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Canadian Money and Tax Matters
Moderator is Wayne Morris

Date: 1/13/2008 2:11:01 PM
Frequently Asked Questions
Author: deb1 Country Flag
Subject: 474/4993 - Expensive Advice?
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deb1 on 1/10/2008 5:40:11 PM

Hi,

I just paid a financial advisor $175 to tell me that I had to pay off my Visa, double my income, and try to get someone to move in with me and share the rent.

Also that my SDRP's, through a Discount Brokerage are not working for me, and now she wants to send me to an Investment Counselor. Apparently they have a certain criteria of qualifications, and only charge 1.5% - 2%. She said that they would move my SDRP's into another Secured Investment and then, when I sell my house, they would allocate that money into an outside Investment fund.

She mentioned joining the Canadian Share Owners Association, and also talked about No Load Funds, and Government Bonds, and EFT's?

Please help, I need direction.

Thank you for your support.
Deb




OperaBob on 1/10/2008 7:01:24 PM

She mentioned joining the Canadian Share Owners Association,

With the amount of money you'd have from your house, if it were me, I'd go with TD Waterhouse or E*Trade before CSA.

No membership fees. Trades are $9.95 at your level and you can buy the whole stock market on any day you wish vs. CSA's $9 trades, limited Co.s and only on one predetermined day a month.

With TD you's also have access to their eFunds which I think would be good for you if you "Couch Potato".

OB

deb1 on 1/10/2008 7:50:36 PM

Hi,

1 - What are E-trades, E-funds etc? What are ETF's?

2 - Are Gov't Bonds a good thing?

3 - Are all the companies listed on the Mergent's Achiever List: DRIPS + SPP's?

4 - If I'm paying 18.5% on Credit Card balance, and paying it $200 a month on it, would it not make more sense for me to withdraw from my SDRSP and pay 15% tax, and then take the $200/month that I would normally pay on my credit card, and invest it?

Thank you for your help,

Deb




OperaBob on 1/10/2008 8:58:25 PM

1 - What are E-trades, E-funds etc? What are ETF's?

E*Trade is a stock broker.

ETFs are Exchange Traded Funds. They are like a mutual fund but trade like stocks. Generally they are a basket of stocks originally representative of a specific index, e.g. TSX, DOW, S&P. Now some are subindex, e.g. you can buy an ETF of gold stocks. The advantage they have are they spread risk across a whole index and have the lowest management fees. The disadvantage is you have to pay brokers' commissions to rebalance them.

eFunds are TD's Index mutual funds that can only be bought online. They have the lowest fees of mutual funds and are easier to rebalance than ETFs. Disadvantage is the fees are higher than ETFs.

2 - Are Gov't Bonds a good thing?


Considered the safest investment they pay very poor interest right now.

3 - Are all the companies listed on the Mergent's Achiever List: DRIPS + SPP's?


No but they have a history of increasing dividends and that's a good thing.

4 - If I'm paying 18.5% on Credit Card balance, and paying it $200 a month on it, would it not make more sense for me to withdraw from my SDRSP and pay 15% tax, and then take the $200/month that I would normally pay on my credit card, and invest it?


Your $175 professional should have answered that.

Whatever you do get rid of your credit card debt ASAP.

OB


Wayneman on 1/10/2008 8:58:50 PM

Opinions only:

1 - What are E-trades, E-funds etc?
TD sells E-funds which are mutual funds that you buy and sell Electronically (using your computer).

What are ETF's?
Excahange Traded Funds. Good things. Very low fees.

2 - Are Gov't Bonds a good thing?
I don't like em. Fairly safe but don't pay much.

3 - Are all the companies listed on the Mergent's Achiever List: DRIPS + SPP's?
No.

4 - If I'm paying 18.5% on Credit Card balance, and paying it $200 a month on it, would it not make more sense for me to withdraw from my SDRSP and pay 15% tax, and then take the $200/month that I would normally pay on my credit card, and invest it?

