Archive for September, 2007

Costs of the Sleepy Portfolio

September 11, 2007


I was curious to see what the blended MER of the Sleepy Portfolio was, ignoring the initial commissions and foreign exchange transactions. In other words, if no transactions were made, how much does the Sleepy Portfolio cost every year?

The most expensive ETFs in the portfolio are the iShares CDN REIT Sector Index Fund (XRE) at 0.55% and the iShares CDN Real Return Bond Index Fund (XRB) at 0.35%. The lone mutual fund in the portfolio, the Altamira T-Bill Fund used to capture the cash component costs a surprising 0.52%. The cheapest ETFs are from the Vanguard – the Total Market ETF (VTI) at 0.07% and the new Europe Pacific ETF (VEA) at 0.15%.

The blended MER of the entire portfolio is a low 0.22%. A $100,000 portfolio invested in a mix of typical mutual funds would cost $2,000 per year, compared to $220 for the Sleepy Portfolio.

Ontario Health Premium and the Election

September 10, 2007


As Ontario officially goes to the polls, it is time to recall Premier McGuinty’s most unpopular “health premium” on Ontario taxpayers. The health premium kicks in on taxable incomes above $20,000 and the levy could be as much as $900 on a taxable income of $200,600.

Unlike regular income taxes, the health premium is a regressive tax. It is galling that taxpayers in a wide range of taxable incomes could be paying the same health premiums despite the fact that the levy is not specifically earmarked for health spending. For example, someone with a taxable income of $75,000 pays the same premium of $750 as another with an income of $150,000, even though he or she is earning half the income. Here’s the percentage of health premium paid on taxable income of various levels:

$25,000 – 1.20%
$30,000 – 1.00%
$35,000 – 0.86%
$40,000 – 1.12%
$45,000 – 1.00%
$50,000 – 1.20%
$60,000 – 1.00%
$70,000 – 0.85%
$80,000 – 0.93%
$100,000 – 0.75%
$150,000 – 0.50%
$200,000 – 0.38%

When the tax was first levied, I wrote to the premier (he is also the MPP for our Ottawa South riding) expressing my disappointment with the tax and reminding him that I will take his decision into account when the next election rolls around. Well, the election is here, the massive tax hike still hurts and on October 10th, it’s time to register our confidence (or lack thereof) in Mr. McGuinty.

Don’t forget to vote on October 10. Remember, if we don’t vote, we don’t get to complain!

Reader Question on Stock Newsletters

September 9, 2007


The following question is from John:

Can stock newsletters like the Motley Fool really promise 20 plus percent returns? Is there some sort of catch?

First, a clarification: nowhere in the web page does the Motley Fool promise future returns of 20%. They are simply saying that their stock picks are up an annualized 23% and beaten the index over the past five years.

Having said that, I’ve followed the Motley Fool guys for years. I still remember some of their picks for a conservative portfolio in the late nineties: JDS-Uniphase (JDSU), Yahoo (YHOO), Intel (INTC), Microsoft (MSFT) and Pfizer (PFE) etc. You wouldn’t have done very well with some of their aggressive picks like Millenium Pharmaceuticals (MLNM), Celera Genomics (CRA) and Human Genome Sciences (HGSI) etc. either.

The point is not to pick on the Motley Fool but to point out that newsletters have a habit of trumpeting their successes and burying their failures (just like mutual funds). They do this for a very good reason: why would you subscribe if they instead advertised a 10-year track record that barely matched the market’s? Or think about it this way: why are these guys still plugging a newsletter when they can make millions in the stock market by keeping their “secrets” to themselves?

It is incredibly hard to beat the markets and I have no idea if the Gardner brothers will continue to do so. They might but it’s not a bet I am willing to make, much less pay for such advice.