Tag Archives: mutuals

Book Review Count On Yourself: Take Charge of Your Money

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Browsing the stacks at our local branch, I found yet another book that looked interesting to me. As someone who only recently started consolidating, simplifying and hopefully improving our savings and investments, it looked like a worthwhile read. Here’s my review of Count on Yourself: Take Charge of Your Money by Alison Griffiths.

Tone

Very calm and self confident, with a conversational tone.

Ms. Griffiths is trying to ensure you stick with the tasks without getting frightened off by jargon or judgment. The book is full of short “case studies” which are really short descriptions of people and their finances.

To set you at your ease, she describes some of her own major money mistakes and often includes her family members as “case studies.”

Who Is Taking Charge of Your Money For?

The target audience appears to be 20-70 year olds. Because she is offering sensible hands-on step-by-step advice about how to set up a very simple but diversified and asset allocated portfolio, her advice fits most age groups.

I suspect the most appreciative audience will be 40-50 year olds who are starting to save money and who are uncertain about retirement and investment.

What’s Not Included in Taking Charge of Your Money?

Despite its name, this book is not about managing and re-paying debt. This book is about saving and investing for the future.

What I Learned from the Book

“Higher risk does not necessarily translate into higher return, especially over time.”

According to her work, a portfolio of 20% cash and 60% bonds plus 10% Canadian equities and 10% American equities has returned 8.7% per year over the past 20 years.

A portfolio of 5% cash, 15% bonds, 25% Canadian equity, 25% US equity, 20% Global equity, and 10% US small companies has returned 8.8%.

Portfolios between those two extremes returned 8.6% and 8.4%.

By cash, she generally is referring to GICs.

This was interesting and somewhat reassuring to me. Our portfolio is closest to the ultra-conservative one listed above, although we have had slightly more in GICs than in bonds.

This is similar to what David Trahair reported in Enough Bull: that GICs can form the backbone of a retirement portfolio.

Regrets

I wish the book had an index.

Would I Buy Count On Yourself?

I would buy this to give to someone who is just starting to straighten out their finances and their investing. It’s encouraging and practical.

Since I’ve already completed most of the steps in her book, I wouldn’t buy it for myself.

Topics In Count on Your Money include

Why We’re Not Talking About Our Finances

Many people are extremely reluctant to share information about their finances. This may be due to fear and frustration.

Getting Organized

  • You need to make a list of every type of financial account you have (include life insurance policies; home insurance policies; etc.) and try to eliminate any unnecessary extra ones
  • You need to make a list of all of the security information associated with each financial item (passwords; user ids; security questions and answers) and store it somewhere both physically and theft safe. If it’s in a safe deposit box can your spouse and one other person with financial authority get to it?
  • It’s a good idea to make another list of all your online access accounts from email groups to eBay accounts and their Userids, passwords and security questions. The passwords etc should differ from your financial passwords.
  • Within each type of financial account (e.g. a RRSP) you need to list everything you are invested in from savings accounts to ETFs

While listing all of these items you may find duplicates, things you can cancel, and cost savings.

Know Yourself

  • your time frame for retirement and major spending
  • your financial situation (do you have a defined benefit pension? will you get CPP or OAS? etc.)
  • your investment temperament (can you handle stress and risk?)

What Types of Ways Can I Save and Invest?

introductions to and explanations of

  • bank accounts
  • TFSAs
  • RESPs
  • RDSPs
  • RRSPs
  • RRIFs
  • non-registered investment accounts

Diversification

What kinds of asset classes there are and why you should usually have something in each.

Asset Allocation

She gives a detailed and important overview of what asset allocation is and how it may be the most important factor in your investment success. (She refers to it as “How many investment eggs in which baskets?”)

Fees

She explains how fees, particularly high MER and DSC mutual fund fees, can destroy savings. She points out clearly how high fees can make the suffering worse during a market crash and significantly lengthen the time it takes for an investor to recover from a market crash.

As someone who held a small amount in an index mutual fund through the 2000 crash, I can agree completely with that, even though it had a pretty low fee. (about 0.7%)

Easy Chair Investing

Her preferred method of investing dates back to a portfolio she tracked in a newspaper column called the Easy Chair.

Basically, she strongly recommends

  • investing in 3-4 low-fee ETFs
  • re-balancing your asset allocation every year

Somewhat surprisingly, she has numbers to show that the return on investment over the past 20 years (probably ending in 2011 since the book was published in 2012) was highest for a portfolio that included cash (as GICs), bonds (as a bond ladder or bond ladder ETF) and equities (only Canadian and US; mirroring the stock indices.)

ETFs

She actually names ETFs specifically and lists the best ones available at the time she wrote the book. (This is a bit unusual in personal finance books.)