Get rid of all credit card debt as fast as you can but do not use RRSP money to do it. No sense investing at all if you are going to carry high credit card debt.


deb1 on 1/10/2008 9:48:49 PM

Thank you,

If there were 1 or 2 good Canadian books, on all of this stuff: (ETF's, Dividend Funds, Etrades, etc., for a beginner, what would you recommend? (I already have Derek Foster's books)


Deb

millsforester on 1/10/2008 10:36:27 PM

I'd still recomend my first investing book I recieved.

The wealthy Barber.

OperaBob on 1/10/2008 11:56:00 PM

Head to the library and start reading back issues of MoneySense magazine. It's aimed at the general Canadian. Just be wary of the mutual fund advice except when discussing Index Funds or the Couch Potato.

Also Canadian MoneySaver magazine. It's a bit more sophisticated but untainted by advertising. As you grow you'll grow into it.

You could also check out:

http://www.investopedia.com

OB

onarock on 1/11/2008 12:40:10 AM

Go to the library, don't buy. A good canadian etf book that i have is "The New Investment Frontier III" by Howard J. Atkinson.

K

OperaBob on 1/11/2008 1:23:33 AM

Deb,

Duncan Hood writes some good one-page articles in MoneySense. Here's one I came across tonight. It says Canadian Business but it was in MoneySense (same parent company:MacLean's):

How to make a million

I plan to have at least $1 million when I retire. Here's how I'm going to do it.

By Duncan Hood, (Canadian Business)


A million bucks. That's how much money I'm going to have when I retire - at the very least. How am I going to do it? Not by flipping real estate, not by playing the lottery and no, not by responding to one of those Make big $$$ at home ads. I'm going to do it the old-fashioned way, by saving a small portion of my salary each year and investing it well over a long period of time. It's true that it will take me 28 years to make my million, but in my view there's no easier way to get rich.

To make your own million, it's better if you start young. If you have 30 years before you retire, you're very lucky. You may not be flush with cash, but you're rich in time. All you have to do is save about 10% of your salary each year, invest it automatically in a low-cost portfolio that's heavy in stocks, and wait.

I started by saving $300 a month when I was 32, but you could start later if you're willing to save more. I opened a discount brokerage RRSP account at my bank and chose a couple of low-cost balanced mutual funds to invest in. I set up an automatic transfer from my chequing account, so that twice a month when my paycheque was deposited, $150 was immediately whisked away and invested.
Canadian Business Online

Then I surfed over to the online Vancity savings calculator to see how I was doing. (Go to www.vancity.com, click on my money, then tools & calculators, then online calculators, then savings calculator.) I entered my facts: I had 33 years to go until I retired at 65, I was saving $300 a month, and I hoped for a 7% return. The savings calculator told me I was on my way to a nest egg of $440,000.

That's quite a bit short of a million, but I had done the hardest part: I had started. To make my million, all I had to do next was gradually increase the amount I saved each month as I made more money. It's easy to increase the amount you save when you get a raise, because even after bumping up your savings, you still have more left over to spend than you did before. Now I have only 28 years left until I retire, but I've increased the amount I save every month so I'm on track to make my million.

For instance, if you were making $75,000, your double-your-salary mark would be $150,000. If you had that much in your portfolio and you were saving 10% of your salary each year, in one year your savings would grow by $18,200 (assuming a 7% return). Of that growth, $7,500 would be due to your contributions and a full $10,700 would be from investment growth. If you reach that point by your early 40s, you're well on your way to becoming a millionaire.

Getting an investment return of 7% a year is tough, but it's certainly not impossible. I recommend investing in a portfolio that's at least 60% stocks, because stocks have beat every other type of investment over the long run. Yes, real estate has been on fire lately, but it has its cold periods, too. Toronto, for instance, has seen average home price increases of only 2.4% a year after inflation since 1980, even with the recent run-up.

