Canadian Money Forum banner

41 - 60 of 66 Posts

·
Registered
Joined
·
16,677 Posts
Discussion Starter #41 (Edited)
I will add, one alternative here which I don't see any problem with is the BMO Monthly Income (D Series) mutual fund that I've mentioned a few times, and recommended to friends before.

It's a traditional balanced mutual fund, similar in many respects to Mawer's etc, except it has a bit more weighted in Canada. Still international diversification. The holdings appear to be plain and derivative free from what I can tell. I just looked at the audited financial statements and didn't see any sign of derivatives or exotic holdings.

Normally I've suggested it as a regular balanced fund but it also does pay a high distribution, I think around 3% to 4%. That means you can get the strong fundamentals of a diversified balanced fund but an elevated payout versus VBAL or MAW104.

In the past I ignored that distribution because I didn't need it, but on this thread's stopic, it's completely relevant and desired. According to Morningstar the yield is 3.3% but this can change at any time of course. Still, it's a strong yield for a diversified fund.

The only downside I can see is the 1.02% MER. But I think when you remember you're getting a well performing balanced fund [ 6.5% CAGR since 1999 ], that pays a decent amount of cashflow, that doesn't look like a bad deal. This is a far longer history than VBAL, and it also has $4 billion invested in the fund.
 

·
Registered
Joined
·
1,408 Posts
ZMI is a derivative dogpatch. Look at its real investment holdings, not the advertising top 10 or top 20 holdings which, unfortunately, regulators still allow financial product vendors to publish in order to misinform their consumers.
all this without even attempting to inform the consumer, who alas still does not bother to read the audited official literature but contents himself with hearsay & marketing claims that are not truthful. Selling something like a naked put fund to vulnerable retirees who cannot even begin to understand it, is an absolute scandal, imho.
https://www.bmo.com/assets/pdfs/gam/etf/a-mrfp/en/A_MRFP_ZMI_E.pdf
...thank-you. I get it. My spidey sense was that this ETF was questionable - but I didn't know which questions to ask!
I will focus my investing choices on Vanguard, MAWER and GIC's. Nix ZMI.
 

·
Registered
Joined
·
16,677 Posts
Discussion Starter #43
...thank-you. I get it. My spidey sense was that this ETF was questionable - but I didn't know which questions to ask!
I will focus my investing choices on Vanguard, MAWER and GIC's. Nix ZMI.
Take a look at BMO Monthly Income (D Series) as well. The story here is that the series A is the parent mutual fund (the old one) that's been around since 1999. However they added the lower fee D series for self-directed accounts in 2014. They are actually the same mutual fund, with exact same holdings, and the only difference is the fee level. So the performance of the D series is the same as the old one, boosted by an extra 0.55% per year.

BMO Monthly Income Fund Series A with MER 1.57%
BMO Monthly Income Fund Series D with MER 1.02% code GGF31148

Therefore you can look at long term performance like here at Morningstar for the old one. It shows 5.90% CAGR since inception in 1999. You can then add 0.55 from fee savings, meaning with the D series you'd have 6.45% CAGR since 1999. A really solid return.

Since you want some income being paid out, if you think the income level from Vanguard or Mawer isn't enough, I think this would be your next best option.
 

·
Registered
Joined
·
15,839 Posts
Black Mac as u know i'm alone out here, working on a giant story whose time has not yet come.

in full bloom the story would require editorial approval & direction (none so far) from several media, plus a small number of skilled investigative reporters working on different aspects of the same underlying theme, which is that ETFs are not holding the securities they are allowed to claim they are holding.

me i'm just a volunteer posting in an obscure financial chat forum ... but gradually over the years i am seeing the evidence creep up, albeit at a snail's pace.

