For my kin: MER and other mutual fund fees.

When buying mutual funds always check the MER. Now, what is MER and why should you care?

According to RBC Global Asset Management: The MER is the total of the management fee, operating expenses (or administration fee) and GST/HST charged to a fund each year. It is expressed as a percentage of a fund’s average net assets for that year. All mutual funds and ETFs have an MER.

If a fund gained 4% last year but paid a MER of 3%, you, the investor in the fund, would realize a return of only 1%. If two funds are identical except for the MER, the one with the lower MER returns more to the investor.

D-series TDB3088 has a MER of 1.19 while TDB972 has a 2.02 MER.

TD offers some funds as both investor series funds and as D-series funds. The D-series funds are only available to investors with self-directed investment accounts. Funds in the D-series have lower MER charges compared to the comparative I-series version.

Recently, I compared five funds. All funds opened with an original investment of  $10,000. Note: the two Dividend Growth funds are identical except for the series. One is an investor series while the other is a D-series.

The D-series fund has a MER about 0.8% less than the very similar I-series fund shown.

The D-series fund returned $285.48 more to the investor than its I-series counterpart. That's a nice reward for buying and selling your funds directly without the aid of a middle man at the bank.

TD Dividend Growth Funds compared: fund with lowest MER performs best.

A general rule: always pay as little MER as possible.

What else should one watch for when buying mutual funds? Answer: sales commissions, known as loads. Try and only buy no-load funds which have no sales commissions added when being purchased or sold. I try to stay clear of both front-end load and back-end load funds as both increase costs.

Is that it? No. Generally, mutual funds are not sold for quick trading. If mutual fund units are sold too soon after purchase, a short-term trading fee is charged. This fee deters quick and frequent trading of funds and the associated trading fees a fund would accrue. How soon is too soon? Usually, one must hold a mutual fund for a minimum of thirty days to avoid short-term trading fees but check this and confirm with each individual fund.

Lastly, there are a few funds designed for short-term investing. An example would be money market funds. Such funds are often excluded from the short-term trading charges. I park free cash in a money market fund, TDB8150, a TD Investment Savings Account. Today TDB8150 is paying 1.35% daily. That's not much but it's better than earning zilch.

You may lose in the short term, so be prepared.

Back in August TD was calling H&R REIT a Buy. I liked reading that as I have held that stock for quite some time. It has gone up and it has come down, but while oscillating up and down it has never reached its target price. I read the August prediction and felt my faith in this stock was well placed. I'd soon be in the black.

What is H&R at today (Oct. 1, 2018)? Would you believe $19.71. Heck, it was at $20.36 back in August. (And it is dropping even more as I write this post)

My point? Buying stock is not without risk. No matter what analysts are saying, their predictions can be wide of the mark. If you are getting into the market, be prepared to lose money as well as make it.

Do your homework and if you bought quality with a nice, safe dividend as part of the deal, hold on. You will eventually come out O.K. and you will get paid nicely for your patience.

I like to think that my investment in HR.UN pays me a 7% yield. I don't dwell on the loss. And, if it drops 10% or more from its recommended price, I'll re-evaluate the stock and, if it checks all the correct boxes, I'll possibly buy some more. I'll have averaged down. I'll sell the shares that push me over my allocation when the stock climbs out of the cellar. I don't like to hold more than my allocation for any stock. I aim for diversity.

And how long do I anticipate holding on to a disappointing stock purchase. Answer: from eight months to two years but it can be longer. With H&R REIT yielding more than 7% annually, I can hold on to it indefinitely. In retirement, I need the income to live and it is delivering. To that extent, my investment in H&R REIT is a success.

(I has another stock that performed very much like H&R REIT. That was Suncor. It went up and it went down but never hit its target. After years of holding it, it climbed above my purchase price and I bailed with a little profit and all the dividends paid over the years, of course. Free of the stock, I sat on the sidelines and watched it climb to about twenty percent above my original price. I didn't mourn my selling. I was happy to be free of it.)

