A reader I’ll call Jim is looking for feedback on his portfolio. Jim is 50 years old and has no company pension plan. Here is the breakdown Jim sent:
$10,000 S&P/TSX 60 (purchased this year, due 2015) at BMO
$7000 term deposit 1.75% at BMO
$81,000 mutual funds at National Bank Financial, including
– Fidelity Northstar Class B (FID210)
– Vengrowth Investment D (VEN662)
– BMOG Asian Growth and Income M FL (GGF620)
– Sentry Select Canadian Income Class FL (NCE517)
– Vengrowth II Investment D (VEN679)
– MacKenzie Cundill Recovery FL (MFC742)
– Manulife Growth Opportunities FL (EPL588)
– Vengrowth I Investment D (VEN669)
– Sprott Canadian Equity Fund SR A FL (SPR001)
– Synergy Canadian CC FL (CIG6103)
$2000 GIC at 4.5% due 2011 at Bank of N.S.
$13,000 Bonds averaging 4.9% at Great West Life (60% company match)
$18,000 stocks at National Bank Financial
$28,000 term deposits (mutual funds) due 2013 (4000) and 2024 (24000) bonds at National Bank Financial
$5000 cash at BMO
$53,000 8 Drip stocks
$1600 Other stocks
The good news is that Jim has more savings than most people. However, this portfolio reminds me a little of mine before I finally fired the financial advisors I had worked with. Jim has assets all over the place.
The biggest chunk of money is in mutual funds at National Bank Financial. I only looked up a few of them, but the MERs were high (between 2% and 3%). The first Vengrowth Fund seemed to have a 10% up front commission! The primary purpose of these mutual funds seems to be to generate fees.
This portfolio has a lot of duplication. The various funds no doubt cover many of the same stocks. It can feel like diversification to own many mutual funds, but this can just obscure what you really have.
My personal preference is to own low-cost index ETFs or funds rather than actively-managed mutual funds. I’m actually getting out of the business of picking individual stocks, but it is possible for knowledgeable investors to create an appropriately-diversified portfolio of individual stocks. I just think it’s easier to use index ETFs.
I’d be interested in hearing what readers think of Jim’s portfolio.