If you invest in the markets, you should invest in an RRSP to reduce the drag from taxes, and choose a low-cost portfolio to reduce the drag from fees. I recommend our Classic Couch Potato Portfolio, which has the lowest fees going, and has produced an average annual return of 11.8% since 1976. Or you could go with a low-cost balanced mutual fund. You can find information about the Couch Potato at www.moneysense.ca, and you can check out our latest mutual fund ranking while you're there.

The longer you save, the easier it gets, because it's near the end that your money really balloons. In the last few years, your portfolio will be rocketing up by more than $70,000 a year.

Since my saving is on autopilot, I rarely even think about it. But if my resolve ever falters, I just go back to that Vancity calculator to check in on my plan. So far, it's doing just fine. In fact I'll be able to finish paying off some debt this year, so I'll have an extra $250 a month to play with. I could easily spend the cash, but the calculator tells me that saving it might be worthwhile. If I do, I'll retire with $1.3 million.


OB

OperaBob on 1/11/2008 1:25:02 AM

Deb,

He had this one of interest to you too:

[Website Address]

OB

Vulstock on 1/11/2008 5:14:16 AM

I got to a net worth of over million.

I started after college with $0

Started saving and came up with $6,000.

Started with mutual funds in 1981. Then open a brokerage account in 1982 and started investing in individual stocks. It did not hurt that my two stock purchases were winners and the Great Bull Market started.

[Website Address]

dfish on 1/11/2008 8:00:01 AM

Started with mutual funds in 1981.

Here's my Plan B:
1. Build a time machine; go back in time, and bring as much money with you as possible...:)
2. Buy all the things that Vulie is going to buy in the "future."

deb1 on 1/11/2008 9:34:07 AM

Thank you all for all of your great advice.
I'm going to head off to the library!!

About SDRP's : My financial advisor, advised that I hire an Investment Councilor to manage my money. Apparently they charge %1.5% - 2%, and I can claim it on my income tax. I don't think I'm in a position to be hiring anyone from now on. It doesn't make sense to pay out more money. I want to manage my own money. So, having said that, what would be the best Holdings to have in my SDRP. (specific companies)?

Also, you mentioned E-Funds - Can you please give me some more direction on how this would work?

I appreciate everone's help and support through this.

Thank you,
Deb

VanDrip on 1/11/2008 9:50:36 AM

Deb, E-funds are index funds with the lowest MER's (management expense ratios) available to us in Canada. The Americans have it easy with Vanguard and the ultra low MER's, and in fact we could have lower MER's if we looked at ETF's, (exchange traded funds, as discussed earlier). The problem with them is that they generally require larger chunks of money, ($3000 and up) for single purchases.

You can set up the E-funds in your RRSP, and have the bank take out money for contributions. It's probably the best way for an average investor who isn't confident enough to pick their own stocks, to get into the market safely. It's also the best purchase for your RRSP.

Outside of that is where the Drips should be. And as to specific companies, nobody can, (or at least, nobody should) tell you which companies you should invest in. Sticking to the big blue chips is generally safer than jumping in to smaller companies whose price may fluctuate more, but no matter which company you choose, do your research. That means reading annual reports, learning to interpret financials. It's dry stuff, but it will get easier, I promise you.

Best of luck.

Kev

OperaBob on 1/11/2008 10:34:24 AM

TD's eFunds:

http://www.tdcanadatrust.com/mutualfunds/tdeseriesfunds/index.jsp

It generally doesn't make sense to pay someone to handle your RRSP unless you have significant savings. Even at that I don't think it pays to have someone charge you 1.5-2% either if all they do is put you in mutual funds charging 2%-3% as well.

TD's eFunds are ideal for small investors not confident about their abilities. At the same time you need to use them wisely. This is where the "couch potato" comes in.

The "Couch Potato Portfolio" was a concept originally developed by Scott Burns of the Dallas Herald as a no-brainer dead simple way of managing your wealth that takes no more than 5 minutes a your to manage.

