Friday, December 12, 2014

Reader Right: TD Dividend Growth is a winner

Question: Have you ever researched TD Dividend Growth fund? I met a TD rep today and he couldn't stop talking about it. Its 10 year record is better than TD Monthly Income, which surprised me.

Thank you.

The bank rep is right. Over a ten year period, the TD Dividend Growth Fund is in the lead when pitted against the TD Monthly Income Fund. As the above graph shows, a $10,000 investment gained $1472.63 more in the TD Dividend Growth Fund as opposed to the Monthly Income offering.

This year may be an anomaly. The Year To Date (YTD) figures show the TD Monthly Income is up 6.49% while the TD Dividend Growth Fund has gained only 6.23%. (I don't know if the dividends are contained in these figures but I doubt it. If the dividends are not included, the use of the DRIP would extend the Monthly Income lead.)

Still, it is clear that the TD Dividend Growth Fund has found its footing, this year excepted. When one checks its quartile ranking position, it doesn't drop from the first to the second quartile until one goes back five years. Go back ten years and one finds it was holding a position in the second quartile even back then. Impressive.

The TD Monthly Income fund supposedly presents a little less risk, it is a balanced fund with lots of bonds among its holdings, but when one looks at the numbers the dividend growth fund doesn't look all that risky.

At 2.03%, the MER is a little high with the Dividend Growth fund. But if you agree that all that matters at the end is how much money is being delivered, you will turn a blind eye to the MER and instead focus on the amazing, steady growth in the value of fund units.

I will leave you with this: a chart comparing the TD Can. Index e-Fund with the TD Monthly Income Fund. I picked five years because that is close to the length of time that I have been retired. Note that the Monthly Income find is well ahead of the index-based fund. A low MER did not push the index fund into the lead.

And, if one checks, one will discover the TD Dividend Growth Fund performed even better than the two funds above.

I started this blog in the hopes of connecting with others interested in building a great portfolio, possibly with retirement in mind. When I get questions like this one, I learn and that was my original goal. I wanted to hear from people who could push me in directions that previously I had never considered.

One thing must be said: all this talk about how good the TD Dividend Growth Fund has been is all history. The old maxim that past performance does not guarantee future results still carries weight. That said, it is not just the TD Dividend Growth Fund that must constantly prove itself. Index funds and ETFs also must constantly prove they are the best game in town.

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