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Discussion Starter #1
OK I'm putting my dunce cap back on with another really basic question. Good thing no one here knows who I am, some of this is embarrassing lol.

Anyway, my RRSP investment account statement for the last quarter arrived this week. I don't understand what I'm looking at here. This might as well be written in greek but I do like the bottom line figures, those I understand lol.

What does this stuff mean?

summary of your investments:

balanced funds (36.25%) along with a monetary account value
canadian equity funds (63.75%) along with a monetary account value

Is that good? What does this mean?
 

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It sounds like the 36.25% and 63.75% figures are proportions of your portfolio (or at least the portions of the portfolio you hold with this broker or fund company).
 

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36.25% of your account is in balanced funds, and 63.75% is in Canadian Equity Funds. Elsewhere in your quarterly report it should tell you precisely how much you have in each specific fund.
 

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What I would like to see is different portfolios and see what THEIR results were for the same period. Or even better, to show what was the most performing portfolio.
 

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There are a million different (competing) theories about asset allocation. However, leaving that aside, I have two general comments:

- your allocation is not very diversified. (I don't know what kind of balanced fund you have, but I suspect it is a Canadian balanced fund).

- balanced funds are an expensive way to hold fixed income. Let's assume you are going to keep the same stocks/bonds asset allocation: it would be cheaper for you to hold one Canadian equity fund, and one bond fund.

We aren't going to know whether these were "well-chosen" unless we know a lot more about you. I also don't know what, in particular, you are wondering about w/r/t these funds. That said, one of the main things you can control when investing is your costs to participate. Do you want (us) to figure out how much you are spending each year to hold those funds?
 

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Discussion Starter #7
Thanks MG and tax. I'm not sure about any further (portfolio?) breakdown than what I have shown. I might have to rifle through some papers to try and find further detail about what I have now.

I bought these at the bank a few years ago. I simply told them I was aggressive and that I wanted to invest in mutual funds. During some quarters I saw growth of 33% and during the recent market crash I saw negative returns. It's just that I see everyone on here speaking so freely about how they invest. Everyone knows what they're talking about. This is one of those topics I just don't understand. So yes, if there is a way of knowing the annual costs of holding these funds by all means, whatever eye-opening info you can provide would be great. I'm just a young guy so am not risk adverse for this particular investment.
 

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It's easy to get the annual cost.

Tell me (via PM or post here) what the fund name is and the FUND CODE (on your statement, it will say something like "Happy Canadian Rainbow and Unicorns Equity Fund 1439 DSC". That's what we'd need to know.)

Then you can look up the fund (once you know the exact code) on Morningstar.ca to find out LOTS of things including holdings, "style," and annual fee.

This is in no way any kind of identifying info, so not to worry about identifying yourself by naming your mutual funds. ;)
 

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Discussion Starter #9
Thanks Mg, you're great.

OK here is what it says on the other paperwork:

Balanced funds
RBC Select Choices Aggressive Growth

Canadian Equity Funds
RBC CDN Equity Fund

Oddly, there are no fund codes. I checked through some other papers and couldn't find them there either but it was just a quick search. LMK if I need to dig deeper.

This is really helpful. Thank you.
 

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Does this work? Here's the Morningstar "quicktake" report on your "Select Choices" fund:

http://www.morningstar.ca/globalhome/quicktakes/fund_overview.asp?fundid=6182

The annual cost to hold this fund is 2.45% per year (i.e., multiply the value today by 2.45% and you will get a rough estimate of the annual cost).

Note that your fund lags both the category and the index for the last 5 years.

Report on second fund coming up.
 

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Thanks Mg, you're great.

OK here is what it says on the other paperwork:

Balanced funds
RBC Select Choices Aggressive Growth

Canadian Equity Funds
RBC CDN Equity Fund

Oddly, there are no fund codes. I checked through some other papers and couldn't find them there either but it was just a quick search. LMK if I need to dig deeper.

This is really helpful. Thank you.
MoneyGaL, It's not likely they sold him 67% RBC CDN Equity Income Fund, which is a Diversified Income Trust Fund. (They changed the name to more accurately reflect the nature of income trusts.)

More probably he has RBC CDN Equity Fund, which is RBC's mainstay CDN Equity Fund. But this fund, liek a lot of the core index funds of the large institutions, is a closet indexer. So you may as well buy the RBC CDN Equity Index Fund for a lot lower MER.

The Select Choices Aggressive Growth is a portfolio fund, made up of about 10 other funds. The Select "Choices" series of portfolios are called that because they contain not only RBC funds but some funds from other institutions. The RBC Select Portfolios an the other hand, are made up of only RBC funds. My observation is that you pay significantly higher MER for the Select Choices portfolios, for no better, and sometimes worse performance.

To OP: I don't particularly recommend the 2 funds you are holding. But without knowing more about your investor profile it's hard to suggest alternatives. It would appear that you have not yet taken the time or effort to educate yourself a lot about investing, so perhaps a wrap fund is still the best solution for you. Or you could easily change to RBC's index funds, in a proportion to suit your profile.
 

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OGG, I suspect you are right. But I didn't find (albeit in only a brief amount of time looking) a fund called "RBC Canadian Equity." ? Can you provide a link on the Morningstar site?

(I'm trying to do this quickly because I'm also writing a case study for work, which is breaking my brain. Visiting CMF is my "break" from writing...):rolleyes:
 

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Here it is
http://www.morningstar.ca/globalhome/quicktakes/fund_overview.asp?fundid=3868

PS to OP: given the current makeup of the Select Aggressive Growth portfolio fund, you have about
- 0% income;
- 74% CDN Equity;
- 12% US equity;
- 9% International Equity
and the balance in cash.

