Sunday, March 1, 2009

Time to dump the TD Monthly Income fund? Nope!

If you're here, you are looking for information about the TD Monthly Income Fund. I've posted a screen grab (click the link) showing how an investment in this fund would have grown if invested right at its inception. The TD Monthly Income fund is actually quite amazing, see the screen grab and I'm sure you will agree.

At the deepest drop during the crash of a couple of years ago, it seemed this fund had possibly lost its way. I dumped about three quarters of my units. Today, I have 15% of my portfolio in the CIBC Monthly Income fund and about 10% in the TD Monthly Income fund. My goal is to bring the TDMI fund up to the 15% level.

I've withdrawn about 9% of  my original retirement money to live and I am still up almost 50% in just more than two years. These past 26 months have been a fine time to be in the market. (I'm writing this March 22, 2011 and I have been retired since January 9, 2009.)

Welcome to my post and to my first blog with teeth. This post has been extensively modified since it was originally written. Today, August 28, 2010, I must again modify this post as a month ago Morningstar took another look at the TD Monthly Income fund. It is back in their good graces.

The following is taken from that Morningstar Quicktake Report. These reports are available to me from both ScotiaMcLeod and the TD Waterhouse.

"New risk profile strikes a more conservative stance.

After posting significant losses during the credit crisis, this fund has gone through a bit of a redesign and the net result should be a less risky offering. Style changes like this can sometimes be a cause of concern, though here the adjustments appear sensible and well executed . . . "

One big concern has been addressed. At one point, according to Morningstar, 35 percent of the bond segment of this fund was almost entirely made up of corporate issues, with roughly half of them below investment grade. For this reason, over a year ago I dumped 75 percent of my TD Monthly Income holdings and bought the CIBC's similar offering.

As of the end of July, the total bond weighting was about the same, but it's been redesigned in line with TD Canadian Core Plus Bond. The high yield allocation has been cut in half and the maximum allocation to equities and income trusts has been lowered from 70 percent to 60 percent. This should remove some of the risk and some of the volatility that had crept into this once numbingly consistent investment.

These changes were made in the aftermath of the fund's 12-month loss of 24.9% for the period ending February 2009. Although this was roughly in line with the category median, it was far worse than most of the other monthly income funds offered by the big Canadian banks.

To the credit of the firm and the managers, the fund hung in and made a very strong recovery in both absolute and relative terms as markets recovered. The fund had a great bounce back because the managers wisely did not hastily take risk off the table at the worst possible time. I have to confess, I switched funds at the worst possible moment and have paid dearly for this lack of confidence in the TD managers but I slept well and that is important, too.

There's more to life than investing but investing makes more possible.
Since the recent meltdown in the global markets, I have done quite nicely. At one point I was up about 37 percent. Today I am well off my highs but I am still up about 29 percent since taking a buyout and retiring. And this is despite having spent a big chunk of retirement savings on an almost six week holiday crossing the States and Canada in my vintage British roadster --- a 1969 Morgan Plus 4.

My present portfolio allocation has 15 percent of my RSP invested in the CIBC Monthly Income fund and 5 percent in the TD Monthly Income fund. If the economy continues to slowly rebuild, I am looking at dumping a lot of the bank stock that I purchased at the depths of the stock market crash and moving that money into these two monthly income funds and a mix of ETFs. Retired, and a little desperate, I strive for a successful mix of stocks and bonds delivering both capital gains and cash rewards. (But with bond interest rates so awfully low, I hate to confess, I am totally in the market and out of bonds, except for the bonds buried in my monthly income funds.)



  1. I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.


  2. I have funds set aside in a Roth IRA. Can I possibly buy the TD Monthly income fund as well as a portion of CIBC's fund to diversify my risk appetite? How do I hook up my roth ira with one of these mutual funds?