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Discussion Starter #1
Hi everyone,

This looks like a pretty valuable community to be a member and I'm looking forward to learning as I contribute.

Here is my situation.

In Feb/07 I began contributing to Transamerica Life Canada Mutual Funds for my RRSP. I didn't know a thing about investing at the time and took my bosses advisor's advice. After doing a lot of research over the last few months and seeing as how Transamerica has no web management and what I consider underperforming high MER funds I decided I'd stop contributing last month and began managing my own portfolio using the TD e-Series and internet guidance, specifically a close approximation of the Sleepy Mini Portfolio at canadiancapitalist.com

Now with $14,400 (currently worth $14,485) combined invested in two separate Transamerica funds, I'm wondering if I'm better off to get those moved to TD and eat the Deferred Sales Charge or should I just wait until the 6 years have passed when the DSC is 0% and redeem then?

Am I presuming this correctly? If I were to redeem early, the DSC will be equivalent to the amount of units I have bought within a time frame multiplied by the DSC % Charge for that time frame multiplied by the NAV at the time of the redemption?

Code:
[URL="http://fundlibrary.com/funds/db/fundcard.asp?id=19467"]imaxx Top Global Managers GIP 75/75[/URL] 
Year        Units       DSC     Fee
> 3 Years   325.7069	3.00%	$45.47
> 2 Years   383.4778	4.00%	$71.39
> 1 Year    464.3088	5.00%	$108.04
< 1 Year    375.2841	6.00%	$104.79
			
Current NAV:4.6539    Total: $329.70
			
[URL="http://fundlibrary.com/funds/db/fundcard.asp?id=19495"]imaxx Canadian Equity GIF 75/75[/URL]		
Year        Units       DSC     Fee
> 3 Years   344.1795    3.00%   $50.58
> 2 Years   337.7758    4.00%   $66.18
> 1 Year    449.8201    5.00%   $110.17
< 1 Year    353.8923    6.00%   $104.01
			
Current NAV:4.8983    Total: $330.93
That's $660.63 total. Any advice on how to proceed as a novice investor would be appreciated. I'm 36 years old and looking long term 20-25 years. Be happy to provide answers to any more questions
 

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1) The decision to eat the DSC fees depends on the difference between the MERs of your current funds vs TD e-funds. If the difference is around 2% (I'm guessing), then in every case you will be better off paying the DSC fee. (I'm ignoring possible performance differences).

2) You are probably correct that the DSC charge is applied to the fund value on the day of redemption, but verify. Some companies offer a book value DSC which is different.

You should see if there is a 10% free option, use this before redeeming.

This post has some more details about minimizing the DSC charge.

http://www.moneysmartsblog.com/defense-mutual-fund-dsc-fees-investors/
 

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As "four pillars" suggested,,take the 10% "free units" first.

Usually you are allowed to get 10% of your units cashed out , without having to pay the DSC charges.
Also you are usually allowed to do this every calender year.

This means you should ask for the 10% free units now....2010....then ask for another 10% free units in jan 2011..

that should allow you to get 20% of your units out in the next 2 months or so without paying any fees on them,
Just call and check their specific rules first. Demand answers!

As to wheher you sell out totally after that, and swallow the DSC charges..thats strictly a personal decision you have to make.

The "financial services" industry is very good at separating you from your money.....your "fiancial advisor". sold you these DSC funds because he made good money on them,,,certainly NOT because they were in your best interests.

Dont feel bad,,,its happened to a lot of retail investors...myself included, years ago, when I wasnt paying attention.

good luck
 

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Usually the 10% free units rule is calculated by purchase anniversary date, not calendar year. Something to check.

There's a few other considerations: one is account fees. If there's a $75 fee (for example) for each account, moving to one account will cut that total cost in half.

The other is transaction fees. You should calculate the costs associated with moving from where you are now to TD e-funds.

I am assuming you are not able to move your existing TransAmerica funds over to TD (that's right, isn't it? That's why I'm assuming you would maintain two accounts in the interim).

