Archive for August, 2009

Top 5 Investment Deals

August 31, 2009


[In a recent column, Rob Carrick listed his top bargains and asked Million Dollar Journey, Larry MacDonald and I to share ours. Here’s the longer version of my picks for the top investment deals:]

  1. Vanguard ETFs: It is a pity that Canadians do not have access to mutual funds from index fund giant Vanguard. Vanguard ETFs, however, trade on US stock exchanges and Canadians with self-directed brokerage accounts can invest in the lowest-cost ETFs around. The MER of Vanguard Total Stock Market ETF (VTI), which tracks the entire US stock market, is just 0.09%. In other words, a $100,000 investment in VTI would incur an annual expense of just $90 (plus the commission to buy and sell the ETF). Other ETFs of interest from Vanguard are the Europe Pacific ETF (VEA, MER of 0.16%) and Emerging Market ETF (VWO, MER of 0.27%).
  2. TD e-Series Index Funds: Investors can assemble a diversified portfolio at a very low cost with TD e-Series mutual funds. These funds are perfect for regular contributions — you can start with as little as $25. Note that the funds are only available online through TD Bank or TD Waterhouse.
  3. Low-Cost Fund Families: You can avoid the high fees associated with many mutual funds by seeking out some of the lesser-known names. These money managers typically sell directly to investors and require a high minimum investment. But they provide active management at a much lower cost than the average mutual fund. Phillips, Hager & North, Leith Wheeler, Mawer and Steadyhand are some examples.
  4. Wash Trading: If you sell and buy US stocks within self-directed RRSPs, most discount brokers will ding you with a two-way currency conversion fee: first when selling your US stock and then when buying your US stock. The currency conversion fee could add up to anywhere between 2% to 4% of your trade and could be much greater than the trading commissions. Wash trading, a feature available with some brokers (TD Waterhouse, for example), allows investors to avoid those pesky foreign currency conversion charges in registered accounts.
  5. Dividend Reinvestment Plans (DRIPs): Many blue-chip companies offer shareholders the option of reinvesting their dividend cheques in company stock without any fees. Some companies even offer a discount on the share price for DRIP participants. Discount brokers also offer “synthetic” DRIPs but investors can only purchase whole shares — fractional shares are not allowed.

This and That: Money Mistakes and more…

August 27, 2009

  1. Our emotions play havoc with our investments. We hold on to losers too long hoping they would break even, confuse luck with skill and allow hindsight to play tricks on our minds. Meir Statman wrote a column in the Wall Street Journal about these and other investment mistakes we make, why we make them and what, if anything, we can do about it.
  2. It is very common to hear claims that portfolios dropped 40% (or whatever number) in the bear market. Such claims ignore the reality that a few asset classes — notably bonds — performed their role in providing ballast to a portfolio, says Tacita Capital’s Michael Nairne (via Wealthy Boomer).
  3. Tax expert Tim Cestnick penned a couple of columns the drawbacks and opportunities of tying the knot from a tax perspective.
  4. The Star’s Ellen Roseman has tips for Canadian investors interested in Florida real estate.
  5. Larry MacDonald reports that policymakers are considering changes to money market funds that could make these funds less attractive to investors.
  6. Kathryn wrote a guest post on whether rewards points are worth the trouble.
  7. Michael James feels that the prevailing rules for estimating the maximum mortgage a homeowner can afford leave little margin for error.
  8. Preet is trying his hand at video blogging and is giving away a copy of Benjamin Graham on Investing (watch for my review next week).
  9. The Globe and Mail’s Chaya Cooperberg debates the costs and benefits of a nanny.
  10. The Dividend Guy featured a guest post on saving money on travel.

Have a great weekend everyone!

Rogers Institutes a Local Programming Improvement Fund Fee

August 25, 2009


If you are a customer of Rogers Cable, get ready to pay more to watch TV. Rogers has sent out letters notifying customers that starting next month, it will levy a Local Programming Improvement Fund (LPIF) fee of 1.5% of their cable TV bill. Rogers helpfully points out that the fee is a direct result of the CRTC requiring cable and satellite TV providers to fund local programming in smaller markets. When the CRTC mandated that cable and satellite providers pay for local programming, it naïvely hoped that the cost will not be passed on to consumers:

In establishing this new fund to support local programming, the Commission [CRTC] is conscious of the impact that it will have on licensed BDUs [Broadcast Distribution Undertakings such as cable and satellite TV providers]. While the precise impact will vary from undertaking to undertaking, the Commission estimates that the aggregate impact on BDUs will be to lower their overall operating margins – currently at approximately 35% – by no more than 1%.

In light of the performance levels of the BDU sector and the benefits accruing to BDUs as a result of other changes being made to the regulatory framework, the Commission is of the view that there is no justification for BDUs to pass along any increased costs relating to the LPIF – estimated to be on average approximately $0.50 per month – to their subscribers.

It is interesting that Rogers chose to break out the LPIF fee separately instead of incorporating it into the next round of price hikes. After all, a 1.5% fee on a $29.99 monthly cable bill works out 45¢ and Rogers is already in the habit of regularly increasing prices by a dollar or two every year. Today basic cable in Ottawa costs $29.99 excluding taxes and a digital service fee of $2.99 — up from $28.49 in 2008, $27.49 in 2007, $25,99 in 2006, $24.99 in 2005, $23.99 in 2004 and $21.99 in 2003 — an increase of 36% over a 6 year period. So, why would Rogers break out the LSIF fee? Informed speculation is welcome.