Tuesday, May 6, 2014

Do ETFs deliver as promised?

There are a number of sites promoting index investing using ETFs or low MER mutual funds. One site claims that a good portfolio can be assembled with just four TD e-funds.

I used to subscribe to the ETF-based portfolio approach and I am uneasy having strayed quite far from the index investing philosophy. Still, using this Graphing Tool found on the TD Asset Management website, I calculated how the above mix would have worked for me if I had used the approach for my portfolio in retirement. 

I easily beat the above no-brainer portfolio. Easily. And by a very wide margin.

I'm going to stay with my present approach. I watch for stocks recommended by analysts I respect. When the stock being discussed meets my needs, for instance it pays a handsome dividend, I buy a chunk of the action. 

Once I buy, I tend to hold. The stocks that I have sold have, as often as not, continued to climb. Some of the stuff I have bought burned me but the injuries were manageable. One has to cut one's losses, sell and move on. 

So far I am riding more winners than losers. This will change, there is no question, but the bull will stop and the bear will step into the spotlight for the index funds as well. As long as my investments don't wilt more than the ETFs tracking an index, I'll be O.K.

For instance, I bought some D.UN at just above $28 some months ago. It yields almost a hundred dollars every month. It has climbed almost a dollar since my purchase. The dividend amounts to more than 7 percent. Very nice. I really don't care where D.UN goes in the coming months, up would be nice but I can live with down. I'm in for the long haul and the dividend that looks solid at this time.

Name an ETF that delivers such a fine dividend. There are some but not many and most of these high flying ETFs are not on the no-brainer portfolio lists. For instance, I have a small holding of REM, an mREIT out of the States. It has been yielding about 15 percent. 

I don't believe that REM is on anyone's list of  no-brainer ETFs to be used in the building of a proper portfolio. Well, come to think of it, it is on one: Mine.

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