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I'm soon to be 80yrs and would appreciate help to see if my portfolio is adequate. I hold these funds in a taxable acct:

1. BMO Saxon Balanced - Principal protected 2013 - 15%

2. BMO Guardian Monthly High Income - 11%

3. CIBC Monthly Income - 27%

4. ML Global Equity Accelerator S7 2013 - 5%

5. TD Cdn. Equity Annual Coupon note S3 2013 - 16%

6. Renaissance High Interest Savings Acct. - 24%

Agent wishes to sell 3 and 4(loss of $7000) and buy Meritage Growth Income Portfolio. Any thoughts are very much appreciated.
 

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7k loss.

I'd be curious as to 'why' your advisor wants you to sell it.

You're losing 7K....your advisor isn't.
your advisor will make money on the purchase of the new fund, and the sale of the old stuff.

The "what's in it for me" factor just ain't there. I think it would take considerable time to make up the 7K loss.

my two cents.
 

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My thoughts exactly. CIBC wouldn't be my 1st choice for a bank monthly income fund (RBC & TD are better rated). But consider the following:

CIBC Monthly Income is CDN Neutral Balanced
- It is usually a no-load fund, but if you are holding it through another institution than CIBC, maybe you have a series that has a load.
- It is rated 5 stars for Performance & Risk by FundLibrary.
- Morningstar Rating is 4, and Tax-Adjusted Rank is 4. Fixed Income Style has Moderate Interest Rate Sensitivity.
- It is rated only 2 stars by Globefund, but Globefund is notoriously biased towards shorter term performance. ( A year ago they rated this fund 4 stars)

Meritage Income Growth Portfolio CDN Neutral Balanced
- It is a front-or back end load fund.
- It only started in Sep. 2006, so FundLibrary doesn’t rate it yet.
- Morningstar Rating is 3, and Tax-Adjusted Rank is 3. Fixed Income Style has High Interest Rate Sensitivity.
- It is rated 4 stars by Globefund, but Globefund is notoriously biased towards shorter term performance. (It had a good year last year, but who wouldn’t when most of your investors came in at the bottom of the market?

So it's not clear to me why you would want to dump CIBC Monthly Income for a start-up that was lucky enough to have one good year last year.

No comment on ML Global Equity Accelerator at this time - except maybe it no longer fits your profile.
 

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I'm soon to be 80yrs and would appreciate help to see if my portfolio is adequate. I hold these funds in a taxable acct:

1. BMO Saxon Balanced - Principal protected 2013 - 15%

2. BMO Guardian Monthly High Income - 11%

3. CIBC Monthly Income - 27%

4. ML Global Equity Accelerator S7 2013 - 5%

5. TD Cdn. Equity Annual Coupon note S3 2013 - 16%

6. Renaissance High Interest Savings Acct. - 24%

Agent wishes to sell 3 and 4(loss of $7000) and buy Meritage Growth Income Portfolio. Any thoughts are very much appreciated.
Not to be flippant, but have you considered firing your advisor? You mentioned that your investments are in a taxable account. Does this mean that you've maxed out your TFSA? If not, you need to consider where you hold these investments as well as what investments to hold. Remember you can income-split with a spouse using separate TFSA (you can contribute to a spouse's TFSA without fear of income attribution). Because your investments are in a taxable account, tax must be one of the crucial factors in acquiring any investment. When I look at your investments, I see some overlap - high income funds and a high-savings account. What was your advisor's rationale - if any - for the overlap? These investments are taxed like interest i.e. the least tax-efficient form of income to receive. Are the BMO Saxon balanced/ TD equity coupon notes GICs linked to equities? If so, they may be taxed like interest too - very tax inefficient. Also, equity-linked GICs tend to have high fees. Why the Renaissance high interest savings account? Is it better than an ING account? What are the MERs on your funds? If your advisor can't answer all those questions, then you should seriously consider a new advisor.

Before you change the specific investments, you need to look at your overall situation. How much risk can you take? If you have a defined benefit plan or an annuity to cover your basic expenses then you can afford slightly higher risk. Dividends are far more tax-efficient than interest, but may be slightly riskier. There are ETFs (exchange traded funds) that yield dividends. CPD is a Claymore ETF that holds preferred shares - riskier than bonds but more tax-efficient. You can also purchase exchange traded funds that hold bonds e.g. XSB (holds mainly gov't + high quality corporate bonds). XSB is yielding about 4%, so if your high yield funds are yielding the same or less, then I see no reason to hold them instead of XSB. You benefit by holding the securities that charge the lowest fees. Looking at your portfolio, there seem to be some high-cost investments. You really need to talk to your advisor. If you're not compleely satisfied with the answers, then don't do anything until you're sure. Did I mention you should talk to your advisor?
 

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I also would question the motives of the "agent" when he/she suggests that you sell what appears to be a principal protected note before maturity. I don't like these things either, but to sell before maturity makes no sense whatsoever as there really is no secondary market for these things so the "haircut" will be pretty stiff -- IOW, you will be taking an unnecessary loss.

