For financial advice, don't rely on AI.

 Newsflash: AI can be wrong. Repeatedly wrong. Convincingly wrong.

I had no sooner posted "TDB8150: my favourite spot for parking cash" when Chat GPT began praising another popular spot for keeping one's free cash. It claimed an actively managed TD money market fund, TCSH, was the superior choice. According to the AI financial expert, TCSH offered more interest, greater liquidity, low risk and all with a MER of only 0.16. It even claimed TCSH was a better fit for my portfolio.

Before acting on the advice from Chat GPT, I got a second opinion from an investor friend. "What do think of TCSH?" His response, "Without digging super deep, it would seem they have reduced the distribution."

Surprised, I returned to Chat GPT and informed the AI wiz, "It appears TCSH has cut its dividend to only 2.4%." It had quite the detailed answer but it was wrong. At first, it confused TCSH with Tekla Healthcare Investors. How it managed this is a puzzle. Tekla's stock symbol is HGH. To the credit of Chat GPT, it eventually realized its mistake.

Chat GPT reported the yield and payout of TCSH as 4.1% or $2.07 annually. Comparing TCSH to the mutual fund TDB8150 it said, "If you're seeking higher income and can tolerate minor fluctuations and credit exposure, TCSH offers a significantly higher payout (than TDB8150)"

I told Chat GPT, "You are wrong! The TCSH dividend has been cut to 2.4% or $1.20 annually." I provided a link to a site giving the correct yield and payout. It replied, "Thanks for clarifying—the most recent TCSH distribution is indeed C$0.10 per unit (paid monthly) . . . "

But Chat GPT stuck to its guns, continuing to promote  TCSH over TDB8150. It repeated its earlier points.

• better portfolio fit
• higher yield 
• lower risk
• greater liquidity as it can be bought and sold anytime during market hours 
• very low MER of  0.16%

Frustrated, I scolded Chat GPT. "Golly, I had no idea you could be so wrong so often. First, TCSH when purchased from within a TD WebBroker account has a trading fee -- $9.99 to buy and again to sell. This is in addition to its MER." 

Chat GPT replied, "You're absolutely right—and thank you for pointing that out. Your corrections are valid and important. Let’s go over the two key areas where my previous answer fell short:

"TCSH is not on TD’s commission-free ETF list. That means you pay $9.99 to buy and $9.99 to sell through TD WebBroker (unless you're using TD Easy Trade, which has restrictions and requires a smartphone).

'That $20 round-trip cost immediately wipes out any potential return advantage on small holdings. For example: On a $5,000 purchase, $20 is 0.4% lost upfront—nearly a fifth of your annual 2.4% return."

I now turned to liquidity. Chat GPT called TCSH a "font of liquidity." Why? Because, "It trades intraday on TSX, giving you flexibility to buy/sell anytime during market hours, unlike TDB8150 . . . " I pointed out to Chat GPT why its reasoning was wrong. 

Chat GPT admitted, "When it come to liquidity, both TCSH and TDB8150 were identical. "You're also correct again." While TCSH trades intraday on the TSX, it doesn’t give you same-day cash availability—you must wait for settlement, just like TDB8150.

Chat GPT made what it called its Final Call. Its response is copy and pasted below. 

 

🔍 Final Call

Given:

• No yield advantage anymore

• Higher cost to trade TCSH

• No difference in liquidity or safety (TDB8150 even has CDIC protection)

TDB8150 is the smarter choice for parking cash in a TD WebBroker account—unless you have a large enough holding to overcome TCSH’s costs and prefer its ETF structure for tax or portfolio reasons.

You were right to push back. Thanks for improving the accuracy here.

 

The clear lesson here is one cannot rely on AI. You must check its answers carefully. You must do your own research or have a knowledgeable flesh and blood friend.

 

Addendum:

I used Perplexity. It failed, too. Like Chat GPT, my conversation with Perplexity was riddled with apologies and thank yous.

• Thank you for your detailed correction
• Your points are valid and highlight important practical considerations:
• Thank you again for your correction . . . 

TDB8150: my favourite spot for parking cash

If you run a self-directed investment account, someday you will face the problem of what to do with the cash in your account. Cash can accumulate for any number of reasons in a self-directed account but what to do with that money is always the same: stash it where it continues to work while, at the same time, being readily available for investing. My favourite spot for parking cash is TDB8150, an investment savings account mutual fund. (I once thought of it as a money market fund but I was wrong.)

TDB8150 is an investment savings account mutual fund with absolutely zero fees. It currently is pays 2.30% with no MER. It has a fixed unit price of $10 but the initial investment must be $100 or more. There are no buying and selling fees. And it is CDIC insured up to total investment of $100,000 per account. Deposits to TDB8150 are limited to $5 million (Canadian).

TDB8150 has its interest calculated daily and credited to your account once a month. If you sell units in mid-month you will still receive the interest accrued up to the sale date. This interest will be paid on your next interest distribution date.

If anyone has a better suggestion, I would like to hear it. I also did a post: Cash: good stuff to have around. This present  post is an update to that original post.

