gdp's Comments

MoneySense : The Models Are Broken—But Indexing Still Works

Thu, 3 May 2012 03:35:15 +0000

Thanks to everyone for entering the draw. Winners will be announced on Thursday morning.

Steadyhand Blog : Tie Breaker - Steadyhand Investment Funds

Thu, 22 Mar 2012 02:55:03 +0000

Tom: I agree with your comment that your funds are hard to benchmark. For example, it doesn't make a lot of sense to compare the Income Fund to the DEX Universe. A blended benchmark that included comparable ETFs with the same asset mix would be more meaningful. For example, in 2011 it might have been: iShares XGB30% iShares XCB45% iShares XDV18% iShares XRE7% That mix would have returned 8.42% in 2011, outperforming the Income Fund significantly.

MoneySense : Commission-free ETFs, here at last!

Mon, 6 Feb 2012 14:28:23 +0000

@Hanns: Unfortunately the lineup of commission-free ETFs does not include many core ETFs: most are narrow sector funds. However, it would be possible to build a well diversified portfolio using Claymore's CLF and CBO for bonds, HXT and XMD for Canadian equities, HXS for US equities, and CIE for international equities.

MoneySense : Couch Potato Portfolio 2011 Returns

Fri, 3 Feb 2012 15:00:00 +0000

@Liz: There is no magic Couch Potato formula, and no single best portfolio. XIU holds only large-cap Canadian stocks, while XIC holds both large and midcaps. The former is cheaper, while the latter is more diversified, and both are excellent choices. The difference between VEU and VXUS is similar. Both cover the same countries, but VXUS has more exposure to midcap and small companies. Again, it would be hard to go too far wrong with either one.

MoneySense : Norbert's gambit: A better way to buy U.S. dollars

Thu, 2 Feb 2012 21:10:29 +0000

@Bob and Felix: I do not have personal experience doing this with Questrade or Virtual Brokers. However, as long as the account allows you to hold both US and Canadian cash, it should not be a problem. I believe that both brokerages allow this (not all of them do in registered accounts). I would recommend calling them before performing the trades to make sure.

MoneySense : Norbert's gambit: A better way to buy U.S. dollars

Wed, 25 Jan 2012 15:31:33 +0000

@MetaRX: You're correct that Norbert's gambit and washing trades are not the same thing. The main difference is that washing trades is only useful if you already hold a security in US dollars and you want to sell it without exchanging the currency back to Canadian dollars. It assumes that you already paid currency conversion fees when you first bought the US-denominated security, but it allows you to avoid subsequent fees. Norbert's gambit, on the other hand, allows you to exchange Canadian dollars to US dollars and back again as many times as you want—assuming that your brokerage account allows you to hold both currencies. The short answer is that with a TD RRSP, you will have to pay to convert currency the first time. Canadian Capitalist has written about this pretty extensively. Check out his blog for more.

MoneySense : Dividends: Not As Tax-Friendly As You May Think

Tue, 24 Jan 2012 17:39:48 +0000

@David: Thanks for your comment. Why is it that people "invest for dividends" but consider capital gains a bonus? Why don't we invest in equities with the expectation of a total return that consist of some combination of both? Behavioral economists have been asking this question for decades, too. As Meir Statman writes, “A dollar labeled dividends is as green as a dollar labeled capital, so rational investors are indifferent between the two.”

MoneySense : Norbert's gambit: A better way to buy U.S. dollars

Mon, 23 Jan 2012 19:49:20 +0000

@Mario: This is a great question. Stock/ETF trades should settle on the third day after you make the transaction. Some brokerages seem to require you to wait these three days before journaling the ETF from one currency to another, but not all of them do. I would suggest you call the brokerage to ask them before you try the gambit.

Steadyhand Blog : Say it Ain\'t So - Steadyhand Investment Funds

Tue, 31 May 2011 17:12:35 +0000

I agree completely that a Mongolia ETF is absurd. I would definitely only buy it if it were inverse and leveraged 3x. :)

MoneySense : Currency Hedging in International Funds

Thu, 7 Apr 2011 20:52:00 +0000

Glad the links helped. Yes, DIY's article is excellent!