[Website Address]

His basic idea was to take 2 low cost index funds: bond and equity and rebalance them yearly. e.g.

Year 1:

$10,000 Bond Index Fund (50%)
$10,000 Equity Index Fund (50%)

End of Year 1 Values:

$9,000 BIF
$11,000 EIF

And you have $3,000 to invest. Allocate your investment so you're back to 50/50

Start of Year 2:

$9,000 + $2,500 = $11,500
$11,000 + $500 = $11,500

End of Year 2 rebalance again, etc.

You can also rebalance by selling some of one fund and buying the other.

The beauty of the system is that you're always buying more of what's low and the mantra is "Buy Low Sell High". It's known as a "Forced Buy Low" method. While results can vary short term over many years this method has outperformed the stock market by 3% which while seemingly small over time is huge. The stock market averaged 10% while couch potato averaged 13%.

MoneySense magazine developed several Canadian versions, e.g.

40% bond (Canada % International), 20% Canadian Equity, 20% US equity, 20% international equity.

The key is to rebalance once a year to get back to the 40/20/20/20 allocation.

TD's eFunds, which you can only buy online have lowest fees and have Index funds that match the categories above.

Here's a link to the Canadian columnists at MoneySense:

[Website Address]

OB


Jon-o on 1/11/2008 10:38:03 AM

You must be with TD Waterhouse to get the lower fee E series funds.

You can use the same allocation with iShares ETFs.

OperaBob on 1/11/2008 10:59:52 AM

Jon-o

Agreed but I think with Deb's level of experience and the size of her portfolio it might be better for her to start with the eFunds first then as she gets more knowledge and assets move on to ETFs.

Or

Buy both ETFs and matching eFunds. Let the ETFs sit and rebalance with the eFunds.

OB

deb1 on 1/11/2008 1:31:11 PM

Wow, thanks guys, for all of the great advice?

OK, so now I already have a Self Directed RSP set up at TD.
Do I just go online and convert some of the holdings now into efunds, and ETF's. Would you be able to give me some examples of each: bonds and equities? I believe you already gave me a list of potential ETF's??

I just need a starting point.

Thanks again for your support. Off to read some books now.

Deb

OperaBob on 1/11/2008 2:17:15 PM

Deb,

We can't specifically tell you what to buy.

You need to decide what you're comfortable with/

My feeling is a "Couch Potato" would be good for you, but I could be wrong/

I want you to read all the articles on the Couch Potato you can find at Canadian Business/MoneySense and any other sources you can find.

If that makes sense to you after reading then decide on the format that makes sense to you and then we can help you with how to go about setting it up.

One important consideration for us is whether you think you'll be adding to your RRSP on a yearly basis?

OB

bob on 1/11/2008 5:43:45 PM

You must be with TD Waterhouse to get the lower fee E series funds.

actually you can also hold efunds in a mutual fund account, which you open in person at TD and then convert to a "special" efunds-only account. The mutual fund account can be registered or not.

Cheers, -'bob'

deb1 on 1/11/2008 5:59:01 PM

So, I guess what need to know is, can I use my existing SDRSP and convert it to efunds? And do I just do this online, or will I have to go in to the bank. And then, will I buy a combination of IShares and, Efts (40/20/20/20)? I just don't know how to choose them.

I'm really starting all of this late, as I only have 7 years before I'm 60. This next 7 years will be very important to me as far as investing, and the quality of life I want to have.

Thanks
Deb


OperaBob on 1/11/2008 8:09:33 PM

Deb,

If you don't have it already you'd need to transfer your RRSP to TD to get access to TD's eFunds. As far as ETFs go any broker will sell them to you.

If your RRSP is $15K to $25K (???) TD should cover any transfer fees.

You can sell anything in your RRSP to buy anything else or just leave as cash.