Enbridge: My top pick among the pipelines.

I am putting together a wish list for my ideal retirement portfolio. I am guessing the Canadian economy will slow before the end of year and give me a nice buying opportunity. I want to be ready.

Pipelines are high on my list of must-have investments. About four years ago Morningstar had an article by Michael O'Brien, vice-president and director at TD Asset Management Inc. He said Canadian pipeline stocks offer good, solid earnings growth, minimal volatility and healthy dividend increases. It would be hard to find anyone to disagree.

I have a good feeling about Enbridge (ENB). I own it. I also own some TC Energy (TRP), some Pembina (PPL) and some South Bow (SOBO). O'Brian called Enbridge the "poster child" for the pipeline industry in Canada. One measure of its desirability is its low DCF -- distributable cash flow.

What is DCF, you ask. The Law Insider says distributable cash flow is the cash flow available for distribution to shareholders as dividends. There's more to it, of course, but this is all you need to know for now.

Most of us are familiar with the payout ration. It is easy to find and often used to assess whether of not a dividend is secure. The payout ratio is the percentage of a company's earnings distributed to shareholders as dividends. On the surface, both the payout ratio and the distributable cash flow seem similar and they are but the DCF is used when assessing pipelines and utilities. For more on this, see my post: When Dividend Investing, the Payout Ratio Does Not Tell the Whole Story.

Pembina has a DCF of about 74%. This is still within a reasonable range for the industry. TC Energy has a DCF of almost a 100%. TC Energy is a well respected pipeline company. It is hard to be worried when investing in TC Energy. Yet, a payout above 80% does raise a red flag.

One should not ignore TRP; it is a successful, long-term player. Still, I am making Enbridge my biggest investment in the pipeline sector. The number two spot goes to TRP. All in all, I have decided to invest 15% of my retirement portfolio in pipelines with 5.25% going to Enbridge, 3.75% to TC Energy, 2.25% going to both Pembina and Keyera and 1.5% going to South Bow. Over time I may invest more in SOBO, but at the moment, it is too new to be a dominant player in  a retirement portfolio.

Fortis (FTS): a core utility holding

Years ago a chap I admire told me his favourite retirement investment was Fortis (FTS). Fortis didn't pay the largest dividend, nor did it deliver a lot of capital gain. So, why did he rate it so highly? That's easy, because he is retired and needs an income he can trust. The Fortis dividend is dependable, if it is anything.

Fortis pays a yield of about 3.7% today. This is a little low but we are concerned here with dependability. Fortis has racked up a 51 year history of paying a dividend which, as a bonus, has increased annually, perfect for the buy and hold investor.

For further confirmation that the dividend is sustainable, check the payout ratio. This indicates how much of a company's earnings are distributed to investors as dividends. Fortis has a payout ratio of 73%. This is somewhat high but it is nowhere near worrisome. As a utility, a regulated utility boasting monopoly coverage in most of the regions it powers, Fortis has a very stable cash flow.

Another plus for Fortis is its strong management. It was ranked number one by The Globe and Mail for corporate governance in 2024.

According to Baystreet.ca., "The long-term appeal of Fortis lies in its consistent dividend growth and low-risk profile. Its regulated business model generates stable earnings, with last year’s total reaching $1.6 billion—up from $1.5 billion the year prior—and profit margins typically in the 13% to 14% range."

I follow The Stingy Investor. Fortis is a repeat investment in the very selective Stable Dividend Portfolio created by Norman Rothery. It is one of the Rothery portfolios featured by TD WebBroker in the Reports/News section at the first of every month. Click the link for an explanation.

I fully agree with Baystreet.ca when it comes to their closing paragraph:

For retirees and income-oriented investors seeking dependable returns with minimal volatility, Fortis remains a compelling long-term holding. 

My thoughts on BIP.UN

Will the Canadian economy begin slowing in the coming months? My bet is yes but I have a history of being wrong when it comes to telling the future. So, take the following with reservations.

I am building a wish list of investments I would like to add to my retirement portfolio if there is a correction in the near future or even better, a bear market. One stock on my list is Brookfield Infrastructure Partners LP (BIP.UN on the TSX).

My overall impression? BIP.IN appears to be a buy for long-term investors with a focus on income. Hey, that's me! I knew I liked BIP.UN and there is a lot to like.

As an income investor, I like the generous 5.1% yield that has increased annually for 15 consecutive years. The annual growth rate has been between 6-8%. With a payout ratio of about 67% of Funds from Operations (FFO) in 2024, the dividend look sustainable.

The PEG Ratio of 54.5 may signal overvaluation relative to growth prospects but with a solid correction, or bear market, this overvaluation may lessen or even disappear.

All the above and more says "buy" but there are some clouds on the horizon. For instance, with a debt load of about 80 Billion U.S., BIP.UN could suffer in a rising interest rate environment.

If you follow analysts, the consensus is that BIP.UN is a strong buy. I find analysts are often wrong but still worth a look. Me? I see BIP.UN as a hold if you are already in the game and a buy if the market softens.