Archive for May, 2008

This and That

May 29, 2008

  1. The fall of Bear Stearns is the biggest business story of the year by far and many books will likely be written on the topic. The Wall Street Journal weighs in with a three part series (Missed Opportunities, Run on the Bank and Dear or No Deal?) on the swift collapse of the brokerage firm.
  2. The Star’s Ellen Roseman offers this piece of advice to rebate cardholders: “Read your statements each month and the accompanying bill inserts – or you could miss out on valuable rewards”.
  3. Rob Carrick on how to pick a trustworthy investment adviser.
  4. Jon Cheveau talks to Malcolm Hamilton who advises young couples to pay down debt first and worry about saving for retirement later. The Wealthy Boomer also conducted a two part video interview with Mr. Hamilton (Part 1 and Part 2) that’s worth checking out.
  5. Canadian Mortgage Trends reported that the big banks are chopping the interest rates on fixed mortgages.
  6. Gail Vaz-Oxlade says that reading (your bills) can save you money.
  7. ETFs were supposed to be ultra low-cost vehicles that allow average investors like you and me to do better than most professionals out there. Tom Bradley bemoans the perversion of the idea in new products that charge 2.25% for a bunch of ETFs. Mutual funds, anyone?
  8. Thicken My Wallet on why large mutual funds under perform the market.
  9. Congratulations to Million Dollar Journey for a mention in the Summer 2008 issue of MoneySense magazine.
  10. New blogger Jim Somerville explains estates and probate fees.

Switching from Index Mutual Funds to ETFs

May 28, 2008


The following question is from Ed, who wants to switch from index mutual funds to ETFs:

Many years ago I set up my RRSP using TD’s low MER e-Series index mutual funds. I learned quite awhile ago that most actively managed funds cannot beat the indexes over the long haul. I’m now thinking of moving from index funds to ETFs. Is there a website(s) somewhere with a good list of available ETF’s? I currently have a TD trading account so flipping over from TD index funds to ETF’s should easily be done not forgetting penalties for redeeming within 90 days.

While index mutual funds are a great option for small portfolios, ETFs could be an even cheaper option for larger portfolios. Though hundreds of ETFs are available, most investors need to be aware of only a handful. You can obtain the list of ETFs that track broad indices under the ETF category on this website or the websites of the major purveyors – Vanguard and iShares (Canada and US). I use the ETF Connect website for looking up more obscure ETFs.

The following table lists the TD e-Series Index Fund and the equivalent ETF:

TD e-Series Fund ETF
TD Canadian Bond Index (TDB909) iShares CDN Bond Index (TSX: XBB)
TD Canadian Index (TDB900) iShares CDN Composite Index (TSX:XIC)
TD US Index (TDB902) iShares S&P Index (IVV)
TD US Index Currency Neutral (TDB904) iShares CDN S&P 500 Index (TSX: XSP)
TD International Index (TDB911) Vanguard Europe Pacific ETF (VEA) or iShares MSCI EAFE Index Fund (EFA)
TD International Index Currency Neutral (TDB905) iShares CDN MSCI EAFE Index (TSX: XIN)

Note that a better substitution for the TD US Index (TDB902) could be the Vanguard Total Stock Market ETF (VTI). Also, an initial currency conversion charge will be incurred when buying ETFs that are listed on US exchanges. Throw in an emerging market ETF and REITs into the mix and you’ll end up with a well-diversified portfolio.

Running after the Joneses

May 28, 2008


Sometime back, I wrote how the urge to keep up with our friends and neighbours drives our spending habits. In a humorous column in The Financial Post (available here), author Neil Steinberg writes:

Call it envy. Call it competitiveness. Call it a desire to meet community standards. But the need to keep up with the Joneses both spurs our personal working lives and drives our national economy, and most of us don’t realize it.

He also offers one prescription for overcoming our urge to what he calls “the human version of a peacock spreading its tail”:

We push beyond just playing our socio-biological role when we at least become aware of the process, and either join in or do not join in as a conscious decision. It can take courage–or obliviousness–to break the mold.

Note: Larry MacDonald referred to the same column in Forbes magazine in a recent post.