OK, before we start advising do you mind telling us the approx. value of your RRSP (I think you did before)? Can you also tell us what you have in it and the approx. amounts of each? You might well have things you should keep and we need to know this before offering opinions.

Thing is you have to decide what to do. It's your money and you will/should look after your money better than anyone else. We can't be responsible. You'll have to decide what's best for you.

OB

doclobster on 1/11/2008 9:56:56 PM

You know, I wish I had met you guys/gals 10 years earlier!

I have approximately $15400 sitting in a TD aggressively managed portfolio. It has not been performing well for the last year or so. Can I just reinvest this within TD couch potato style? Admittedly I still have to go and read the articles on being a couch potato.

I contribue $300 monthly to a CI Canadian investment fund. It is only up 1.45% for the last 12 months but does have a decent track record. There is only about $5K in that account. I don't get as many fees as my planner is a friend and it is a no load fund. Do you think I would be better leaving that fund and trying the couch potato? At the moment I don't really have more than that $300 monthly to invest - anything extra I could pick up I was going to drip and I just bought the building I work in - so it is tying my funds up pretty tight.

Trust me that I won't hunt you down if I don't make a million dollars - just interested in your vantage.

Thanks!
Dan

doclobster on 1/11/2008 10:05:23 PM

hmm. I probably should have started a new thread for that - sorry.

OperaBob on 1/11/2008 10:37:14 PM

doc,

Have you ever wondered with all the noise about Index funds how the bank financial planners never mention them to you when you open an account?

Could it be that the planner gets less money from them? Naaaah!

Yes you could buy eFunds and couch potato.

OB

deb1 on 1/12/2008 1:50:43 PM

OK,This is what I have in my current SDRSP:

Approx. Percentages of Total Holdings

Bell Aliant Comm T/U - 3%
BCE INC - 4%
Precision Drilling - 2%
Rothmans Inc - 6%
Toronto Dominion Bank - 8%
TD DIV GWTH-I/NL'FRAC - 13%
TD CDN EQ SER-I/NL'FRAC- 16%
TD CDN MNY MKT-1/NL'FRAC-17%
TD CDN INDX-E/NL'FRAC - 9%
TD DVSF M/INCM-I/NL 'FRAC - 2%
TD CD BD IDX_E/SE/NL'FRAC - 3%
TD ENERGY-I SER/NL'FRAC - 4%
TD VALUE-I SER'FRAC - 3%
TD CDN B/C EQTY-I/NL'FRAC -2%
TD BAL GWTH-I/NL'FRAC - 4%
TD ENT&COMM-ISER'FRAC - 2%

Thanks for all of your help and support,
Deb

VanDrip on 1/12/2008 2:03:42 PM

Deb, that's quite the runaway portfolio you have there. Now please understand, I'm not judging, because mine used to look very much the same only a few short years ago. Every year, my dad and I would make the trek down to the bank, (trek being about a block and a half, but it sounds bigger if I say trek). I'd put money into RRSP's, and I always bought new ones, a couple per year. It wasn't long before I had 18 mutual funds. That's too many, for a variety of reasons. One, it's far too over diversified. Two, it's very hard to keep track of. Three, it really isn't very much fun.

I've since gotten down to my main three, which are all TD e-funds, held in my RRSP, doing a couch potato. I also have a few others that I'm transferring over at various times. I have money outside my RRSP as well, although not as much, but it's growing with my more recent focus on Drips.

And of course I have mad-money which I like to keep in very aggressive investments. Most of that is in Sprott Canadian Equity. It's been my best performing investment, and because of that, it's now more heavily weighted in my portfolio than I like, so I may be trimming that one back a little, but at the same time, I want to ride it out a little more.