FWIW i have no faith that the vanguard funds are any better. Nor blackRock nor any other ETF vendor. Include the growing list of new TD ETFs among the prevaricators as well. Certainly include BMO.

please allow me to say that i am not in the least opposed to funds trading & holding derivatives of some unreported nature, while promising to give investors "the return" of a computer-driven index model.

what i am against is the coverup. I'm against the pretence that such funds hold the exact securities listed in the index, when in fact they are engaged in representational trading using unnamed hidden securities, they are trading & holding options, swaps, futures & other derivatives without divulging details, & they are lending out unnamed securities to hedge funds for shorting purposes in exchange for fees starting at 2% & escalating rapidly to 5%.

re Mawer, my tentative view is that their tax-favoured balanced fund *may* be one of the few in canada that actually does hold what it says it holds.
 

·
Registered
Joined
·
2,880 Posts
what i am against is the coverup. I'm against the pretense that such funds hold the exact securities listed in the index, when in fact they are engaged in representational trading using unnamed hidden securities, they are trading & holding options, swaps, futures & other derivatives without divulging details, & they are lending out unnamed securities to hedge funds for shorting purposes in exchange for fees starting at 2% & escalating rapidly to 5%.
Every time you post one of these revealing opinion pieces, I thank my stars that all my equities are in individual company stocks. No funds, no ETFs, no derivatives, no engineered products. Yet people say it's too complicated to own stocks.

ltr
 

·
Registered
Joined
·
1,408 Posts
please allow me to say that i am not in the least opposed to funds trading & holding derivatives of some unreported nature, while promising to give investors "the return" of a computer-driven index model.

what i am against is the coverup.
Understood HP. The process of looking closely at the holdings of these EFT's is daunting to say the least. I am no better at this than I was 15 year ago. I was never good at it - but I am getting a little better. I am rather skeptical of most things financial.

Vanguard, however, impresses me because their VBAL is quite similar to MAW104. I am holding MAWER as the standard to beat in my point of view. VBAL, though only a few years old, at least has returns to date that are consistent with MAW104. (Yes, it's true, VBAL is full of Vanguard ETF's, and those Vanguar ETF's may well be similar to the house of horrors that ZMI reveals - only I lack the ability, or perhaps initiative to research it.)

My point: VBAL seems to be very similar in returns and in composition to MAW104. Both are made up of 5-7 funds. Will the future tell the same story? I'm not sure - but I am focused on the "since inception" column - 8% for MAW104 and MAW105. If I go GIC's, that would be around 2-3%.

That doesn't mean that MAW104, VBAL and MAW105 are without their warts and shortcomings. I can only use the data and resources that I have. I'm not ready to put Vanguard funds on the "least wanted" list yet. (and BTW - I know that you didn't suggest this). Your message is clear - you focus on the clarity with which the financial industry and regulators permit certain practices (options trading, currency speculation etc) to go on, with undisclosed and possibly nefarious consequences.

Post Script: If* MAW105 is closer to transparency in its actual (not manipulated) holdings than most other funds, then does it not follow that all of the funds within MAW105 are also transparent?
 

·
Registered
Joined
·
3,263 Posts
I will add, one alternative here which I don't see any problem with is the BMO Monthly Income (D Series) mutual fund that I've mentioned a few times, and recommended to friends before.
At one time, I used TD Monthly Income Fund mainly to soak up cash in my registered accounts. It was the top rated monthly income fund at the time (and may still be). I recall it having a total return of about 8% despite MER of close to 1.5%. Then they disallowed i registered funds, so I moved on.

Just looked at it over 16 yr period since I retired. (I posted comparable figures recently for XIU/XIC over same period). TDB622 has performed almost as well as XIU/XIC equity etfs, despite the MER and the fact it includes 31% fixed income. (It is a balanced fund). Total Return is about 7.1%.

I don't see how those funds can overcome the MER drag, so have stayed away. But they may be good for some. Especially those who don't have trading accounts.
 

·
Registered
Joined
·
743 Posts
The derivatives used in ZMI are covered calls and cash-covered puts. While I am not a big fan of them, these strategies are generally safe and actually less risky than buying and holding the underlying, given the lower deltas. The question is whether one wants to achieve equity exposure by going long directly or indirectly through premium selling. I personally favor the former, but the latter is also a valid approach.
 

