Performance of Currency-Neutral S&P 500 Index Funds

January 19, 2014

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Many investors would like to get exposure to US stocks in their portfolio even if they believe that the US dollar is in a secular decline against other major currencies. In theory, currency-neutral funds appear to offer the best of both worlds: exposure to one of the world’s most dynamic stock markets without the baggage of the risk of a depreciating currency. However, if you look at the eight year performance history of currency-neutral funds since they were first introduced in 2006, a different reality emerges.

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Why I moved to BMO InvestorLine

January 15, 2014

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I’ve held all our investment accounts at TD Direct Investing (TDDI) for a number of years. When I moved to TDDI, they were one of the few ones around that offered wash trading in registered accounts, which helped save a pile on currency conversions when switching from foreign stocks to broad market ETFs. Since then, a few discount brokers — RBC Direct Investing and BMO InvestorLine prominent among them — have started offering US Dollar RRSPs. Clients in other brokers like Scotia iTrade and CIBC Investor’s Edge are now reporting that US dollar dividends in registered accounts are converted into Canadian dollars at favourable rates. TD Direct Investing, unfortunately, is not only dragging its feet on offering a US Dollar RRSP but also refusing to do anything about currency conversion charges in registered accounts. At the very least, to remain competitive, TD Direct Investing should convert US Dollar dividends in registered accounts at favorable rates but in recent communications, TDDI indicated the best they can do is wash US dividends into the TD US Dollar Money Market Fund but only for selected clients and only if the client calls before the dividends are due and requests a wash trade. To be fair, TDDI is reported to have stopped double dipping on US dollar dividend reinvestments as it did in the past but that is of little use to non-DRIPers.

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The 2013 Sleepy Portfolio Report Card

January 12, 2014

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Background

I started the Sleepy Portfolio in 2005 to benchmark my personal portfolio, which at that time was mostly invested in individual stocks. The portfolio started off with an initial outlay of $100,000 but no new money has been added since. This is not simply a model portfolio; it reflects investment returns that can be obtained in the real world by accounting for costs such as spreads, trading commissions, MERs, foreign exchange conversion charges etc. For example, dividend payments on US-listed ETFs are assumed to incur a foreign exchange fee of roughly 2 percent when they are deposited into the account. Note, however, that the portfolio is assumed to be held in a registered account, so it does not take taxes into account.

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