She lists fewer than 10 for each of the three classes she recommends you invest in:

  • bonds
  • Canadian equities
  • US equities
  • Index Mutual Funds

She acknowledges that for some investors ETFs are not possible yet. She therefore names the best (at time of writing) available index mutual funds. No/low loads and low fees are a must.

Asset Allocation

She reviews sample allocations for different life plans and personalities.

Count on Yourself Portfolios

She walks you through the basic steps required to set up an ETF Easy Chair including short-listing which ETFs to choose to buy in each category.

She provides some advice for investors who feel they must also include REITs or dividends, etc.

She also walks through the basic steps for setting up an index mutual fund portfolio for those who can’t use ETFs.


At amazon.ca

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How to Sell a Mutual Fund in a CIBC Investor’s Edge Account

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When we transferred our RRSP account from CIBC to CIBC Investor’s Edge, we transferred in several mutual fund holdings. These had been bought in the days of the Wealthy Barber, but now in the days of the Wealthy Barber Returns it is time to admit they are not an optimum investment and sell them. Here’s how we sold a mutual fund inside our Investor’s Edge account.

Check for Any Deferred Service Charges or Early Redemption Fees

Any time you consider selling a mutual fund, be sure to check a recent copy of the Fund Facts for the product. Make sure you will not have to pay a fee for the sale.

In particular, many funds have an “early redemption fee.” Basically that means if you sell the fund within a certain number of years after buying it, they will charge you money. The number of years can be up to 7!

If you can’t find the information you need online, call the financial institution that offers the fund and ask. For example, you could phone BMO and ask what the fees are for the BMO TSX Composite mutual fund. The description of the holding on your Account Holdings screen should include the fund’s number which will help the agent know exactly which fund you are asking about.

Investor’s Edge staff will not know whether you have to pay any “early redemption fees” or “deferred service charges.” They are a discount broker (unlike a full service broker) and they do not help you with these types of questions.

We bought our mutual funds before the turn of the century so there were no fees to sell them.

Enter Your Order before the Mutual Fund Daily Trading Deadline

Mutual fund orders must be placed before the cutoff time each day or they will be processed on the next business day.

As of September 2013, orders have to be placed by 3 p.m. Eastern Time.

Some funds may have an earlier cutoff time. If it is critically important to you, phone Investor’s Edge to discuss the cutoff time, or ensure you place the order at the start of the trading day.

Selling a Mutual Fund at Investor’s Edge

  1. Sign In to your Investor’s Edge account.
  2. From the link list on the left side of the page, select Account Holdings.
  3. Review your assets. Decide which mutual fund you wish to sell.

Review the Dividend Information

  1. Click on the Code for the fund of interest. It will open the Fund Centre facts for that holding.
  2. If your fund is about to pay a dividend in the next few days you may want to delay the sale till after the dividend is paid. I know that, in theory, the fund’s NAV should drop when the dividend is issued by the exact same amount. I also know that some mutual funds end up being worth more if you cash them 2 days after the dividend is paid than if you cash them 2 days before the dividend is paid. You’ll have to decide what’s best for your fund and your investments.

Enter the Request to Sell

  1. On the Account Holdings screen, click on the downward pointing arrowhead at the end of the line for the mutual fund you want to sell.
  2. From the list, click on the link: Sell
  3. The Mutual Fund Order Entry screen opens.
    Review the pre-filled fields. Is the information in the

    • Account number and type
    • Action: Sell
    • and Mutual Fund name and code

    fields correct?

  4. If desired, click on Get Quote to see the last day’s price.
    You will not know exactly what you are selling a mutual fund for because the price will be set at the end of today.
  5. In the Amount area select one of:
    • Dollars, and type in the value you want to sell
    • Units, and type in the number of units you want to sell; or
    • Sell All

    Conveniently, it will tell you the approximate value in $ of your holding based on the last day’s price and the number of units you hold.
    I selected Sell All.

  6. For non-registered accounts you may be able to choose where the proceeds of the sale are deposited. For an RRSP account, the only choice is to Pay to: CAD RRSP Account.
  7. Click on the Next button.

Check Your Order and Sign Off

  1. Review the order information on the Verify Order screen.
  2. If it’s correct, in the Trading Password field, type your password.
  3. Click on the Submit Order button.
  4. Make a note of your Order Tracking Number or copy and paste the confirmation into a document and save it.
  5. Click on the View Order Status button.
  6. The Status should be listed as Pending under the Mutual Fund tab.
  7. Click on the Sign Off button.
    For increased security, close your browser session.

When Will I Get My Money?

According to the Investor’s Edge Mutual Fund tutorial:
“The standard settlement period for mutual fund trades is the transaction date plus three business days (T+3). The settlement period for money market funds is the transaction date plus one business day (T+1).”

So I won’t expect to see any money deposited until the third morning after today.

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Did you ever experience any quirks when selling a mutual fund within Investor’s Edge? Or did you just wonder why you bought the fund in the first place? Please share your experiences with a comment.