Good luck,

Kev

OperaBob on 1/12/2008 2:58:28 PM

Just some quick comments:


Bell Aliant Comm T/U - 3%
BCE INC - 4%
Precision Drilling - 2%
Rothmans Inc - 6%
Toronto Dominion Bank - 8%


TD DIV GWTH-I/NL'FRAC - 13%
TD CDN EQ SER-I/NL'FRAC- 16%
TD CDN MNY MKT-1/NL'FRAC-17%
TD CDN INDX-E/NL'FRAC - 9%
TD DVSF M/INCM-I/NL 'FRAC - 2%
TD CD BD IDX_E/SE/NL'FRAC - 3%
TD ENERGY-I SER/NL'FRAC - 4%
TD VALUE-I SER'FRAC - 3%
TD CDN B/C EQTY-I/NL'FRAC -2%
TD BAL GWTH-I/NL'FRAC - 4%
TD ENT&COMM-ISER'FRAC - 2%


1. Gee, the financial planner doesn't happen to work for TD do they? ;-)

2. Leave the stocks at the moment. BCE should be bought out at $42.75 sometime in the next 3-6 months. You'll have it automatically sold commission free.

3. Looking at the funds (and total portfolio)

a. You're just over 17% fixed income: money market & balanced fund so let's say you're portfolio is:

17%-20% fixed income and 80% equity (23% stocks + 57% equity funds). This is a very aggressive portfolio. As you're in your 50s I think you said you might think about increasing the fixed income percentage. (Opinions???)

If your portfolio is around $100,000 and you're paying the average MERs then your fees will be something like:

i) $170 on the money market
ii) $100 on the balanced fund
iii)$1,570 on the remaining funds

or

approx. $1,840 per year

You don't see that money taken from your account because fund companies remove it bit by bit each and every day. In your case a little over $5/day so you never notice.

If you convert it all to eFunds (and it does appear you might have one already) the fees should drop to below $400/year or approx. 80% less.

b. I assume your funds are no-load so if you haven't bought them too recently you should be able to convert them without commission. Check first though. Also, if you're buying in the same family many funds waive fees to exchange.

c. First fund I'd dump is the balanced fund. Balanced funds are half bonds yet they charge full MERs. Also many of the equities in the fund will also be found in your other funds anyway. Avoid overlap.

d. I'd bet a lot of the equities in the dividend fund would also be in the Canadian Equity fund so it's just more overlap. I wouldn't be surprised if some of the equities in the value, energy & ENT & Communication funds are already in the Equity fund already too: BCE, Telus, Imperial Oil come to mind as well as the banks.

Some changes I'd consider if it were me:

Keep the stocks
Keep the money market fund (your stocks pay dividends and you'll want some place to park the money until you allocate it).
I'd reduce the money market value to a minimum and start buying GICs with the cash.

If I was thinking of a 40% bond (GICs & Money Market Fund) and 60% equities allocation I'd consider adding cash this year to GICs rather than selling funds for cash.

Convert the remaining funds to 20% Canadian Index, 20% US Index, 20% International Index.

In following years I'd try to maintain the 40/20/20/20 balance.

Just an opinion.

OB






mdeight on 1/12/2008 10:03:21 PM

I've been considering moving to indexed funds for a while now. Was just on the ING site and noticed they have a new group of indexed mutual funds. They're called the Streetwise Funds and come in three different flavours - all four having an MER of 1% and no other fees. The three funds are:

Balanced Income Class (70%Can Bonds, 10%Can Equities, 10%US Equities, 10% International Equities)

Balanced Class (40% Can Bonds, 20% Can Equities, 20% US Equities, 20% International Equities)

Balanced Growth Class (25% Canadian Bonds, 25% Can Equities, 25% US Equities, 25% International Equities)


The indices that they are mirroring are:


Canadian Bond - DEX Universe Bond Index

Canadian Equity - S&P/TSX 60

US Equity - S&P 500

International Equity - MSCI EAFE


These funds appear to be the "Ultimate" couch potato as you don't even need to worry about rebalancing - the fund does it for you. Rebalancing appears to be done quarterly - not sure if this is a good thing or not (too frequent?) I was wondering if anyone had any comments or opinions. Is this approach any different than buying the individual indices themselves and rebalancing them yourself? The balanced growth class is intriguing to me.

