# TD Comfort Portfolios



## w0nger (Mar 15, 2010)

I remember reading on some blog out there that sometimes these pre-made portfolios actually charge you more MER's than if you were to purchase the mutual funds within them seperately, however i'm not sure how to do the math. Here's the info with the posted MER

TD Comfort Equity Portfolio 1.98%

inside the portfolio is the following:

TD Canadian Equity MER - 2.07%
TD Dividend Growth MER - 1.92%
TD Global Multi-Cap MER - 2.52%
TD Global Divident MER - 2.45%

So the real question is... am i ahead of the game when i'm making regularly schedule contributions...? or should i be considering purchasing the mutual funds seperately...?


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## andrewf (Mar 1, 2010)

Oh god. 

Run away! 2% is way, way, way too high.


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## 777god (Mar 16, 2010)

2.52??!!!

Wow, forget mutual funds and go with a non-levered ETF.
Do some research and keep all that hard earned money of yours!


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## OhGreatGuru (May 24, 2009)

Not familiar with TD's but they're probably the same as RBC's portfolio funds - the MER is a weighted average of the MER's of the constituent funds - it's stated in their prospectus.

But I agree with the other comments on this particular TD portfolio - those global funds have high MER's.


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## Soils4Peace (Mar 14, 2010)

Those MERs are pretty high. Wouldn't yoiu be better off if you kept most of that fee? Why not go with the Class e index funds, and make your own portfolio? 

TD Canadian Index - e - 0.31% (TSX Composite)
TD US Index - e - 0.33% (S+P 500 broad US)
TD NASDAQ Index - e - 0.48% (Info Tech growth emphasis)
TD Dow Jones Industrial Average Index - e - 0.31% (Industrial emphasis)
TD International Index - e - 0.48% (MSCI EAFE)

You miss out on market cap diversity but you will gain about 1.6% of MER with a blend of these funds. 

When your investment grows you can look into switching to a group of ETFs in a discount broker account for competitive MERs and a greater diversity of options (e.g. you will want some emerging markets, or maybe a REIT ETF, or small cap ETFs like XCS, XMD, XSU).


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## Brad911 (Apr 19, 2009)

This is another classic wrap mutual fund account that any of the big banks and many asset management companies are now selling aggressively. As a shareholder of TD I want you to buy them because they're very profitable for the company; as an investor I would caution you to consider the individual funds and save yourself the MER.


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## scomac (Aug 22, 2009)

AS others have already said, the portfolio of funds products are more expensive than buying the underlying investments funds individually. However, you do get something in return for the extra level of fees. For starters, you only have to make a single regular investment rather than multiple or choosing between multiple funds when amounts are small. This isn't an issue for those with sizable assets or those making large regular contributions, but it can be a performance impacting issue when dollar amounts are small. Secondly, you have less decisions to make as the purchase and subsequent rebalancing of the portfolio is done by the managers according to a predetermined methodology. Any investor can do this themselves, but the real question is; will you? This is the point when negative decision making can have a big impact on your investments returns. Will you continue to put money in the best performers and ignore the others? Will you sell one that has gone down a lot in order to preserve what little is left. If you are prone to engaging in counter-productive activities, then the additional fees might be money well spent. Only you know who you are and how you will react. Even that is uncertain as most folks tend to overestimate their tolerance to stresses of this sort.


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## tojo (Apr 20, 2009)

scomac said:


> AS others have already said, the portfolio of funds products are more expensive than buying the underlying investments funds individually. However, you do get something in return for the extra level of fees. For starters, you only have to make a single regular investment rather than multiple or choosing between multiple funds when amounts are small. This isn't an issue for those with sizable assets or those making large regular contributions, but it can be a performance impacting issue when dollar amounts are small. Secondly, you have less decisions to make as the purchase and subsequent rebalancing of the portfolio is done by the managers according to a predetermined methodology. Any investor can do this themselves, but the real question is; will you? This is the point when negative decision making can have a big impact on your investments returns. Will you continue to put money in the best performers and ignore the others? Will you sell one that has gone down a lot in order to preserve what little is left. If you are prone to engaging in counter-productive activities, then the additional fees might be money well spent. Only you know who you are and how you will react. Even that is uncertain as most folks tend to overestimate their tolerance to stresses of this sort.