Markets don't just go up

Since I retired in early 2009, the stock market has generally been a damn fine place to have one's money. Oh, there have been downturns but they didn't last and they left few financial scars. Now, it is 2018 and the party is getting a little long in the tooth. I've been betting the correction would not arrive until 2020 but since expanding my portfolio recently, the market has been retracing its steps almost daily.

I had been sitting on a pile of cash. I was certain a 10% correction was in the cards. I waited and waited and waited. With every passing month I sacrificed dividend income. Finally, in the last month or so, I decided I was wrong. I should not be on the sidelines. I started buying.

I bought the following:

• ALA (Altagas)
• EMA (Emera)
• FTS (Fortis)
• H (Hydro)
• IPL (Inter Pipeline)
• PPL (Pembina Pipeline)
• SJR.B (Shaw Communication)
• TD (TD Bank)
• TCN (Tricon Capital Group)

And how have I done? I'm down. I've lost $1551.89. Oh, Emera, Fortis and TD are up but all the rest are down in varying amounts. Altagas is down a full 7 percent and Pembina Pipeline is following close behind with a 5.93 percent loss. One could argue that Pembina is a greater loss as I invested more in the pipeline and so have now suffered a three digit decline.

Am I kicking myself for making my recent stock buys? A little. But I'm kicking myself for not having simply stayed in the market. If I had, I'd have paid less for many of the stocks that I bought and I'd have collected a year's worth of dividends to cushion today's pullback. Investors are warned not to try and time the market. It is advise I usually follow.

There were no withdrawals, simply losses.

I turned 71 this summer. This milestone had a little extra meaning for me. It meant that London Life would finally be returning what's left in my Freedom Fifty retirement account. I invested about $4200 almost twenty years ago.

If I'd simply put that money in the TD Monthly Income Fund and reinvested the dividends, today I'd have about $14,000. Instead, I entrusted the money to London Life and today I only have about $2100. The only ray of sunshine brightening this whole story is that at 71 a guarantee kicked. London Life guaranteed if I waited until the age of 71 to ask for my money, it would send me at least seventy-five percent of my original investment. I'm hoping to have about $3150 returned. I say hoping because lately I have found getting London Life to put this in writing has proven difficult.

That said, I submitted a form last Tuesday. I should see the remnants of my investment soon and, when I do, I'll post the news.

The point of this post is to say, don't put all your bets on one horse when it comes to investing. If I'd have given my entire RRSP to  London Life, as was suggested by its rep, I'd have lost a massive amount of money. I'd been in financial trouble today and I'm not because I didn't.

If I were young and just starting out, and I knew what I know now, I'd take a big chunk of my money and invest it following the advice found on the Canadian Couch Potato investment blog. I'd hold a little money back to invest directly in stocks I really liked. Why would I do that? For fun. Investing can be, and should be, fun.

The last thing that I'd do is give my money to an investment advisor. I have seen two recently and both only made one solid promise: they would charge me to manage my money. One admitted to a fee of three percent of the value of my portfolio annually the other fudged their answer.

And I believe them. They will take out their fees without fail. London Life took out their fees annually. Their fees were part of the problem. Those fees made it very hard to earn enough money to replace the money that Freedom Fifty Five lost in the first year or two.

Finally, as I got older and got more and more comfortable with investing, I'd carefully prepare an allocation goal. I'd create a portfolio based on this allocation using the software supplied by whichever bank I was using to manage my actual portfolio. The practice portfolio would be based on my actual portfolio and then I'd sit back and see which approach delivered the best results.

And, I am actually taking my own advice even though I am now 71. I am tracking three portfolios: one my actual portfolio and two practice portfolios.

If my actual portfolio is worth X today. My allocation-based portfolio is up .14 percent and my Couch Potato Portfolio is down .08 percent. But there is one big difference between my present portfolio and the other two. My portfolio, structured for income, is paying thousands of dollars more than either of the other two portfolios.

Dividend-paying stocks can ease the pain of a decline

Don't buy just for the dividend. This is a good rule. Stocks with crashing values often path through a phase where the dividend yield is great on paper. The dividend has held while the stock price has dropped. This is not a buying opportunity. Sadly, but not unexpectedly, the dividend is often cut and both the stock price and the dividend tumble into the dumpster. As the rule says, don't buy just for the dividend. It can be ephemeral.

