Saturday, June 18, 2016

Good investment advice is often boilerplate.

Good investment advice is easy to come by. It is everywhere. My local paper often has a tip or two or carries an article on a local investment wizard. The Internet is awash with investment blogs. And all the advice is good. It must be as it so often is the same advice whether it is in the daily newspaper or on the Web. If everyone agrees, it must be right, right?

Not really. Good, dead-on accurate, investment advice is actually tough to come by. There are lots of general rules, such as keep your costs low. Everyone seems to agree these are good rules to follow.

Find enough folk saying the same thing and you can be forgiven for beginning to think that you have discovered the core rules for investing. Just remember: "Rules are made to be broken."

For instance, check out the post by Farnoosh Torabi, a well-known and well-respected personal financial expert. Read her post here: Investing Series. Torabi gives some good advice but it is boilerplate. It is good advice that can be found in numerous spots around the Web. But is it right? Absolutely right? Can you take this advice to the bank, as they say. Torabi writes:

If you want to build an income stream . . . take a look at dividend income investing [using index funds.] . . . How do you choose . . . an index fund . . . Simple. . . . Look for the one with the lowest Management Expense Ratio (MER).

Like I said, boilerplate. It is good advice but it is not the whole story. I wish I could tell you the whole story, but I can't. But I can point out that basing all your decisions on the lowest MER is not necessarily a winning strategy.

For instance, check out the graph below. See how well the TD Monthly Income fund (TDB622) performed compared to a fund I found on one of Torabi's lists. I chose the TD Managed Index Balanced Growth Portfolio-e (TDB852) for this comparison because it seemed to be the closest index fund in her list to TDB622. The fund with the higher MER, TDB622, paid out $20,000 each December as did the Torabi e-fund. But, and it is a big but, TDB622 finished with $114,365.44 more value.

The lesson here is don't let low MERs stop you from checking under the hood. There is more to investing that keeping costs low. There is also trying to ensure that income is high.

Click on image to enlarge. TD Monthly Income is green. e-fund is blue.
I'm going to end this post by confirming that I have put my money, and my wife's money, where my mouth and my blog post is -- we have a fair chunk of our retirement savings in TDB622. At least we did. I believe the new D-series monthly income fund, TDB3085, is actually the old TDB622 but with a lower D-series MER. I switched out of TDB622 and into TDB3085 some months ago.

Like I said, Torabi's advice was good. It just may not have been the whole story. Just like she advised, I chased the lower MER offered by the D-series fund. But I didn't let the still somewhat high fee stop me from investing. I'm betting my monthly income fund will deliver good growth while incurring less volatility. Time will tell if I am right.

Wednesday, June 15, 2016

Dream Office REIT

I like Dream Office REIT despite the fact that the stock has gone down considerably since originally attracting my attention. Luckily I have bought more on the big dips. Because of my recent buys, I'm not doing all that badly on the investment.

Dream Office REIT cut its dividend and the price has tumbled considerably from the highs it had reached a little more than a year ago. Today I feel the dividend is safe and the unit price, I believe, will climb at some point in the future. I don't have a crystal ball.

And what exactly is the yield today? Answer: 8.11%. That's a very nice yield. And if I'm right, and it's safe, that is a yield on which a retired person can do some living or, at least, pay some bills. If D.UN stays depressed, under $19, and I am able to assemble a little cash, for instance selling my shares of Norbord Inc. (OSB), I'm going to buying a little more D.UN.

Remember, I am not an advisor. I am just a simple retired fellow trying to make ends meet. Before buying Dream Office REIT, check with your own financial advisor and get some expert advice.