Mark

deb1 on 1/12/2008 10:58:38 PM

Ok, Guys, thanks for your help.
This whole thing is very upsetting to me. I really don't know where to turn? I have invvested $$$ in a financial planner who has charged me and told me that I need an Investment Councelor. I'm not in a postion to do this. This is all very overwelming for me. Not that I'm stupid, I'm extremely creative, and I know that once I get it, I will be amazing. I just need more knowlege and guidance.

My email is deborahlee1@sympatico.ca

Thanks again for your support,
Deb


OperaBob on 1/13/2008 1:46:39 AM

See if you can find Heinzl's "Stop Buying Mutual Funds".

At least after reading that you'll be more knowledgeable about how to evaluate funds.

OB

mdeight on 1/13/2008 7:04:32 AM

oops, meant to hit post new - not post response. sorry

onarock on 1/13/2008 10:06:12 AM

BINGO! Thats the one VanDrip, Thanks.

K

deb1 on 1/13/2008 11:26:02 AM

1 - For purchasing GIC's. Am I doing this inside my SDRSP? What are some examples of GIC's?

2 - Reduce the MNY MKT - by how much?

3 - What are some examples of Canadian, US, and International Index funds?

4 - I may already have an e-fund? - which one would that be?

Thank you so much for everything!!

Deb


Wayneman on 1/13/2008 11:43:15 AM

Just an opinion, not gospel.

1 - For purchasing GIC's. Am I doing this inside my SDRSP? What are some examples of GIC's?

Just a contrary opinion but I don't buy any GICs. There was a time once when they yielde 11-12% but now they pay more like 4-5%. Safe but you won't make much on them.

2 - Reduce the MNY MKT - by how much?

A Money Market fund is a place to park cash while waiting for a better place to put it. It is more like a holding tank that pays you very little but is a place to wait for a future opportunity.

3 - What are some examples of Canadian, US, and International Index funds?


A good Canadian index ETF is XIC or XIU or CRQ or HXU. For others lokk up i-shares.

4 - I may already have an e-fund? - which one would that be?

TD CDN INDX-E/NL'FRAC is a Canadian index fund.

OperaBob on 1/13/2008 11:44:03 AM

1 - For purchasing GIC's. Am I doing this inside my SDRSP? What are some examples of GIC's?

GIC (Guaranteed Income Certificates) or "term deposits". Get best tax treatment inside an RRSP. Your TD account should offer them under "Fixed Income".

Mine are mostly laddered out 5 years. (I have a few that I went much longer on when they were paying 8%). Basically with laddering you buy 3 - 5 GICs/bonds and have them come due in 1 to 3 or 5 years., e.g.

$5,000 one year
$5,000 two year
$5,000 three year
$5,000 four year
$5,000 five year

When the first GIC (one year) becomes payable renew it for 5 years. This helps you average out the ups and downs in interest rates.

2 - Reduce the MNY MKT - by how much?


To a small amount or the minimum because money market funds usually pay less than GICs. What you're doing is parking your money short term until you can invest it. Your equities will pay dividends. You don't want the dividends to just sit there as they will earn virtually no interest as cash.


3 - What are some examples of Canadian, US, and International Index funds?


Just use the TD link I gave previously. You can't find any better Index funds than these.

4 - I may already have an e-fund? - which one would that be?


TD CDN INDX-E/NL'FRAC - 9%

OB

OperaBob on 1/13/2008 11:47:20 AM

Wayneman,

Just a contrary opinion but I don't buy any GICs. There was a time once when they yielde 11-12% but now they pay more like 4-5%. Safe but you won't make much on them.

Considering Deb's situation and experience I think she should proceed with caution.

OB

deb1 on 1/13/2008 1:11:01 PM

Ok, so, I'm going to reduce the money market to the minimum. Does that mean I go in and sell most of it? What is the minimum?