That said, a good stock with a good dividend has the dividend as an ally, a backstop to loss. Bank stocks rise and fall but the Canadian bank stocks have a history of retaining dividend payouts throughout each cycle. I own Royal, Scotiabank and TD. My BNS is down at the moment but its dividend looks secure.

Recently I bought Pembina Pipeline. Today my investment is down $405. Ouch. That said, my 400 shares will yield $912 in the coming year in dividends. With today's loss factored in, I am still $507 to the good. At the price I paid to buy this stock, the dividend is still delivering 2.76% on my investment.

Yes, I know, the stock may yet fall farther. Today's numbers are just a snap shot of how the math performs at the moment. It may not be as good tomorrow. But, and this is more likely, at some point in the relatively near future the math will be better, much better. If I had wanted to avoid volatility, I would have bought a GIC. But then I might have had to settle for as little as one percent on my money. Even with a $405 loss, I am still doing better than if I had bought a GIC to keep for a year.

End of Day Add: At market close today my total PPL loss stood at $368.99. Pembina made a gain today despite the overall market suffering a very small loss. I will try and remember to come back in a month and tell how my PPL purchase is working out.

An allocation plan for my retirement portfolio

I've been retired since 2009. My pension was inadequate and I needed dividend income from my investments to live. Sadly, I don't have enough invested, or so the bank tells me. I've got a problem and yet I've lived well for the past nine years. How? I've put my money to work in solid companies paying decent dividends.

A TD Waterhouse estimate of my dividend income for next 12 months. Click on image to enlarge.

It has been easy being an investor during the past nine years. The market has been very forgiving. According to one trusted source, the present party should continue until 2020. Then we may see a correction. That's a market drop of ten percent. If we see a bear market, that means a drop of twenty percent or more. And a bear is always a possibility.

So, I've decided to get my financial house in order, to batten down the financial hatches so to speak. I'm using the intervening months to assemble a solid portfolio of resilient companies plus some decent ETFs to take my wife and me through the coming downturn and there will be a downturn. There always is. On the bright side, they don't tend to last long. Eight months would be normal and two years would be an exceedingly long lasting bear market.

I thought of going the Couch Potato route but for a number of reasons I have decided to borrow some Couch Potato ideas but not anywhere near all. You might feel differently. I highly advise checking out the Couch Potato. You could do much worse.

In my next post, I will talk about one of the sectors I am putting front and centre in my retirement portfolio: Utilities.

Posts temporarily down for editing.

I've taken my previous posts down for updating and editing. Since starting this blog, I've grown and my views have changed somewhat. It is time for a careful reboot.

Cheers!

iShares REM: Reverse Split

I was surprised today to see that my REM shares (iShares Mortgage Real Estate ETF) are now worth more than $40 (US). The last time I looked those shares could be bought for something in the neighbourhood of $10 (US). Why the jump? A reverse split.

A reverse split of 1-for-4 took effect before the market opened this past November 7, 2016. Each REM share was converted to one quarter of a (New) share in the popular iShares capped ETF. In other words, if you owned 800 old shares, you only own 200 new shares today.

Why the reverse split? I have no idea but with a new president-elect Donald Trump led government in the States, an increase in interest rates may be in the offing. If so, an ETF like REM, with its high 13%-plus dividend, will come under downward pressure. The new value gives REM room to fall. (No matter who was elected, rates will go up at some point. Of that, there is no doubt.)

If REM rallies next week, I may sell. When the dust settles, after the inauguration in early 2017, I may buy back in if the price is right.
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This post was taken down for examination. I have reposted it as of June 16, 2018. REM today is selling in the mid forties and yielding better than 12%. I should have held my ground. Selling REM was a mistake.

If and when REM drops back down into the thirties, I will give it serious consideration. Rates have started climbing and two more hikes are expected before the end of the year. There may be a buying opportunity in the future.

Remember I am not a financial adviser. I am a retired photojournalist. I post my thoughts on investing for a number of reasons. One big driver is a hope that I will get some feedback. I am out to learn from others and I hope my writing will promote discussion.