mawer Balanced in her group RRSP at work. Manulife administers the plan. The all-in management fee is 0.56%. It covers both Manulife and Mawer expenses.


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## james4beach (Nov 15, 2012)

GoldStone: so they're achieving a lower MER by holding the O series?


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## james4beach (Nov 15, 2012)

That's quite something. Yes in the financial statements I see that each fund holding is series O. So it does appear you get an excellent deal (only 0.98% total MER) by holding the fund of funds, instead of the individual funds.

If that's true it bucks the trend, because usually you pay _more_ MER for funds of funds. Here it appears you pay less.


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## dubmac (Jan 9, 2011)

GoldStone said:


> For comparison, my wife owns Mawer Balanced in her group RRSP at work. Manulife administers the plan. The all-in management fee is 0.56%. It covers both Manulife and Mawer expenses.


^that is a very good deal!
It should also be added that only by holding MAW104 does an investor obtain units of Mawer' New Canada Fund. The New Canada has (historically) done very well - and it is not available to investors - (not sure why). https://www.google.ca/finance?q=MUTF_CA:MAW107&ei=tjfTUrjjOoaxqQGRTg


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## james4beach (Nov 15, 2012)

Can someone buy these Mawer things at iTrade or TDDI? Are additional fees incurred when doing that?


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## GoldStone (Mar 6, 2011)

TDDI - yes. No fee to buy. $45 to sell.


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## dubmac (Jan 9, 2011)

you'll need to ask your broker.
I purchased mine through MD Management. I always ask whether any 3rd party collects any kind of trailer fee, or percentage, or additional MER on the transaction.


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## GoldStone (Mar 6, 2011)

james4beach said:


> GoldStone: so they're achieving a lower MER by holding the O series?


I don't know the exact arrangement between Manulife and Mawer.

BTW, I was wrong about the fee. 0.56% doesn't include Mawer operating expenses (0.05% as of 2012/12/31). The all-in fee is 0.56% + 0.05% + HST. Still a very good deal.


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## youngdad3 (Jun 29, 2013)

speaking of MER, I'm sorry to be a bit offtopic but maybe someone can enlighten me on somehing. If I was to buy a certain ETF let's say XTR with a MER of 0.57%. It's biggest holdings are other ETFs like XHB, XHY, CBO, etc. do the MERs add up on top of each other? (0.50% + 0.57%) or there is some kind of discount and the disclosed 0.57% MER on XTR would be the real total MER ? I've always avoided ETFs/MFs holding other ETFs/MFs because of the confusion.


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## GoldStone (Mar 6, 2011)

0.57% is the real total MER. Click on the "i" icon under Management Expense Ratio. It provides the explanation:

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

Personally, I wouldn't touch XTR with a ten foot pole.


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## youngdad3 (Jun 29, 2013)

^^ Thank you GoldStone, It makes sense now. XTR was the first one that came to my mind, not something I would buy either.


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## james4beach (Nov 15, 2012)

youngdad3: good question. Don't just add; calculate a weighted-average MER by making a spreadsheet with each holding, it's percent weight, and the holding's MER. Then do a weighted average calculation (like SUMPRODUCT). The result is the _lowest_ the fee can be.


```
XHB	19.71%	0.50
XHY	17.32%	0.61
CBO	17.03%	0.28
CPD	11.31%	0.50
XUT	10.14%	0.60
XEI	10.13%	0.61
XRE	9.30%	0.60
XDV	5.03%	0.55

Weighted average MER 0.51
```
The weighted average MER for XTR's holdings is 0.51%. The total MER, as GoldStone said above, is higher at 0.57%. iShares is charging an extra 0.06% for the convenience of having this all wrapped up in XTR. This is usually the case for fund-of-funds.

I don't recommend XTR either, unless you absolutely understand what you're buying. It has 37% of assets in junk/near junk bonds. Additionally, 83% of the fund acts like stocks so it's like having 83% equity exposure. The other issue is that they distribute capital back to you, including your own money, which slowly (over time) depletes the capital of the fund and likely won't result in capital gains.


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## MoreMiles (Apr 20, 2011)

GoldStone said:


> For comparison, my wife owns Mawer Balanced in her group RRSP at work. Manulife administers the plan. The all-in management fee is 0.56%. It covers both Manulife and Mawer expenses.


Are you sure? It seems that Manulife resells Mawer's fund with a markup and trailer. Mawer is telling all the advisors to to pick up their funds from Manulife if they want to be paid a trailer or commission. I don't think Manulife is cheaper... that 0.56% may actually be EXTRA.

http://www.mawer.com/mutual-funds/advisor-information/


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## MoreMiles (Apr 20, 2011)

Similar low fee one fund portfolio, think

Beutel Goodman Balanced Fund
Leith Wheeler Balanced Fund
Steadyhand Founders Fund
CI High Income Fund

All these funds did well with a MER of 1.5% or less.


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## GoldStone (Mar 6, 2011)

MoreMiles said:


> Are you sure? It seems that Manulife resells Mawer's fund with a markup and trailer. Mawer is telling all the advisors to to pick up their funds from Manulife if they want to be paid a trailer or commission. I don't think Manulife is cheaper... that 0.56% may actually be EXTRA.
> 
> http://www.mawer.com/mutual-funds/advisor-information/


What you described is a completely different option from what my wife owns in the group RRSP plan. No advisors are involved. It's a segreated fund administered by Manulife. It's only available in group pension arrangements (DC plans and Group RRSPs). The underlying fund is Mawer Balanced. And yes, I'm sure about the fee.


