Using a Search Engine to Find Mutual Funds

Using Morningstar.ca, I will click on Funds.

From there, choose the funds that you want to filter by.  In the case above:

  • CAD
  • TD Asset Management Inc

The list will populate with all the mutual funds available.  You will have to verify that the fund exists with your mutual fund provider.  The list of mutual funds on Morningstar.ca may not be 100% accurate since some mutual funds will get added and removed daily.

You have 5 option to choose from, so for the example above, I clicked on Fees and Details.  Furthermore, I clicked on Min Initial Purchase to sort the mutual funds by the lowest amount first.  The Min Initial Purchase may not be accurate.  I do not see how a zero minimum investment makes any sense.

From there, you can examine each mutual fund and determine which one fits your risk tolerance level.  Furthermore, Morningstar.ca gives details on their rating and other information on the mutual fund by clicking on the mutual fund name.

Under the Universe, you can choose either mutual funds or segregated funds.  They both have their pros and cons.  Therefore, you will have to determine if a guarantee that a percentage of the principal is worth the extra insurance cost for a segregated fund.

http://www.investopedia.com/articles/mutualfunds/09/segregated-funds.asp

tmxmoney.com also has a mutual fund screener.  Unfortunately, I cannot get it working at the moment.  In any case, I will show how I will use it if it works.

Under Investor Tools, you will find Mutual Fund Screener.  Click on Mutual Fund Screener to open the Mutual Fund search.

Before I start, I make sure the mutual funds listed are in CAD. Then, I click in the boxes under Criteria to change the values from the default.  From there, I edited the Values and the Condition.  You can add new criteria by clicking on the Add New Criteria link.  From there, you click on Run Screener to show the mutual funds that fit your criteria.

A partial list of Canadian Mutual funds is listed from the TSX search terms that I have used.  You may have to add search terms and/or be more specific to get a better focused list.  There is a 400 fund list limit.  Therefore, mutual funds 401 and above will not be shown.

You will notice that my columns are different.  To the right under the New Search button, you will see Edit Columns.  Click on Edit columns.

You will see that you can add or remove columns.  There is currently a maximum of 10 columns allowed.  Therefore, uncheck the ones you don’t want to see and check the ones that you want to see.  A maximum of 10.

Buying a Mutual Fund Through a Trading Account

I will go through the process of buying a mutual fund from my discount broker Questrade.  Many people have never seen a real trading platform, so I will remove the mystery for those who never seen a real trading platform.

Every broker should have the option to buy mutual funds.  Therefore, from my discount broker Questrade, I will click on MUTUAL FUNDS since I am going to buy a mutual fund.

To buy a mutual fund with a broker account if the broker has the option, you need the fund code.  In this case, RBF263 which is in CAD.  After a few seconds, the screen will populate with the fund information.  Next, you can either purchase in Units or Dollars.  In this case, I use Dollars and enter $1000.  From there, click the SEND ORDER button.

You will notice that the commission charge is $9.95 to buy.  Since I am using an independent broker, I must pay a broker fee.  The same goes when it comes to selling the mutual fund.  $10 to buy and $10 to sell.

Read the confirm your request carefully and if you are satisfied, click CONFIRM.

To purchase mutual funds from a broker, be sure to ask how much it will cost to buy and sell.  In most cases, the cost to buy and sell is free as long as it is the banks own mutual funds.  To buy other banks mutual funds, the fee to buy or sell can be high.

Reading the Mutual Funds Facts Sheet

When it comes to reading the mutual funds fact sheet which is called fund facts at RBC, http://fundinfo.rbcgam.com/mutual-funds/rbc-funds/fund-pages/rbf263.fs, many people have no idea what the different parts are.  Therefore, I will explain the parts that are important for traders and also the regular saver.

At the very top, you will see the Fund code.  This fund code is needed when purchasing mutual funds through a regular broker account.  Therefore, to purchase this mutual fund in:

  • CAD RBF263.
  • USD RBF449.

Below the Fund code is the MER which is 2.10%/year.

To the right of the MER is the minimum investment required which is $500.  Some will have a minimum investment required which will decrease the MER.  For example, a $25,000 investment will reduce the MER to 1.90%.

As you read further down, you will see 1. sales charges which is where the cost to buy, sell or other extra fees are if available.  In the case of this mutual fund, no extra fees.  There can be numerous letters after the fund name such as A, B, C, D, E, F.  You will have to read the mutual fund fact sheet for details on the letter meaning.

2. Fund Expenses is the MER/year and how it is calculated.  In the case of this mutual fund, the MER/year has the TER/year calculated into the MER/year for this mutual fund.  Some funds do not add the TER to the MER, so you will have to add the MER + TER to find the total MER.

Trading Expense Ratio (TER) – If you are buying mutual funds outside of a tax sheltered account, you may end up with a large capital gains tax that you will have to claim on your income tax.  Therefore, I prefer to keep mutual funds in a TFSA, RRSP or other tax sheltered account to avoid the headaches.