Next, I buy GIC's? When I looked up "Fixed Income", there were quick picks - Canada Bonds, Provincial Bonds, Corporate Bonds - What would be the best?

Then I buy XIC, XIU etc?

Thanks,
Deb

OperaBob on 1/13/2008 1:31:19 PM

http://www.tdwaterhouse.ca/services/asglin.jsp#Fixed

Deb,

The worst thing you can do is blindly follow my/our advice. Take what we say and decide what you think is best for you.

As you can see TD offers GICs (which are different from bonds) . I don't have an account so I can't pull them up for you.

Drop into a TD broker office if there's one near you and discuss GICs, Index funds.

It might seem mind boggling at first but after awhile you'll get an understanding of what's best for you.

The next time I'm in Chapter's I'll see if there's a current General investing book for you.

OB

Wayneman on 1/13/2008 1:54:58 PM

Ok, so, I'm going to reduce the money market to the minimum. Does that mean I go in and sell most of it? What is the minimum?

There is no minimum. It's your money waiting for you to do something with it. Up to you. If you decide to buy something else, take out from your money market fund enough to pay for it. You may be able to transfer a dollar amount from it to another holding. Keep in the money market only the amount you want to save to buy something else later.

Then I buy XIC, XIU etc?

Not all of them. They are pretty much the same. You don't need 2 Canadian ETFs that are similar. Choose between: XIC, XIU, CRQ, HXU


If you want to look at GICs, go toTD's list @ http://www.tdcanadatrust.com/GICs/GICTable.jsp


Wayneman on 1/13/2008 2:01:00 PM

A correction re TD's Money Market fund.
You can sell it all if you want out of it but if you want to keep it going they require a minimum of $1000 at TD.

deb1 on 1/13/2008 2:06:38 PM

Thank you Wayneman, and OB!!!!

What are some US and Int'l ETF's?

Thank you so much for all of your help.

DEB

Vulstock on 1/13/2008 2:20:47 PM

http://www.etfconnect.com/select/FindAFund.aspx

http://www.etfconnect.com/select/FindAFund.aspx

Wayneman on 1/13/2008 2:28:50 PM

There are lots of them. A few you might want to look at are:
CLU - Claymore US index
CIE - Claymore Internatinal Index
CBQ - Claymore BRIC (Brazil Russia India China)

OperaBob on 1/13/2008 6:05:30 PM

There is no minimum.

Many money market funds do have a minimum and when you try to deal with them online you'll find the broker's website has preset contribution limits.

As I recall TD's is $100 minimum to start and $100 minimum contributions.

However, talking to a live representative might get you by these limits.

OB

deb1 on 1/13/2008 6:38:40 PM


Where do I find out what the min. $investment is for the ETF, and do I have to contribute every $$ every month to these?

Thanks,
Deb

Vulstock on 1/13/2008 8:54:42 PM

Where do I find out what the min. $investment is for the ETF


One share is the minimum.

For example, the Vanguard Extended Market ETF (VXF) is currently under $100 since the price of the this ETF is $97.65. I got this information from the etfconnect site that I posted earlier.

[Website Address]

Vulstock on 1/13/2008 9:08:23 PM

I have to contribute every $$ every month to these?

No, when you have the cash you can additional shares.

Now everytime you buy you will incuring a brokerage commission so the buys should be in amounts that the commission costs is a small portion of the investments for purchasing the ETF.

Vulstock on 1/13/2008 9:26:56 PM

I guess Canadians do not have much choices in ETFs based on the listing from the TSX site

[Website Address]

I wonder if a Canadian can buy the U.S. based ETFs since it appears that the U.S. investor have more choices.

Jon-o on 1/13/2008 9:36:26 PM

You are right Vulie, Canucks of fewer homegrown ETF choices. That list is from Sept. 07 so I'm not sure if there have been any new additions.

And yes, we can access U.S. ETFs but obviously currency conversion comes into play.
 
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