If that's the case, you will need to sell units and incur a transaction fee in the first account, then move the cash to your TD e-funds RRSP account, incurring a transfer fee (usually; unless TD waives it, which they may not do for small amounts), then purchase the e-fund series you like in the TD account, incurring a transaction fee.

So keeping the funds where they are has high costs (which you now know) - but moving them little by little may also incur relatively high costs as well, even for "DSC-free" units.

In addition to the ongoing costs of implementing the strategy to move the funds over a little at a time, there's also a "PITA" factor. That is, you would need to monitor DSC rollover dates for each parcel of units, calculate break-even points, sell the units for which there is a break-even point, and then move the cash over to TD and buy new funds. Your time and attention are inputs which should be valued as well.

You should do whatever works for you with whatever tradeoffs you are happy with - my only advice is to make sure you are clear about all the transaction costs you will incur if you decide to do a staged move out of TransAmerica. I've also provided another way of looking at your total costs with my "pain in the *ss" factor. :)
 

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Discussion Starter #5
1) The decision to eat the DSC fees depends on the difference between the MERs of your current funds vs TD e-funds. If the difference is around 2% (I'm guessing), then in every case you will be better off paying the DSC fee. (I'm ignoring possible performance differences).
Sorry I should have specified these in my original post. The MER on the TOP Global is 3.09, an e-Series International Index is 0.48. The MER on the Canadian Equity is 2.68 and on the e-Series Canadian Index is 0.31. Sounds like I'm still better off.

Thanks for the link, quite helpful.
 

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Discussion Starter #6
Thank you warp and MoneyGal. The anniversary date is Feb 17.

No MoneyGal I can't move these funds directly to TD

If I take the 10% cash out now and again after the anniversary date, how will that affect my RRSP contributions even if I'm putting them right back into TD?

Also if I do a 10% cash out, do they take the oldest units?

The "PITA" factor is one I'm strongly considering. I think I'll wait until the anniversary date of my initial deposit (which was $1200), pay only 1% DSC for that amount then just bite the bullet for the rest and do one complete move.
 

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Usually the 10% free units rule is calculated by purchase anniversary date, not calendar year. Something to check.

There's a few other considerations: one is account fees. If there's a $75 fee (for example) for each account, moving to one account will cut that total cost in half.

The other is transaction fees. You should calculate the costs associated with moving from where you are now to TD e-funds.

I am assuming you are not able to move your existing TransAmerica funds over to TD (that's right, isn't it? That's why I'm assuming you would maintain two accounts in the interim).

If that's the case, you will need to sell units and incur a transaction fee in the first account, then move the cash to your TD e-funds RRSP account, incurring a transfer fee (usually; unless TD waives it, which they may not do for small amounts), then purchase the e-fund series you like in the TD account, incurring a transaction fee.

So keeping the funds where they are has high costs (which you now know) - but moving them little by little may also incur relatively high costs as well, even for "DSC-free" units.

In addition to the ongoing costs of implementing the strategy to move the funds over a little at a time, there's also a "PITA" factor. That is, you would need to monitor DSC rollover dates for each parcel of units, calculate break-even points, sell the units for which there is a break-even point, and then move the cash over to TD and buy new funds. Your time and attention are inputs which should be valued as well.

You should do whatever works for you with whatever tradeoffs you are happy with - my only advice is to make sure you are clear about all the transaction costs you will incur if you decide to do a staged move out of TransAmerica. I've also provided another way of looking at your total costs with my "pain in the *ss" factor. :)
Sorry to quote the entire block of text, but this is actually a really good summary of the traps that await anyone who attempts to move money around between banks. Not being careful could mean you get eaten alive by fees and procedures. I have a little bit of exposure to this, and the mechanics of all of this seem geared towards discouraging people from moving their money around.
 

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Usually the 10% free units rule is calculated by purchase anniversary date, not calendar year. Something to check.