I'll bet that the conversation went something like this: "jcub2; I can do a lot better for you with this new investment product that just came out -- Meritage Growth Income Portfolio. We could sell your CIBC Monthly Income and ML Global Equity Accelerator to realize the capital loss on those investments at no cost to you and get you a tax refund when you file your 2010 income tax return."

If that sounds familiar, then your agent has some tough questions to answer.
 

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jcub you are greatly to be congratulated for keeping such a good eye on your investments and for having the courage to bring your portfolio and your concerns here to this forum.

along with others, i am concerned about the wisdom of your advisor's recommendations. I sincerely hope you will put everything on hold for a few more weeks, during which time you might gather up a few more of our opinions here (such as they are !!) and perhaps voyage on to obtain one or two additional opinions from other financial advisors (licensed in-the-flesh advisors, as opposed to virtual advisors.)

my greatest concern is with the proportionately large proposal of buying Meritage income growth. I did look at their website and at all the material for this fund, and frankly i recoiled in horror. This is a fund of funds. It holds nothing but 10 other mutual funds. Granted, they are reasonably selected, but you will probably be paying 2 layers of fund management fees. This would be enough to totally turn me off.

to make matters worse, there is probably a load fee to buy Meritage, whereas the component funds or equivalents thereto can be purchased load-free.

in addition, i noted that this Meritage income growth portfolio returned a meagre 21.40% in 2009, a year in which many common stocks doubled. The holding-down of this return was probably caused by the large fixed-income component, so the fund cannot be slighted for this reason, as its mission is to offer a significant income fraction. Nevertheless, i see nothing to recommend this high-fee fund either for yourself or for anyone else. I believe the risk exists that your advisor is recommending it because he is herding as many of his clients as he can into a small selected handful of funds in order to increase his trailer fees (alas, they do behave like that.)

what to do? my suggestion would be to merely stay with the CIBC income fund and the ML Accelerator fund for the time being, while you search for other and better suggestions at a leisurely pace.

i have assumed that nearly all of the $7000 potential loss you mention arises from ML accelerator, because ordinarily speaking a purely income fund like the CIBC should not have declined that much in market price.

re this loss: among things to consider are whether you can apply it against gains this year; or whether you can carry it back to claim credit for declared capital gains in prior years; or whether you might carry forward such a loss because you anticipate future capital gains.

re the Renaissance holding: this is a fairly large proportion (about one-quarter) of your portfolio. Renaissance currently pays .90%. Savings accounts at ING currently pay 1.20%, so there is a difference that can be important if enough money is at stake. Please remember, though, that you'd have to open and manage an ING account yourself. It's not difficult to do - i've had one for years & they work like a charm. You can carry out transactions either online or by telephone with live representatives. But please remember that your advisor will probably oppose your moving the cash to ING, because it will mean taking one-quarter of your portfolio away from his grasp. By the way, i personally believe that a cash or cash-equivalent proportion of approximately 20-30% is appropriate for someone in your age bracket, but others may have different views.

wishing you all the best, and hoping you will proceed slowly and carefully.
 

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Discussion Starter #7
Portfolio Question

First off thank you all.

To ashby corner...he says to put the loss against 2010 earnings and that he doesn't see ML Global making up the initial investment going forward. To OhGreatGuru...he wants to dump CIBC Monthly as it is underperforming and he says Meritage has done better over the last year and pays a higher monthly dividend. Is this true as I looked and the monthly appears to be less? To Larry6417...yes I have cosidered firing him. No mention of a TFSA BTW. The principal protected funds don't pay dividends. CIBC.,BMO Guardian and Renaissance only pay dividends. I get yearly interest on the TD note. To scomac...that was exactly the speech I got plus the comments as stated above. To humble pie...yes the $7000 loss was mostly ML Global. He wants me to get rid of Renaissance eventually as its not making much. He says the Meritage has bond funds in it to make up the fixed income component of the portfolio. At that time he also wants to sell the two BMO funds. He didn't say what this money would go into.
 

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I have added up your different asset allocations, and your portfolio is about equally divided between Fixed Income (including the Savings Acct., which is closer to Cash); Principal Protected Notes; and Equity (mainly CDN)

You've seen some of the comments on the merits/demerits of PPNs. I'm not an expert on these, but it appears you do trade off a lot for the security of the principal. The Merril Lynch Global Accelerator does not appear to be principal protected, and as a global equity linked note may be out of character with the typical profile for your age group. If it is not principal protected it may make sense to dump it for something more appropriate. For example both TD and RBC have highly rated monthly income funds with long track records - RBC's is a little more conservative, whcih may be more suitable to your circumstances.

The amount you have tied up in a so-called "high-interest" savings account is not much of an investment. You should re-think that unless you need the ready access to that amount of cash.
 

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Discussion Starter #9
Portfolio Question?

On PPN., considering the downturn in 2008/09 it did work out. Having said that on an upturn in the market there is no merit. On the ML Global Accelator Fund it's a mix of three indexes - DOW.,Nikkei.,Stoxx50. A 1/3 of the principal is protected. Thanks OhGreatGuru for your comments. I am waiting on the changes he suggested as I am thinking of also getting a new advisor. I agree that the Ren. money should go elsewhere. I take it that you're talking of TD and RBC if I got rid of CIBC? If I redirect the Ren. monies to dividends is it better to stock pick or choose an ETF or fund?
 