·
Registered
Joined
·
15,839 Posts
Every time you post one of these revealing opinion pieces, I thank my stars that all my equities are in individual company stocks. No funds, no ETFs, no derivatives, no engineered products. Yet people say it's too complicated to own stocks.


LTR i was thinking of you as i posted my comments above because you are a gold standard of successful wealth management. I say "a" rather than "the" gold standard because there are other somewhat related models; but your approach would be right up there near the top.

not that anyone ever needs to hold a large & elegantly crafted portfolio such as yours. For smaller or beginner investors, Argonaut popularized the 5-Pack approach, which eventually became a 6-Pack & then a 12-Pack. A bank, a telco, an industrial stock, a utility, a pipeline, a REIT.

several years ago, cmffer Eder described a 3-Pack which he had funded for his then minor age daughter. As best i can recall it consisted of BCE, one leading canadian chartered bank plus one other important stock such as CNR. Today the daughter is an adult & you can just imagine how splendidly that portf has prospered. The sidebar advantage is that it was a no-brainer. The owner was a minor child. The portf required no financial analytical skill whatsoever.


* * * * *

a few years ago, when my partner-in-crime haroldCrump was an active cmffer, we used to e-mail each other how, when we were younger, we'd originally planned to retire with something like 4 basic ETFs. Something simple, along the lines of what CMF founder Canadian Capitalist used to call his "sleepy portfolio," which was a simple couch potato formula.

but gradually harold & i had woken up to the fact that cheap, ultra low cost ETFs are duplicitous beasts. They have mathematical models promising to give investors this index return or that index return, meanwhile holding & trading a dog's breakfast of undisclosed securities, including unknown stocks which are considered to "represent" an index, along with other unknown stocks chosen for the high fees they can generate when loaned out to hedge funds (vanguard has a paper for advisors describing how they specialize in lending risky high-fee loaners, which earn them 5% from hedge funds instead of the more normal 2% fee.)

consequently, haroldCrump & i said to each other, we were planning to hold real stocks in our old age. Common shares of high quality publicly traded companies. As Argonaut & others publicized, a sector selection would do the job just fine.

what we discovered is that a classic portf of these stocks is actually simpler to hold. The broker will do all the bookkeeping at zero cost. There will be one T5 tax slip per account.

large cap canadian stocks are in the news all the time, so it's easy to keep up with their news. They are analyzed to death, in full public view, by armies of smashingly brilliant CFAs, whose research one can easily find for free, so it's not necessary to attempt to do one's own individual "research." Punctually, every time an important company sneezes, those CFAs will deliver a full spectrum of opinion.

.
 

·
Registered
Joined
·
16,677 Posts
Discussion Starter #52 (Edited)
I do agree that individually held stocks can work out very well (and as mentioned elsewhere, I'm trying to do this with 30% of my equities).

But we should not under state the unique and somewhat rare skills of like_to_retire, Argonaut and eder. In Eder's case for example he guided his child on the investments to hold. I don't think the child was improvising from there and going and buying new stocks ad hoc.

In all of these cases, the actual stock picks were carefully considered, plus there has been good self discipline. There is management and maintenance of the portfolios. And there is also a survivor bias when we talk of these forum members who have had excellent results. We are not talking about all the other people who've come into CMF at some time and tried stock picking.

There are countless people in the world who try to buy "great blue chip stocks" on an ad hoc basis, seemingly buying good stocks, but can't get good performance over the long term. This is still why going with an index ETF is generally a good idea for most people, despite the problems that exist with ETFs.
 

