Monday, November 24, 2014

TD Monthly Income_Answers to e-mail questions

Hi Sir,

Love your blog on investments.

Have a few quick questions on TD Monthly Income, for which you have a soft corner. I was hoping if you could clarify them for me.

The MER is 1.48%, but are there are any hidden costs that we are not aware of?
Also the return it shows of 8-9%, is that after deducting the MER?
The average return of 8 - 9 % of TD Monthly Income, is this coming from the TD website? Is there any chance that you have independently calculated the returns from your own investments in TD Monthly Income and do they match the return posted by TD?

I also like TD Monthly Income but want to verify the returns independently from you.

Would appreciate your input.

Regards,
Sam
___________________________________________

Dear Sam:
First, let me make it clear that I am NOT a financial adviser. I am a retired newspaper photographer. I am sharing my feelings about investing and hoping to hear from others who are attempting to run their own self-directed portfolios.

Fund Facts posted by TD contains a lot of the answers to your questions. Follow the link. Or follow this link: TD Helps.

To summarize what you will find:
  • This is a no load fund. There is no charge to buy or sell. But, read on. Note the following:
  • If you cash the fund within 30 days of purchase, you may pay up a 2% early redemption fee. Similarly, there may be a 2% fund switch fee if you switch out of TDB622 too quickly.
  • The MER (Management Expense Ratio) is 1.48%.
  • There is also a TER (Trading Expense Ratio) of .01%.
  • There is an ongoing trailing commission but this is folded into the MER. It is essentially invisible to the investor.
I believed the posted YTD return did NOT include the monthly dividend. A TD rep confirmed this. Here is a link: TD Help. In backing testing this fund I found most years it is best to make use of the offered DRIP, Dividend ReInvestment Plan. Let the dividends accumulate and compound. If you must make a withdrawal, do so at the end of the year.

You may have noticed that the dividend is a little low compared to those paid by other monthly income funds. The reason is that TDB622 has no Return of Capital component hidden within its monthly payouts. I see this as a plus. Follow these links to learn more:
And yes, my calculations based on my investment in TDB622 agree nicely with the numbers provided by the bank.

As a retired fellow, I find this fund very attractive. YTD it has returned about 10.7%. The distribution yield is 1.87%. It is a nicely balanced fund with some 53% invested in Canadian common equities and 37% invested in bonds, mostly Canadian bonds in a mix of government and private issues. The fund has something in the order of 371 investments. Another big plus is the low annual portfolio turnover of only 10.72%. Buy this one fund and buy a great mix of investments at a low cost.

I have found that this fund often outperforms many highly praised index-based ETF portfolios.

1 comment:

  1. Hi Ken,

    No one pushes TD Monthly Income as TD won't be making as much in fees in the same.

    Thanks for all the input. You certainly rock!

    ReplyDelete