I think your point is well taken. An elderly couple that I know have their portfolio manage by TD, under a similar program. They are paying about 2% average a year in MER, base on mutual funds selected by their TD advisor. At first I'd gave them the "high MER" argument, hoping they manage affairs themselves, by using e-funds, and perhaps do better in the long run by taking the high MER factor out of the equation. As it turned out, they navigated through the crash of 2008/2009 virtually unscathed, under the competent management of their advisor, when everyone else was losing 40 - 50% of their portfolios. Not all of us have the time or inclination to go the DIY route. These services provide and alternative for them, and in the case of my example, the fees were well worth it.


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## OhGreatGuru (May 24, 2009)

_AS others have already said, the portfolio of funds products are more expensive than buying the underlying investments funds individually._

Not always true. RBC's Select Portfolios are just the weighted sum of the MERs of the constituent funds, all of which are in-house RBC funds. Their MERs are actually lower than the MER for the RBC Balanced Fund. And I think the other banks have similar products. What is true is that you could do better by building your own portfolio even of RBC funds by choosing only lower MER funds and more index funds.

I also agree with tojo - portfolio funds have their place in the market, though they aren't likely to be attractive to all the DIY investors here.


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## shstylo (Apr 6, 2010)

So I went to TD and asked them about the Growth Comfort Portfolio which is similiar to the one posted above. I also told them I was thinking about investing in some e-funds offered by TD.

The advisor told me to invest in the comfort portfolio which had a (1.8% MER) and not worry about the extra ~1.2-1.3 MER as I'll see better results in my returns since these funds are managed by professionals and all. She went on to show me some past performances and it was quite convincing that the portfolio was doing better in a 10 year span. 

I have read some MoneySense articles on how in the long run you'll do better investing in index funds as it's really a coin flip whether or not you'll see better results on mutual funds. 

So having said all this, does this mean that picking a portfolio like the one TD offers incurs more risk as you might potentially see better returns (ie worth the higher MER) while picking a portfolio of index funds is a more conservative approach? Or do you guys think packages put together like that are just a marketing scheme?

I'm just a little confused with all the information I'm getting from all sides.


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## MoneyGal (Apr 24, 2009)

...it isn't really "more risk" versus a "conservative" approach with index mutual funds. 

A more appropriate way to think about this trade-off is that you would be trading the _certainty of market returns_ (minus a small amount for index fund/ETF fees) for the _possibility of higher-than-market returns_.

There are a bunch of other implications, too. You have to pay more attention to your funds if they are actively-managed. 

So how do we evaluate the possibility that a portfolio of actively-managed mutual funds will beat straight market returns? 

Well, for the 20-year period ending December 31, 2009, DALBAR says that active investors earned an average annual return of 3.17% versus index investors at 8.20%. (Disclaimer: I know that DALBAR says that the one-year returns in 2009 show that active investors outperformed index investors.)


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## shstylo (Apr 6, 2010)

In that case I think the portfolio may not be the best approach as you don't get a lot of flexibility on which funds you want to choose.

Does anyone know of a good guide on how to pick mutual funds? I've heard it's like picking a needle in a haystack.


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## MoneyGal (Apr 24, 2009)

Well, if you want market returns, pick index funds. If you want above-average returns, then you face the needle problem.


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## Soils4Peace (Mar 14, 2010)

You can enhance returns while minimizing risk if you employ the principles of Modern Portfolio Theory. There is a positive correlation between return and risk. However, you can reduce the overall risk by dividing your portfolio into components whose risk correlates poorly. Bonds are good against stocks. NASDAQ's tech focus is good against the TSX financials, energy and materials. NASDAQ is a volatile exchange, but including it actually reduces the volatility of a portfolio that is high in typical Canadian equities.


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## tojo (Apr 20, 2009)

shstylo said:


> So I went to TD and asked them about the Growth Comfort Portfolio which is similiar to the one posted above. I also told them I was thinking about investing in some e-funds offered by TD.
> 
> The advisor told me to invest in the comfort portfolio which had a (1.8% MER) and not worry about the extra ~1.2-1.3 MER as I'll see better results in my returns since these funds are managed by professionals and all. She went on to show me some past performances and it was quite convincing that the portfolio was doing better in a 10 year span.
> 
> I'm just a little confused with all the information I'm getting from all sides.


I was with such an advisor many years ago; with the investment division was known as TD Evergreen. They maintained an actively managed portfolio for me of load mutual funds from CI, Trimark, Mackenzie, etc. When I suggested to have the funds switched to TD Index funds, I thought was going to get slapped in the face … couldn’t believe the pushback. I didn’t understand why the reaction, as I thought it might have been in their best interest to move to a TD product. Well, as part of my investment education, I realized the advisor was living of the trailer fee component of the 3rd party funds. No such incentive exists in the index or e funds (even though it is offered by the same company)…. it presents a conflict of interest, but hey, they have to make a living somehow…. Consequently, you will rarely see an investment advisor or “professional” recommend index / e funds, etf's.