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First off thank you all.

To Larry6417...yes I have cosidered firing him. No mention of a TFSA BTW. The principal protected funds don't pay dividends. CIBC.,BMO Guardian and Renaissance only pay dividends. I get yearly interest on the TD note.
You receive a lot of interest income, so your advisor's not mentioning a TFSA is absolutely atrocious - I would call it incompetence. You can open a self-directed TFSA yourself easily at any major bank. If you have a spouse then you can contribute $20,000 ($5,000 for both 2009+2010 for yourself and your spouse). A TFSA will shield you from tax on the investments held within, even when withdrawn. For example, if you held a bond ETF in the TFSA, the payments received from the ETF would be tax-free upon withdrawal. I would make sure that you're receiving eligible dividends. I ask this because some income funds provide a mixture of types of income. They may pay dividends, interest, or return of capital. Even though the payment to you may be called a "dividend" the income is taxed differently (interest income is taxed like interest even if called a dividend). Dividends are taxed much more favourably than interest and can be left in a taxable account. If you've decided to take the risk of receiving dividends then the question becomes: what's the lowest-cost, safest, highest-yielding investment vehicle for you? I would look at the MER of your dividend funds and compare it to something like CPD, which holds preferred shares only and yields about 5%.
 

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To scomac...that was exactly the speech I got plus the comments as stated above.
Did he sell you the investments he now wants to sell? If so, you might want to ask him why you should because his first choices were apparently inferior, so why would the new choices end up being any different?

This sounds very much like an advisor that is attempting to churn a portfolio for his own benefit through increased commission income. It really pisses me off to see a so-called professional exploiting a senior citizen in this way. A pox on him! :mad:
 

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" ... he says to put the loss against 2010 earnings ... yes the $7000 loss was mostly ML Global."

a capital loss can only be netted against capital gain. It cannot be used to lower other investment income or "earned" income or any other income. It can, however, be carried back a few years to prior declared gains and forward indefinitely. That's why i inquired if you really do have such gains, or do you anticipate such gains in the future. Because your portfolio is not skewed to capital gains, and without taxable capital gains your loss is going to be useless taxwise, although it may be painful in real life.

here is a small but sensitive point. If you do not have present, recent past or anticipated future capital gains, is your advisor instructing you nevertheless that you can deduct your loss from other "earnings" - ie from other investment income ? this would really be wrong. It would mean he's hard-selling you, and in the best of all possible worlds should not be handling senior citizens at all.

as for the Renaissance, as everyone knows all such accounts are presently paying a pittance. What kind of "bond fund" is he talking about ? There are deep-discount corporate bond funds, aka junk bond funds, with higher yields, but risk is higher & they are a different kettle of fish. As for high-quality longer-term bond funds, these are at risk to lose value as soon as interest rates start to rise ... and as for very short-term quality bond funds, these will not pay much better than a GIC or even an ING daily savings account.

i see that great guru has a different point of view, but i'm sticking to my knitting & saying that very roughly 20-30% of a senior's portfolio can stay in cash-equivalent in case there are unforeseen expenses. The exception would be if we're talking about a larger portfolio, well north of 500K, when the sheer numbers would mean a ridiculous amount of cash.

one last thing for now, jcub. Please be careful about disclosing information. The preceding paragraph is definitely not an invitation to disclose anything more about your portfolio.
 

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Discussion Starter #13
Portfolio Question

Thanks to you guys or girls as the case may be. I agree with all the comments made and will not be acting on his advise. Humble pie...The bond portion was included the Meritage Fund. Thanks again for all your concerns. It's great to know there are wonderful people out there looking out for the older generation.
 

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2. BMO Guardian Monthly High Income - 11%

This is getting further afield, but this fund (which I believe is now called BMO Guardian Growth & Income) is a CDN Income Trust Fund, with an MER of 2.30. FundLibrary gives a grade of "D", and Morningstar Rating is only 2. This seems an overconcentration in Trusts for the profile of a typical 80-yr. old (and funds like the CIBC Monthly Income will already will include income trusts). If this can be sold at a profit, consider rolling 2 & 4 into another good balanced monthly income fund.

PS. I had a similar diversified income trust fund in my portfolio for a short while. But then I had a look at how it it's performance was pretty much paralleling a Divided Fund since the tax rules for income trusts changed. But compared to the Dividend Fund the Income Trust Fund had higher MER, was much less diversified, and had "income trust risk". So I bailed. At your age, if you have an equity allocation, it should probably be in a conservative CDN equity fund like a good Dividend fund.

I suggested a balanced Monthly Income Fund because these are a mix of fixed income and conservative equity, and structured to provide regular distributions in a reasonably tax efficient manner. But looking at how much "fixed Income" of various kinds you already have in your portfolio, perhaps rolling 2 & 4 into one of the better rated bank dividend funds would be a better solution. But you would have to look at your overall financial picture and cash-flow needs to decide.
 
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