When a mutual fund manager is buying and selling securities, he/she will have to pay a broker fee to buy or sell.  Therefore, the more buying and selling within the mutual fund, the higher the TER.  If the broker worked for free, or there is no trading, the TER will be zero.

Farther down, you will come upon the trailer fee or trailing commission.  This commission is paid to your advisor for his/her services.  Some brokers will reinburse this fee if you buy this directly through a broker account without an advisor.

Since there are short-term traders who buy and sell mutual funds with hopes of making a profit, 3. Other fees explains the other fees associated if you sell too early or transfer this mutual fund to another bank.  You will have to ask your bank or broker about the transfer fee.

 

Importance of Stock Liquidity

If we look at the company CVG.TO, the last traded price is $33.33.  Furthermore, with the level 2 trading view, we can clearly see who are the buyers and sellers and their limit order bid and asking price.

The spread, difference between the bid of $33.12 and ask of $33.60, is quite large.  Therefore, this is a stock that may become difficult to sell in the future for a decent price.  If you want a stock that should be easily to sell in the future, look for large, high volume, lots of shares traded, stocks.  As you move towards low volume, few shares traded, the risk increases.  Of course, higher risk = higher reward.  Unfortunately, there is no guarantee that a company that has high volume will stay that way in the future.  Furthermore, there can be high volume as the stock price plummets or flies high.

For the stock CVG.TO, if you want to sell 480 shares with a market order, you will sell 200 shares to the highest bidder for $33.12 then another 80 for $33.11 then another 200 for $33.10.  Therefore, the last traded price will be … $33.10.

If you want to buy 260 shares with a market order, you will buy 100 shares at $33.60 then 100 shares at $33.61 then 30 shares at $33.62 then 30 shares at $33.63.  Therefore, the last traded price will be … $33.63.

As you will see from the examples above, when you buy or sell CVG.TO with a market order, you will not get the last traded price.  You will get the price that the bidder or seller is demanding.

Spotting an Investment Scam

There are companies that have been known to cook the books.  Therefore, as an investor, you will have to do your homework before investing.  Most companies are honest and will not take any risks since the shareholders can sue the company for fraud.  Furthermore, the reputation of the top corporate leaders, C-suite executives, will be tarnished in the process.

This is where many investors will do the research on the C-suite executives.  To verify the C-suite executives integrity and knowledge in the industry they are competing in.  Hunter Harrison is a legend in the railway industry known to turn around struggling railway companies.  He is worth the $50 million plus yearly salary.

Therefore, a successful company will need an excellent team of C-suite executives.  Their vision, direction, experience and knowledge can determine the fate of the company.

The one basic rule I go by is this.  If it sounds too good to be true, it probably is.

Google is also good for finding reviews on investment opportunities.  I will put the word scam after the name to see if anything pops up in Google.

http://www.investopedia.com/university/scams/

http://www.chicagotribune.com/business/ct-bogus-sec-filings-20170322-story.html

http://www.cnbc.com/2016/12/28/platinum-partners-and-affinity-fraud-commentary.html

Muddy waters research uncovers scam companies.  When muddy waters is on the news with a new scam company being targeted, sell immediately.

Creating the Dogs of the TSX60

When you visit morningstar.ca, click on Portfolio.  You will have to create an account to begin adding stocks to your portfolio.  From there, you can examine the stocks in the TSX60 index in your portfolio every year to determine if it is time to rotate the dogs of the TSX60.

TMXMoney.com can also be used to create a portfolio.  They both work the same, but one may have some features you like better.

In order to figure out what companies are in the TSX60 index, you will have to go to TMXMoney.com then click on Research.  Under Indices & Constituents, you will click on TSX.  S&P/TSX 60 Index (CAD) is the one you want to click on to find the top 60 companies on the TSX.  Click on Constituents – S&P/TSX 60 Index (CAD) to show the list of companies that compromise the top 60 companies.  You can export the list to a spreadsheet or print the list so you can enter in the companies in your watchlist.

Dogs of the TSX 60

When it comes to stock picking, there is not guaranteed strategy.  Nevertheless, the purpose of purchasing stocks is to win more than you lose.  Therefore, a strategy that I would use is the dogs of the TSX.

Simply picking a few of the top dividend payers on the S&P/TSX 60 Index sounds like a winning strategy, but there are potential pitfalls.

When a trader decides to buy individual stocks, he/she must have a strategy.  When it comes to buying the Dogs of the S&P/TSX 60, a trader should look into the financials to ensure that the stock dividend is not going to get cut in the near future.  A corporation that cuts its dividend can see a sharp decline in its stock price.  Therefore, a dog of the S&P/TSX 60 can be a dog because other traders saw what you missed.

http://www.investopedia.com/university/stockpicking/