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## james4beach (Nov 15, 2012)

Just a random idea. What if someone were to do: long Mawer Canadian Equity Fund, short XIU

Given that Mawer seems to reliably outpace XIU, wouldn't this be a market-neutral strategy that's nearly sure to be profitable? You would only pay the cost to borrow XIU shares short (around 0.5% per year at IB) and profit whether markets go up or down.

Heck start up a hedge fund and do it on a large scale! Free money?


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## GoldStone (Mar 6, 2011)

Mawer Canadian Equity trailed the benchmark in 4 out of 10 most recent years. 2005, 2006, 2009, 2010. Your strategy requires a very strong stomach.

http://www.mawer.com/mutual-funds/performance-and-distributions/annual-performance/


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## MoreMiles (Apr 20, 2011)

Mawer is not part of mutual fund association guarantee. It is a small company compared to banks and many fund companies like Templeton. Is there a worry to use all-in-one fund with them? All your asset / eggs in one company, what if they suddenly disappear or close one day? Is there such concern?


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## GoldStone (Mar 6, 2011)

^ No. It's a FAQ.



> 12. Why Mawer is not an MFDA member & does this impact investors in Mawer Mutual Funds?
> 
> The MFDA Investor Protection Fund provides protection to eligible customers of MFDA members on a discretionary basis to prescribed limits of securities, cash or other property of the MFDA member that may be unavailable as a result of the member’s insolvency. The protection against insolvency applies primarily because mutual fund dealers accept deposits in their trust accounts before remitting the purchase proceeds to the fund company.
> 
> At Mawer, we do not hold client monies in a trust account – all cash and investments are held by a Canadian trust company which is protected under banking and trust laws to act as custodian for Mawer Mutual Funds. Since all assets of the Funds are at all times segregated from those of the Funds’ trustee, manager and custodian, they are not available for any use or purpose other than the investment objectives of the Funds. In accordance with provincial laws, a mutual fund’s assets belong to the fund and its investors, not to the dealer, manager, portfolio manager or trustee.


http://www.mawer.com/mutual-funds/frequently-asked-questions-mutual-funds/#12


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## james4beach (Nov 15, 2012)

GoldStone: good point, thanks. I wouldn't really do this (thinking aloud) but someone may still consider doing it if they're happy with that tradeoff. It's still market neutral, and of course it won't create a profit every year but the track record may entice some people to do such a pair trade.

MoreMiles: mutual funds (provided they actually hold assets and have a Net Asset Value) hold assets on behalf of shareholders. These assets are held with a custodian, which for Mawer is RBC Dexia. Provided there is no fraud in the operation, even a failure of the fund company wouldn't affect you much... your assets would still be with the broker.

I encourage you, and everyone, to read the audited financial statements for a mutual fund. Understand exactly what it holds (specific stocks, bonds). Are the assets liquid? Is there anything exotic inside?

You should never put all your eggs in one basket. Not one mutual fund company, and not even one brokerage. *Fraud can happen*. For example MF Global was a large brokerage that recently lost nearly $1 billion of client assets, which were supposed to be segregated. The CEO wasn't convicted and walks free. There is always the danger of this kind of fraud... it's an inherent risk of doing any kind of stock/mutual fund investment.


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## james4beach (Nov 15, 2012)

There is still an element of trust, as with any investment activity.

We trust that Mawer is being honest with their accounting. We trust they are being responsible with the flows of money and not classifying one type of money as another, or misrepresenting their books. We trust that their auditors are competent and would be catching any funny business (_note that auditors have missed many very large financial crimes in the last decade_). We trust that the auditors aren't in cahoots and not getting kickbacks. We trust that their custodian is also not screwing with the assets held in trust.

These are all assumptions. Yes unfortunately there are (recent) examples of all of these kinds of frauds... there are no guarantees, whether it's a big investment firm or a small one.


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## james4beach (Nov 15, 2012)

P.S. think of the Madoff case. Investors received statements, and could deposit and withdraw money. It looked like a successful investment firm, but it turns out that NO trades were being made for at least 13 years! Yet every year, Madoff's firm was audited. Yet every day, he worked with JP Morgan Chase (the custodian)... an enormous bank, with tons of professionals, accountants, checks and balances.

Some warning signs with Madoff

 Questionable returns, especially if it's not crystal clear where the returns come from
 Cheques should never be written to the advisor's name except for fees.
 Madoff's auditor was a small firm, not a large global firm. It's safer with a big firm, but that's still never rock solid.

Large firms were involved with Madoff's scheme too. For instance JPM -- a huge bank -- was the custodian. So, um, over those decades did they ever question where the hell the assets were? Or how they were accounted for? Apparently not. See in the investment world this stuff doesn't really matter... JPM is settling with the prosecutors. No people at JPM will be charged or thrown in jail for being huge parts of a huge scam.

I'm writing all of this because *you have to be suspicious of everything in the financial industry.*

The involvement of a large bank, like JPM (for Madoff) or RBC (for Mawer) doesn't automatically make it safe. There's no guarantees, folks. Just ask yourself, how can the people involved at JPM walk away so easily from collaborating with Madoff?


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## newfoundlander61 (Feb 6, 2011)

Purchased the Mawer Balanced Fund MAW104, thanks for the input.


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