There's a few other considerations: one is account fees. If there's a $75 fee (for example) for each account, moving to one account will cut that total cost in half.

The other is transaction fees. You should calculate the costs associated with moving from where you are now to TD e-funds.

I am assuming you are not able to move your existing TransAmerica funds over to TD (that's right, isn't it? That's why I'm assuming you would maintain two accounts in the interim).

If that's the case, you will need to sell units and incur a transaction fee in the first account, then move the cash to your TD e-funds RRSP account, incurring a transfer fee (usually; unless TD waives it, which they may not do for small amounts), then purchase the e-fund series you like in the TD account, incurring a transaction fee.

So keeping the funds where they are has high costs (which you now know) - but moving them little by little may also incur relatively high costs as well, even for "DSC-free" units.

In addition to the ongoing costs of implementing the strategy to move the funds over a little at a time, there's also a "PITA" factor. That is, you would need to monitor DSC rollover dates for each parcel of units, calculate break-even points, sell the units for which there is a break-even point, and then move the cash over to TD and buy new funds. Your time and attention are inputs which should be valued as well.

You should do whatever works for you with whatever tradeoffs you are happy with - my only advice is to make sure you are clear about all the transaction costs you will incur if you decide to do a staged move out of TransAmerica. I've also provided another way of looking at your total costs with my "pain in the *ss" factor. :)
Some incorrect info here - the 10% free date is usually year-end. I've never heard of using the anniversary date although it's certainly possible. Phone your company and find out.

Transaction fees - I doubt there will be a redemption selling fee and I know for sure there is no purchase transaction fee for TD e-funds. There will likely be a transfer fee - ask TD if they will cover it.

@Plen - You don't remove the 10% free from the RRSP account - it will stay inside the account as cash or a different load of the fund.

FIFO - they should take the oldest units for 10% redemption, but you will have to verify this.
 

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My bad. The 10% rule is by calendar year. I was mis-remembering.

The DSC rollover schedule is by anniversary date, though.

Whatever the specific fees are, my point was simply that the original poster should verify all the fees, in addition to placing a value on his time and attention as resources that would have to go into the plan to move units over slowly. Make sense?

If, for example, he was opting for the *even cheaper* ETF route, there would indeed be transaction costs associated with each purchase in the new account.

Let's say TransAmerica charges a $75 transfer fee (not unheard of) that TD won't waive for a relatively small account and possibly a new customer. Does it still make sense to cash out 10% of units now, and 10% in January? Does it make more sense to cash out 20% of units in January?

The reality is I like building mathematical models so I can gauge the impact of various factors. The original poster should be aware of all the costs/fees he may incur with different plans of action, so he can rationally create an optimal strategy. Or not; but that's what I would do. :)
 

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My bad. The 10% rule is by calendar year. I was mis-remembering.

The DSC rollover schedule is by anniversary date, though.

Whatever the specific fees are, my point was simply that the original poster should verify all the fees, in addition to placing a value on his time and attention as resources that would have to go into the plan to move units over slowly. Make sense?

If, for example, he was opting for the *even cheaper* ETF route, there would indeed be transaction costs associated with each purchase in the new account.

Let's say TransAmerica charges a $75 transfer fee (not unheard of) that TD won't waive for a relatively small account and possibly a new customer. Does it still make sense to cash out 10% of units now, and 10% in January? Does it make more sense to cash out 20% of units in January?

The reality is I like building mathematical models so I can gauge the impact of various factors. The original poster should be aware of all the costs/fees he may incur with different plans of action, so he can rationally create an optimal strategy. Or not; but that's what I would do. :)
I agree the OP has to look at all the costs, including the time costs.

He won't move the 10% free money in a separate transfer however. He can request that it be placed in a cash or money market fund inside the account.

Once he has completed everything he wants to do - then he will just do one transfer to the new brokerage.
 

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Discussion Starter #11
Alright here are some more details and numbers

I just got off the phone with Transamerica, they told me the cashout is based upon the value at each anniversary date and my total DSC charge would be $590.13.