MoneySense : Currency Hedging in International Funds

Thu, 7 Apr 2011 15:39:46 +0000

I should also add that transactions 1 and 2 (as well as 3 and 4) are made at virtually the same time. So you can`t assume a strong USD in transaction 1 and a weak one in transaction 2. Maybe that`s the source of the confusion. Here`s a real-world example to ponder: http://canadiancouchpotato.com/2011/04/07/a-case-...

MoneySense : Currency Hedging in International Funds

Thu, 7 Apr 2011 15:37:07 +0000

"LeftCoastNewfie: I know this concept is confusing, and it fooled me too until I worked through the math. In tansactions 1 and 2, and again in 3 and 4, US dollars are on both sides of the equations, so they cancel each other out. I can assure you that Mr. Jain, who manages global portfolios, is correct here. This post has a good explanation of the concept, and a spreadsheet with examples: http://canadianfinancialdiy.blogspot.com/2007/05/...

MoneySense : Why I’ve Given Up On Indexing

Mon, 4 Apr 2011 17:16:51 +0000

Gotcha. :)

MoneySense : Where Do Returns Come From?

Tue, 29 Mar 2011 12:27:45 +0000

@Wallace, Lenny, Chad and Libor: Thanks for your comments! Lenny, to answer your question about whether it is best to go all-in or move your money into index funds a bit at a time, the research suggests that doing it all at once is best. This is especially true if you are currently in high-cost mutual funds now, since your exposure to the market is the same either way. The index funds just lower your costs.

MoneySense : A Bold New Venture

Mon, 28 Mar 2011 17:28:11 +0000

@Marie: Wait for my next post before you consider jumping into Venture stocks. :)

MoneySense : Where Do Returns Come From?

Thu, 24 Mar 2011 18:51:52 +0000

@JoeQ: Yes, the other part of the active management (other than picking stocks) is trying to time entry and exit points, which as you say, is usually futile. You may miss the worst of the declines, but then you usually miss much of the rebound, too. One of the pillars of the Couch Potato strategy is to stay invested at all times.

MoneySense : Does Rebalancing Boost Returns?

Fri, 18 Mar 2011 14:56:56 +0000

@Guest: The calculations do not include taxes or trading fees, which would be different for every investor.

MoneySense : A DRIP in the Bucket

Fri, 18 Mar 2011 14:55:00 +0000

@Marie: There are not many certainties in investing: all any of us can do is put the probabilities in our favour. No one can say whether this ETF will outperform that ETF over the next ten years. We can't even say with certainty that stocks will outperform bonds. All we can do is keep costs low and control risk the best we can. @Robert: It’s important to look at the whole picture. You’re comparing ETFs to the cheapest index funds in Canada (the TD e-Series) funds, and you’re right that the fee difference can be very small. But you don’t need to have millions for the difference to become significant. See this post for the math details: http://canadiancouchpotato.com/2010/06/25/should-... The other issue is that not everyone has access to the TD funds, and they do not cover all of the major asset classes, such as emerging markets and REITs. There are also many ETFs that track better indexes: for example, Vanguard’s VTI is much broader than index funds that track the S&P 500. The fact that dividends are not automatically reinvested in VTI is not a significant drawback. This is the main argument I tried to make in the post: the main driver of an investment decision should never be whether or not the fund has a DRIP.

MoneySense : Can Your Funds Outperform Over a Lifetime?

Fri, 18 Mar 2011 14:48:04 +0000

@Marie: Every time you add an actively managed fund to a portfolio (even if most of the other funds are passive) you lower your probability of matching an all-index-fund portfolio. Of course, there is always the possibility that the one or two active funds will allow you to beat the market. It's just a very small possibility, and it comes at the risk of even greater underperformance.

MoneySense : BMO’s Target Maturity Corporate Bond Funds

Wed, 23 Feb 2011 19:33:08 +0000

@Fernando: When ETFs hold other ETFs in the same family, they do not double-charge the management fees.