Are you happy with that asset allocation?

PPS: You said you are young, not risk averse, and asked for an aggressive portfolio. Other than that we don't know much about you. The 0% income certainly fits an aggressive profile. The overweighting in CDN equity would not usually fit, but it has probably worked out for you by luck because of the way the US economy tanked. The conventional wisdom (if you believe in asset allocation models) is to roughly balance CDN, US, & International equity. These are not normal economic times, but if you are in for the long haul you should probably be increasing your foreign equity content.

There isn't any single wrap fund from a bank I would recommend for an aggressive portfolio. Banks are fair to middling for CDN bonds, Dividend Funds, CDN equity, and CDN Balanced Funds. But none of them seem to do particularly well in foreign markets, aside from their index funds. I don't know if it's their innate conservatism or high overheads.
 

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OGG, thanks! (I have no idea why a search for RBC Canadian Equity didn't produce that result for me...!)

In addition to what OGG said, you are paying:

(Your current value in the Aggressive fund x 2.45%)+(your current value in the Canadian fund x 1.97%) per year for those funds (approximately...the MERs are calculated more frequently than yearly...)
 

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Royal, I am in the same boat as you right now. I think you're ahead of me in getting this stuff figured out so good luck! I am on the learning curve. Asset allocation seems like the next chapter for myself

one more subscription haha
 

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Discussion Starter #17
By all means stick around 72 - I've found the respondents to this thread to be top notch, as always. I'm slowly absorbing what has been said here. Now onto my questions...

MG why are you pointing out the fees I am paying for these funds? Do you feel they are too high? They seem high to me, but I'm clueless remember. LMK if I should be doing this differently to save on fees?

Second question is more to OGG's comments above about the asset allocation. I have no reason to be happy or unhappy with that allocation. It basically means nothing to me. But I understand what you are suggesting. How about if I call the investment people at the bank and get them to change the CDN portion to 40% and then 30% each for the US and foreign sections. Or should I wait until the US and world economies improve? Lots of bad news out of Europe, Iceland and Greece lately. What's your opinion?

Why did you say 0% fits my profile? What's 0% income? What does that mean?

Oddly, the graph on the link you provided shows different percentages from what you wrote above?
 

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TRM: investing costs are important. I don't need to link to anything: here's what you need to think about. If the markets return (for example) 5%, and you are paying 2% in fees, and inflation is 3%, what is your real, after-inflation, after fees return?

5% return - 2% fees - 3% inflation = 0.

Now, you can't control what the markets do. And you can't control the rate of inflation. But you CAN control how much you pay to invest.

Retail mutual funds are expensive, and there are cheap(er) alternatives. What are you getting for the amounts you pay? Are you getting advice? Are you satisfied with the advice you are getting?

I'm not saying that all investment fees are wrong. What I am saying is:

1. you should be aware of what you are paying to participate, because it is one of the most important factors in your long-term success - AND it is a factor entirely in your control

2. you should get something you are satisfied with in exchange for the fees you pay, especially since you have lots of lower-cost alternatives available.
 

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MG why are you pointing out the fees I am paying for these funds? Do you feel they are too high? They seem high to me, but I'm clueless remember. LMK if I should be doing this differently to save on fees?

Second question is more to OGG's comments above about the asset allocation. I have no reason to be happy or unhappy with that allocation. It basically means nothing to me. But I understand what you are suggesting. How about if I call the investment people at the bank and get them to change the CDN portion to 40% and then 30% each for the US and foreign sections. Or should I wait until the US and world economies improve? Lots of bad news out of Europe, Iceland and Greece lately. What's your opinion?

Why did you say 0% fits my profile? What's 0% income? What does that mean?

Oddly, the graph on the link you provided shows different percentages from what you wrote above?
1. In your 3rd post you said "So yes, if there is a way of knowing the annual costs of holding these funds by all means, whatever eye-opening info you can provide would be great." This implied you had no idea how to look up the MER (Management Expense Ratio) of a mutual fund, so MG told you what they are.

2. I said 0% income fits your profile because you claim to be young, willing to take risk, and told the bank you wanted to be aggressive. (but see Item 5). Income funds are less volatile and lower risk. The higher the proportion of income in your asset allocation, the more conservative it is considered to be.

3. I gave you the approximate percentages for your overall portfolio, consisting of the two funds combined. The links just show the asset allocation for the individual funds.

4. Income allocation means fixed income investments, which in mutual funds is usually bonds.

5. If you are not aware of the meaning of income asset allocation; cannot interpret an RBC quarterly mutual fund statement; and don't know how to look up MER and why it is important, i would not consider you to be a knowledgable investor. And IMHO the bank should not have agreed to sell you an aggressive portfolio, because your level of knowledge does not fit the profile for an aggressive investor. (although in other ways you may fit because of age, investment horizon, etc.) Until you have learned more you would appear to be a candidate for a simple CDN balanced fund. I am reluctant to suggest anything too specific without knowing a whole lot more about your profile; but you might consider the Select Balanced Portfolio Fund or the Select Growth Portfolio Fund.

6. There are a number of on-line sites from financial institutions that help you determine a recommended asset allocation through a simple Q&A. Try filling some of them out (And be brutally honest in your answers) and see if you get any consistent results. Then pay your RBC mutual fund rep a visit and tell them you want to go over your investor profile because you are concerned your asset allocation may not fit your profile.
 
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