There are no fees for transferring from Transamerica.

The MERs for the imaxx Top Global Managers is 3.09 and for the e-Series International Index is 0.48, the MER for the imaxx Canadian Equity is 2.68 for the e-Series Canadian Index is 0.31

The 10% annual no-charge surrender is based upon anniversary date not calendar date so I could do some now and some after Feb. 17. However these come from my earliest purchases which after Feb will be at 2% DSC
 

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Not to belabour a point but in the original post, he wasn't suggesting he would move all of his assets at one time. He was asking for advice.

If he cashed in his 10% free units and left them sitting in cash in his account, there's yet another cost to consider: which is the opportunity cost or "sideline" cost of not being in the market with money that WAS in equities and is now in cash earning zero or close to it.

If you are cashing out of equities (however they are held) to remain in cash when this is not your desired asset allocation, you need to factor in a potential loss of expected return.

For a lot of reasons, which are probably now becoming apparent in my posts, I think in most situations the optimal solution is to bite the DSC charge (unless you are in the first year of the DSC schedule) and implement the revised strategy.

Cashing out of high MER funds to remain in cash *when this is not your desired asset allocation* does not make a lot of sense to me. If you have a long time horizon, and would otherwise be invested in equities with that cash, then (for me anyways) asset allocation would likely trump transaction costs.

I don't like "rules of thumb" in investing and while I may be caught up in details, I don't like approaches which gloss over what are for me the fundamentals in creating and sustaining a successful investment strategy, and (for me) asset allocation is one of those core things.
 

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Not to belabour a point but in the original post, he wasn't suggesting he would move all of his assets at one time. He was asking for advice.

If he cashed in his 10% free units and left them sitting in cash in his account, there's yet another cost to consider: which is the opportunity cost or "sideline" cost of not being in the market with money that WAS in equities and is now in cash earning zero or close to it.

[ ... ]

For a lot of reasons, which are probably now becoming apparent in my posts, I think in most situations the optimal solution is to bite the DSC charge (unless you are in the first year of the DSC schedule) and implement the revised strategy.

[...]
I'm not so sure ... going back to the original post, plen said:

" ... I'm wondering if I'm better off to get those moved to TD and eat the Deferred Sales Charge or should I just wait until the 6 years have passed when the DSC is 0% and redeem then? ..."

Both scenarios seem to imply everything is transferred at one time. The advice seems to be around when that time should be, as anything before six years will trigger DSC charges.


Your comments about "sideline" costs, while on the mark, may not apply if the decision to take the DSC charge and move into the TD funds is what happens.

If it's a gradual shift where the funds are converted within the Transamerica account and then a delayed transfer to TD, then in addition to the "sideline" costs, I'm wondering a couple of things. What rates would Transamerica pay on the cash? (Likely not a lot) Does Transamerica offer a no-fee money market fund? If the money market fund is a DSC fund, it will start the whole cycle over again.

@Plen: Whether it is done gradually or in one shot, the key is to transfer the investments within an RRSP, from Transamerica to the institution of your choice. This route will avoid a tax bill for an RRSP withdrawal plus the associated withholding tax.

Since you mention TD e-series, presumably you already have a TD or TD-Waterhouse RRSP opened. If so, the only question is whether Transamerica and TD will allow a "transfer-in-kind" (i.e. the funds themselves) or if I'm remembering correctly, you'll have to sell the TA funds for cash before requesting a transfer.
 

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Great post.

TransAmerica will likely pay close to nothing on cash. I don't know if they have a non-DSC MM fund.

I think we are all talking around the same points - what I think, personally, is the non-optimal solution is to cash out small numbers of units and leave them in cash OR cash out small numbers of units and transfer them into TD to purchase e-funds *if* there is a transfer cost TD will not pick up.

It seemed to me that the advice earlier in the thread was to get the 10% units out of the DSC'd mutual funds ASAP - but then that leaves the question of what to do with the cash.