·
Registered
Joined
·
15,839 Posts
There are countless people in the world who try to buy "great blue chip stocks" on an ad hoc basis, seemingly buying good stocks, but can't get good performance over the long term. This is still why going with an index ETF is generally a good idea for most people, despite the problems that exist with ETFs.

aren't the above Just Your Opinions though. I know of no studies involving "countless people in the world" who exercised due diligence, bought high quality stocks & then, over very long term time frames, they all somehow mysteriously failed.

the real problems with today's synthetic ETFs will not surface unless a severe market collapse occurs. That's when derivative markets, all-risk counterparty swaps, futures & unsecured broker loans of stocks from ETFs will bottleneck. No one knows who or how many would survive. The world has never known the mega-trillions of derivative instruments that are traded today.

as haroldCrump e-mailed a few years ago, "People are not going to believe what's going on until a major global money centre bank fails. That's when all the unsecured derivative positions will surface."

deutsche bank - a well-known major derivative trader - teetered a few months ago but Merkel's gummint rescued the bank by merging it with commerz.

if, as & when a US based ETF held by a canadian fails in a global meltdown, who would be the regulator to whom a canadian beneficial owner might look? the US regulators will say they have no jurisdiction because beneficial owner resides in canada. The canadian regulators will say they have no jurisdiction because the holding is - or rather was - a foreign security.
 

·
Registered
Joined
·
743 Posts
Even though one could potentially build a good portfolio from scratch using a subset of single large cap stocks, it will almost certainly have a lower risk-adjusted return than the market portfolio. Bill Bernstein describes this very eloquently:

The reason is simple: a grossly disproportionate fraction of the total return came from a very few "superstocks" ....
So, yes, Virginia, you can eliminate nonsytematic portfolio risk, as defined by Modern Portfolio Theory, with a relatively few stocks. It’s just that nonsystematic risk is only a small part of the puzzle. Fifteen stocks is not enough. Thirty is not enough. Even 200 is not enough. The only way to truly minimize the risks of stock ownership is by owning the whole market.
From the Efficient Frontier: http://www.efficientfrontier.com/ef/900/15st.htm
 

·
Registered
Joined
·
1,408 Posts
the real problems with today's synthetic ETFs will not surface unless a severe market collapse occurs. "People are not going to believe what's going on until a major global money centre bank fails. That's when all the unsecured derivative positions will surface."
.
but it does beg the question HP, if and when the conditions you describe above, what bank, telcom, utility, insurance or rail company could withstand the colossal mayhem associated with an event like this? A 6 or 12 pack would be consumed in no time (pardon the play on words). Perhaps it's just me, but this sounds worse than 2008-09, and on the scale of 1920's depression. What family could meet their mortgage payment in these conditions?

Do banks, like some ETF's, have some financial skulduggery of their own that they use to manipulate stock prices? I am not informed enough to know what kinds of skulduggery - only that when I read headlines periodically, some banks have been implicated in stocks manipulations - usually in forex markets (Albeit these are US banks - not Cdn).

Would it really matter in a case like the one you describe that one's pf invested in XIU or invested in the top six holdings of the TSX? It sounds to me like, regardless whether it's XIU or top six in TSX, we'd be in an economic depression, and it likely wouldn't matter.
 

·
Registered
Joined
·
16,677 Posts
Discussion Starter #56 (Edited)
aren't the above Just Your Opinions though. I know of no studies involving "countless people in the world" who exercised due diligence, bought high quality stocks & then, over very long term time frames, they all somehow mysteriously failed.
I think that a disciplined stock picker, who has a good method, and who sticks to their method (including when it underperforms for years on end) can end up with good performance. I am hoping to be one of these stock pickers and I am taking my shot at it.

However I think (this is a theory) that most investors will struggle with that in practice either on the 'discipline' part, the 'good method' part, or 'sticking to their method' part.

How many CMF stock pickers who emphasized energy and resource stocks have stuck to their method of holding quality stocks for the long term? And let's not just wave our hands and exclude this category because energy had a bear market. That would be survivorship bias.

The stock pickers we hear from today all have method that are light on commodities. That includes all the X-packs including my own. I would argue that this is indeed survivorship bias and that we are only seeing a subset of stock picking, which happened to use methods that resulted in outperformance.
 