IMHO, if you have the time and desire, you can easily set yourself up with a simple “couch potato” portfolio of index funds / ETFs, and do better over the long run by minimizing the MER. However, if you don’t have the time or confidence to do so, you may be better off with an advisor. Their mandate is not really to rip you off, but with the understanding that for a price, you can have them manage your money for you. As I indicated in an early post, I know some people who used such a service, and actually survived the crash of 08 with minimal damage. Good Luck .


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## MoneyGal (Apr 24, 2009)

> Consequently, you will rarely see an investment advisor or “professional” recommend index / e funds, etf's.


When you hit the minimum requirement for fee-only advisors, you will typically not be sold retail mutual funds - you will either get a stock and bond portfolio or you will get index funds/ETFs. Or, where they exist, F-class mutual funds which do not pay a trailer to the advisor. 

I was an all-ETF advisor (plus some stocks) when I was an advisor, and there are lots of those around. (Hard for individuals to buy bonds; we used bond ETFs.)


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## tojo (Apr 20, 2009)

MoneyGal said:


> When you hit the minimum requirement for fee-only advisors, you will typically not be sold retail mutual funds - you will either get a stock and bond portfolio or you will get index funds/ETFs. Or, where they exist, F-class mutual funds which do not pay a trailer to the advisor.
> 
> I was an all-ETF advisor (plus some stocks) when I was an advisor, and there are lots of those around. (Hard for individuals to buy bonds; we used bond ETFs.)


Yes, I should have qualified my comments to indicate that I was referring to advisors that make their living off the MER's of the load funds. Fee-only advisors will be more objective, without the incentive of the trailer fees...you pay either way - more invisibly through the mutual fund load, or directly to the fee-only advisor.


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## drdtyc (Mar 23, 2010)

MoneyGal said:


> When you hit the minimum requirement for fee-only advisors, you will typically not be sold retail mutual funds - you will either get a stock and bond portfolio or you will get index funds/ETFs. Or, where they exist, F-class mutual funds which do not pay a trailer to the advisor.
> 
> I was an all-ETF advisor (plus some stocks) when I was an advisor, and there are lots of those around. (Hard for individuals to buy bonds; we used bond ETFs.)


Hi MG,

May I know what is the typical minimum investment sum for a fee-only advisor? How much does such an advisor charge? Is it time-base or % of the sum invested? How to know which advisor is worth of his fee?


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## slacker (Mar 8, 2010)

shstylo said:


> So I went to TD and asked them about the Growth Comfort Portfolio which is similiar to the one posted above. I also told them I was thinking about investing in some e-funds offered by TD.
> 
> The advisor told me to invest in the comfort portfolio which had a (1.8% MER) and not worry about the extra ~1.2-1.3 MER as I'll see better results in my returns since these funds are managed by professionals and all. She went on to show me some past performances and it was quite convincing that the portfolio was doing better in a 10 year span.
> 
> ...


Not sure how the TD person can quote 10 years data for the TD Comfort Growth, its inception date was Dec 8, 2008.

Here's how it compared to the TSX in the last year or so. It's trailing the TSX quite badly...

http://www.google.ca/finance?chdnp=...cmpto=TSE:.GSPTSE&cmptdms=0&q=MUTF_CA:TDB888&


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## MoneyGal (Apr 24, 2009)

drdtyc: I'm not an expert on how to choose a fee-for-service advisor. Actually, I should probably write a long post about the differences between fee-for-service and fee-only, but it's almost midnight. 

Short answer to your questions is: most fee-for-service advisors that I know of will have a relatively high minimum of $500K or more, but many will take you on if you meet other criteria (i.e., less investable assets but actively growing assets). 

How much the advisor charges will depend on their service model. A typical rate is 1% of AUM (assets under management); higher for smaller portfolios and lower for larger portfolios; plus investment management fees. 

There is a big variation in what is covered for that fee: a comprehensive financial plan? an Investment Policy Statement? quarterly meetings, or more frequent (or less frequent)? a tax return? etc. 

As for how to choose a fee-for-service advisor - it isn't different from choosing an advisor compensated under a different model. You need to find someone you are comfortable with, whose investing style is compatible with your own beliefs, who will give you what you want at a price you are willing to pay. 

You might find this blog interesting - written by an advisor who provides advice and support to other advisors transitioning to a fee-based model: http://tofeeornottofee.com/blog.html


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