Plen - is all of this helpful to you?
 

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Discussion Starter #15
It has been very helpful, yes, thank you. I was not aware of all the options and considerations. I guess the big thing for me to consider is my personality. I'm lazy, I don't like calling and talking to people to work things out. I prefer clicking buttons online. This sort of legwork with Transamerica to minimize the lowest fees initially makes me recoil with "Ugh, that's way too many phone calls and being on hold and making sure everything is done correctly." I have much more faith in transactions I manage via the web being done correctly.

I am pretty sure I will just bite the bullet right now. I just talked to TD and they don't charge a receiving transfer fee either. So in the end my cost will be just that $590 - It's hard to say "just" to that amount of money but in the end I think the payoff suits the type of person I am and my long term goals better.
 

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:)

I've said this other places on this forum but not lately but here it is: if you are optimistic about equities, the time to get in the market is now.

You could think about the $590 as "tuition" for learning about DSCs, high MER funds, etc. :cool:
 

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Great post.

TransAmerica will likely pay close to nothing on cash. I don't know if they have a non-DSC MM fund.

I think we are all talking around the same points - what I think, personally, is the non-optimal solution is to cash out small numbers of units and leave them in cash OR cash out small numbers of units and transfer them into TD to purchase e-funds *if* there is a transfer cost TD will not pick up.

It seemed to me that the advice earlier in the thread was to get the 10% units out of the DSC'd mutual funds ASAP - but then that leaves the question of what to do with the cash.

Plen - is all of this helpful to you?
I only suggested putting the 10% free money in cash as one option. Another option is to put it in the front-end version of the same fund which will minimize the time out of the market.

The problem with that approach of course is that might start a 90-day period in the front-end fund where redemption fees will be charged if redeemed within the 90 (or whatever) days.

He would have to check with TA to see if that situation applies.
 

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It has been very helpful, yes, thank you. I was not aware of all the options and considerations. I guess the big thing for me to consider is my personality. I'm lazy, I don't like calling and talking to people to work things out. I prefer clicking buttons online. This sort of legwork with Transamerica to minimize the lowest fees initially makes me recoil with "Ugh, that's way too many phone calls and being on hold and making sure everything is done correctly." I have much more faith in transactions I manage via the web being done correctly.

I am pretty sure I will just bite the bullet right now. I just talked to TD and they don't charge a receiving transfer fee either. So in the end my cost will be just that $590 - It's hard to say "just" to that amount of money but in the end I think the payoff suits the type of person I am and my long term goals better.
Sounds like a good plan.

Make sure the current 10% free redemption is done or is part of that redemption.
 

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:)

I've said this other places on this forum but not lately but here it is: if you are optimistic about equities, the time to get in the market is now.

You could think about the $590 as "tuition" for learning about DSCs, high MER funds, etc. :cool:
I'm going to say March 2009 was the best time that you could get for possibly the next 10 years... but now may not be bad. At that point the TSX composite was under 8,000 and and it's now 12,650 or so.

I've paid that tuition myself to get the last bits out of DSC funds - I just make sure I pay that cost out of cash not out of the account.
 

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Discussion Starter #20
Sounds like a good plan.

Make sure the current 10% free redemption is done or is part of that redemption.
It is a part of the full redemption, yes, I asked.

I just got back from TD (they're next door to my work) and initiated the transfer. Since the whole process can sometimes take up to 6 weeks, I'm wondering now what to do with the funds in the meantime.

Transamerica allows 4 free fund transfers yearly but I can only transfer within same Maturity/Death guarantee and same sales charge options. Which limits me to this list (75/75 category).

I was curious where I should put the funds in the meantime. Should I call them and move it all to the money market right now just to be on the safe side in case the day/week they finally do the transfer the fund/market performs terribly and then the lag between getting it into TD could potentially hurt me?

I guess it's a question of how comfortable I am with a gamble.
 
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