·
Registered
Joined
·
15,839 Posts
... those Vanguar ETF's may well be similar to the house of horrors that ZMI reveals


actually i don't find ZMI to be a house of horrors at all. It is no worse & no better than any other ETF. They are all engaged in cost-saving strategies of one kind or another - several of which i've named, over & over again - because the primary feature the investing public is slavering for these days is Ultra Low Cost.

the vanguards are in the same boat. The one i looked at closely - emerging markets - is based on a chinese all-shares index that includes shanghai & trades on london exchange. Vanguard states this in their prospectus. Yet they display a spreadsheet naming as "holdings" approximately 2,500 shares trading in some 30 countries around the globe - many politically disorganized - many with highly corrupt stock exchanges, participation in which demands careful & costly action by investors - & they represent that they are holding, re-balancing & exchanging those 2,500 shares with authorized participants all over the planet on a daily basis ... all this for a miniscule .15% MER ...

really as i type the above i continue to remain incredulous that sophisticated investors such as some of the CMF members on here are willing to believe such fantastic tales .:peach:

common stocks are subject to intricate & elaborate news coverage in both canada & the US. There is always a gallery of intelligent reporters who probe, exhume & report extensively on business & finance. You yourself, Black Mac, have found & posted some brilliant articles by the globe's europe bureau chief Eric Reguly here in cmf forum, for example.

but ETFs are not yet receiving the same kind of investigative coverage. So far, major media journos & the investing public at large are willing to swallow the ETF marketing KoolAid. This blindness will break down eventually, i believe, but so far this hasn't happened.

haroldCrump's view differed from mine, though. Harold believed that the investing public will never know anything unless or until a major global money centre bank would collapse, exposing & destroying all its unsecured loans & derivative positions.
 

·
Registered
Joined
·
1,408 Posts
actually i don't find ZMI to be a house of horrors at all. It is no worse & no better than any other ETF. They are all engaged in cost-saving strategies of one kind or another - several of which i've named, over & over again - because the primary feature the investing public is slavering for these days is Ultra Low Cost.
I follow your analysis HP. Not lost on me.
I did aks one question in post script that focused on MAWER. You suggested that MAWER's 105 may be actually hold what is reported in their holdings - without any of the smoke and mirrors that most/all MF's & ETF's possess on closer scrutiny. However, MAW105 is a collection of other MAWER funds. So *if* MAW105 is closer to transparency in its actual (not manipulated) holdings than most other funds, then does it not follow by extension that all of the funds within MAW105 (MAW102, MAW120, MAW108 etc) are also transparent?
 

·
Registered
Joined
·
15,839 Posts
I did aks one question in post script that focused on MAWER. You suggested that MAWER's 105 may be actually hold what is reported in their holdings - without any of the smoke and mirrors that most/all MF's & ETF's possess on closer scrutiny. However, MAW105 is a collection of other MAWER funds. So *if* MAW105 is closer to transparency in its actual (not manipulated) holdings than most other funds, then does it not follow by extension that all of the funds within MAW105 (MAW102, MAW120, MAW108 etc) are also transparent?


actually i didn't number the relevant Mawer fund, what i specified was the Mawer tax-advantaged balanced fund, did i not? whatever its number, it's the one built for non-registered, therefore taxable, accounts.

the tax advantage is complicated. I've already described the strategy fully in another thread, something like a year ago. At the time jas4beach "got it" & he utilized the strategy to work around a taxable gain in his own account by switching to a TD index sector fund for the necessary 30 days.

also at the time another cmffer who i believe is a chartered accountant by profession, posted that he also advises the same Mawer strategy to his clients.

the strategy requires that a fund hold a decent selection of real stocks. Derivatives will not work in the Mayer tax advantage strategy. That's how i deduced that at least the tax-advantaged fund does hold a variety of real, publicly-traded stocks.

absolutely do not know about any other Mawer funds though. Remember, one swallow does not make a summer.

.
 

·
Registered
Joined
·
1,408 Posts
That's how i deduced that at least the tax-advantaged fund does hold a variety of real, publicly-traded stocks.
.
OK. Now I see. BTW, the Tax Advantage Balanced fund is MAW105. I seem to recall that MAW105 (Tax-advantaged) is invested in the same holdings as Mawer Balanced MAW104. If so, then MAW104 and 105 are composed of the same Mawer funds, and in the same proportions.
 
41 - 60 of 66 Posts
Top