Comments on: Big Bank Monthly Income Fund Comparison

By: Sputs

Sputs — Sun, 24 Jan 2010 23:20:25 +0000

I noticed that RBC Income fund is not available for TFSA or RRSP. Has anyone faced this issue with the other incomme funds?

By: Neil Hampshire

Neil Hampshire — Mon, 18 Jan 2010 10:26:47 +0000

Hi, I just want to share that buying $90,000 of BMO Monthly Income average cost 8.07/share giving around $670/month means that I can keep leasing a new car just off my dividends. I can get car insurance, oil changes, maintenance, etc if I wanted to. Or I could have rent and utilities covered. But right now, I am reinvesting 70% of it roughly and living off the rest. At age 33, I am a bit behind with my portfolio, and having only 70% of it reinvesting, I am worried that I am not going to grow this fund fast enough. I am only making $35,000/year from work so there is not much room for adding money from my paycheque. I am wondering if any of you know any better strategies out there.

By: MyLifeInBrampton

MyLifeInBrampton — Thu, 16 Jul 2009 17:21:49 +0000

@Tim.

The distribution for the CIBC Monthly Income is actually 0.06/monthly = $0.72/year which gives the 5.23% return, not 7.10%.
The above table is incorrect unless the distribution has been changed on the last 2 weeks since June 30 distribution.

By: Jordan

Jordan — Wed, 15 Jul 2009 10:27:30 +0000

@FrugalTrader have you ever benchmarked your income fund’s performance against comparable indexes to see if you did better or worse?

By: FrugalTrader

FrugalTrader — Wed, 15 Jul 2009 10:25:07 +0000

Hey Jordan, CIBC monthly income fund was one of the first funds that I purchased with an advisor many moons ago and I’ve just left it in place. In the future, I will most likely transfer that account to my self directed account and use ETFs instead.

By: Jordan

Jordan — Wed, 15 Jul 2009 09:00:58 +0000

@FrugalTrader

I’m curious why do you use an actively managed income fund instead of using passive index funds / etfs with lower expenses? Have they outperformed?

Also I’m curious what your opinion is of income funds with high distributions due to Return of Capital, it’s not really making money but to the average investor it looks like it’s got a great return.

@Kent

My parents own Mac Sentinel Income Series and I can tell you the worst period is not -9.6%, MorningStar shows the worst 1 year Rate of Return as -14.1% and that’s after the fund has recovered some. Holding over the last year as been a gigantic struggle for my folks.

http://www.morningstar.ca/globalhome/quicktakes/Fund_Performance.asp?fundid=417

By: Mark in Nepean

Mark in Nepean — Tue, 14 Jul 2009 23:28:38 +0000

I think income funds or index funds, are the way to go for the TFSA, especially when the fund provides a dividend.

That will be my plan for the 2010 TFSA.

By: Tom @ Canadian Finance Blog

Tom @ Canadian Finance Blog — Tue, 14 Jul 2009 17:49:15 +0000

I’ve never really looked into income funds before, I find the MER a bit high to interest me.

By: Journey

Journey — Tue, 14 Jul 2009 06:43:25 +0000

I am still trying to work my way out of 110k in student loan debt. Maybe one day ..I will get to this place.

By: Kevin Hall

Kevin Hall — Tue, 14 Jul 2009 03:59:28 +0000

Hi, just wanted to comment on some of the info on RBC. I bank with them so I am familiar with their funds and policies. When I opened my TFSA the first thing I thought of was contributing to the Monthly Income Fund and reinvesting the dividends. Unfortunately, it is no longer open to Registered accounts and the TFSA is considered one. Secondly, the .84% MER for the series D funds is great if you have the $10000 minimum to open the fund. Hope this helps anybody making up their mind.

By: cxd771

cxd771 — Tue, 14 Jul 2009 03:50:58 +0000

The yields seem higher because stock prices have been hammered recently as we all know. I’ve held BMO monthly income for a long time. They have never cut the dividend or missed a dividend payment. If there is a shortfall on cash for a dividend payment, they make up for it with return of capital. I’m a little worried about such a high yield as it is not sustainable in the long term.

By: Kirk S.

Kirk S. — Mon, 13 Jul 2009 22:29:46 +0000

I have been looking into the RBC Monthly Income fund for my fixed investments in my RRSP, but currently have the Bond Index fund. All of those options seem to have a great yield!

By: cannon_fodder

cannon_fodder — Mon, 13 Jul 2009 14:52:07 +0000

I think what is most interesting is the allocation between equities/bonds/cash. It would be interesting to see how that allocation has changed over the past 3 years.

CIBC and TD look the most aggressive with BMO and RBC most conservative (if you consider higher proportion of equities vs. bonds as being aggressive).

It would seem that CIBC and TD can’t put much more money in equities whereas BMO and RBC could if that is their strategy.

By: FrugalTrader

FrugalTrader — Mon, 13 Jul 2009 13:54:21 +0000

Tim, I took the 2008 distribution of $0.88 and divided by the current NAVPS. The assumption is that 2009 will have the same distribution as 2008. You’ll notice from the link that the fund has paid 0.72 over the past several years.

Blogging Banks, my personal opinion is that Canadian bank dividends are safe for now. If you take a look at the div payout relative to earnings, they are a bit on the higher side historically, but nothing to be worried over (IMO).

By: Blogging Banks

Blogging Banks — Mon, 13 Jul 2009 13:42:10 +0000

At 1.1% to 1.5% annual expense isn’t it better to just do the income portion on your own by properly allocating fixed income and equity investments?

Also what is your take on individual cdn bank stocks? Are the divs safe?

By: Tim

Tim — Mon, 13 Jul 2009 13:29:36 +0000

From that link the yield on the CIBC fund is 5.23% and the table above has it at 7.10%. What makes up the difference in yield?

By: FrugalTrader

FrugalTrader — Mon, 13 Jul 2009 13:26:06 +0000

Here they are:

cibc:
http://www.morningstar.ca/globalhome/quicktakes/fund_overview.asp?fundid=2820

BMO:
http://www.morningstar.ca/globalhome/quicktakes/fund_overview.asp?fundid=2442

RY:
http://www.morningstar.ca/globalhome/quicktakes/fund_overview.asp?fundid=3141

TD:
http://www.morningstar.ca/globalhome/quicktakes/fund_overview.asp?fundid=2792

BNS:
http://www.morningstar.ca/globalhome/quicktakes/fund_overview.asp?fundid=76270

By: Henry

Henry — Mon, 13 Jul 2009 13:24:18 +0000

If costs are a concern, RBC Monthly Income Series D’ MER is only .84% and PH&N Balanced Series D’s MER is only .87%. RBC Monthly Income Series D is only available through RBC Direct Investing. PH&N Balanced Series D is available without transaction costs at RBC Direct Investing, Scotia iTrade, and BMO Investorline.

Disclosure: I personally own CIBC Monthly Income. I have been very disappointed about its management. Downside risk was not minimized during the crash and the manager didn’t take the opportunity of lower prices to increase equity allocation. Preet recommends that tactical asset allocation funds are the way to go if you want flexible asset allocation.

By: ToT

ToT — Mon, 13 Jul 2009 13:18:47 +0000

Hi,

Thanks for that – I can’t find any of these funds on the morningstar website. What are their names or codes?

The yields look too high – is part of that distribution return of capital or are they leveraged?

Thanks!

By: FrugalTrader

FrugalTrader — Mon, 13 Jul 2009 13:15:29 +0000

Tim, my CIBC monthly income fund is held within my RRSP. Believe it or not, I haven't had the chance to open a TFSA yet. But when I do, it will most likely be with Questrade.