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Free ‘advice’ is sometimes not worth the price (biased advice from banks)
March 16, 2016
1:02 am
Loonie
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At FundLibrary, I was clicking on various fund categories and looking at 1 year returns to date, Ithink,or perhaps just 2015 calendar yr, as well as shorter, to see if things appear to be on the upswing (not). I didn't check every category, but checked most of the likely suspects. It was a sea of red. I didn't find anything anywhere near 10.54, so wonder what you are looking at and would be interested to know. Most, if not all, were slightly in the red, most in a range up to 5%; some more. If I'm misreading this, I'd like to know how to get a better result, please.

However, based on what I think I'm seeing, so much for the theory of asset allocation with rebalancing annually or semi-annually, just when I had almost become persuaded of it. I believe somebody got a Nobel prize for that theory.
The trouble with economic theories, as I see it, and I am no expert, having just read some books as a layperson in this field, is that they are better at describing the past than understanding the future. New theories are built on the failures of the previous ones, which seems to suggest that the new ones may not, in the end, do the job. I'm not necessarily blaming the theorists, although some seem rather sloppy and overconfident. This kind of thing does happen in most disciplines. But it ought to make us very wary of putting too much faith in them. Everything works well... until the day when it doesn't, and that is the day that really matters.

March 16, 2016
9:51 pm
Norman1
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SavingIsGood said
...
You are right; that was strange. But he recommended fund he is investing in for his children education and for his retirement.

Maybe you did not look hard enough. How and where did you look? http://www.fundlibrary.com?
What I can see in terms of performance is: 2015 - 10.54, 2014 - 12.11, etc. maybe I am looking at wrong measurement? But if you look at 'simple return', you are right; they are all in red.

10.54% in 2015 and 12.11% in 2014. That matches MAW104, the Mawer Balanced Fund, Series A.

It is among the funds listed in FundLibrary: Annual performance of funds from Mawer Investment Management Limited. Its Globe Investor profile is here.

March 17, 2016
1:28 am
Loonie
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Thanks, Norman! This is undoubtedly the fund that was being referred to and is probably the one the advisor recommended. It's also the one that Bill likes, as mentioned in another thread.

I was looking at a page with a different format entirely, and I actually couldn't find any Mawer products in it, no matter which category I selected, as I was looking for them. This puzzled me, and I wondered if the fund companies had to subscribe to it.
I didn't keep the reference, so don't know how I got lost, but thanks for your help. It's a bit more encouraging.

Edited to add:
Actually, the more I look at this, the more confused I get.
I see where FundLibrary lists the 10.54, and I see where GlobeInvestor has that as well.
However, on the Globe page, they say two other things that don't seem to me to be consistent with the first. Maybe you can help me understand this.
It says that the fund is down 1.42% year to date (I interpret that as Jan 1 to Mar 16, 2016).
It also says it's down 0.51% "one year". (I interpret this to mean Mar 16/15 to Mar 16/16, or some similar dates, reflecting whenever they last calibrated it.)
What I can't understand is how that can be consistent with 2015 return of 10.54%. If it only went down 1.42 so far this year, how could that account for the difference between 10.54 and -0.51?
I find these charts very difficult to follow at times.

Also, if SavingisGood is correct that I was looking at something called "simple return" earlier, then what is the difference? I would have thought that a one-year return was a one-year return, regardless. If it were more years, then, yes, I would expect the years to be averaged out or compounded, depending on what type of chart it was. How could the same fund be in the red in one place and up over 10 in another in the same year?

Also, if, in the FundLibrary site, you click on the tab "Short Term", you also get the low figure and a much lower figure for 2 years than you get with the other page.

March 17, 2016
6:09 pm
Norman1
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The one-year and multi-year returns are compound annual returns of periods ending February 29, 2016.

Net asset values of equity mutual fund units, like the Mawer Balanced Fund, are quite volatile in the short term. So, the short term returns fluctuate quite a bit depending on the end points one uses to measure return.

Have a look at the graph of $10,000 invested in the fund from February 2015 to February 2016. There is a -3% to +3.5% swing in the value of the investment over the twelve months!

March 17, 2016
7:34 pm
Loonie
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Sorry, but I am still lost.

You refer to one-year (and multi-year) return as of 29 Feb 2016. At the moment, I am only looking at one-year, and I don't know which figure to rely on..

Are you saying there are two different end points at play for one year which are being referred to here? Are you saying that if the end point is Feb 29, that this gives a radically different result from some other one-year end point (such as Dec 31,2015?)

Which do you consider that the 10.54 and -0.51 refer to?
Is there some reason why one of these figures would typically be more rosy than the other?

Thanks.

March 17, 2016
8:18 pm
Norman1
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Loonie said
...
Are you saying there are two different end points at play for one year which are being referred to here? Are you saying that if the end point is Feb 29, that this gives a radically different result from some other one-year end point (such as Dec 31,2015?)

That's right: There are two different pairs of endpoints and the different pairs give very different results.

The return numbers on the Fund Library ANNUAL page for 2015, 2014, 2013, and so on are the calendar year returns, from Dec. 31 of the previous year to Dec. 31 of the given year.

The 1-year return numbers on the SHORT-TERM page are the return over the last twelve complete calendar months. Currently, those are the twelve calendar months ending with February 29, 2016.

Which do you consider that the 10.54 and -0.51 refer to?
Is there some reason why one of these figures would typically be more rosy than the other?

Thanks.

10.54% is the return for calendar year 2015. -0.51% is the return for the twelve calendar months ending February 29, 2016.

That the 2015 calendar year return of 10.54% turned out to be much more rosy than the -0.51% return over the twelve calendar months ending February 2016 is just random chance.

March 17, 2016
11:09 pm
Loonie
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Thanks, Norman. That really helps.

So, while past years for this fund, based on calendar year, have been very positive, they could also have been lacklustre if the year had ended in, for example, February, instead - at least for this past year.

In addition, by fiddling again with that graph, it looks like the gains in calendar 2015 were really in the first 2 months. Since then, not much happening, but a well-timed spike at the end of December significantly improved the picture for the calendar year.

People have obviously done well with this fund, but of course one never knows what is coming next. It does illustrate that you really have to look at results over longer term.

March 18, 2016
10:09 am
SavingIsGood
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Norman1 got it right! Well, somebody did take time to verify my statement. Thank you for your effort.
Mawer has one even better performing but younger fund managed by the same person MAW130.
But I am very confident in MAW104 with low MER, total net asset of $1.5B, established in 1988. Boring, as they say...

Somebody mentioned 'results over the long term'. Unfortunately that does not mean nothing. Remember Consumer Distributing. Fantastic company selling small appliances and everything electronics through catalogs with no show rooms? You would expect it to last forever but it bite a dust most likely due to management greed...
So what we have now? Bestbuy which bought everything it could to offer basically garbage. Now they started selling diapers, baby cribs, watches, pots and pans... what is next? Dildos, sex toys, car parts, guns. Instead of focusing on electronics they want to have hands in everything. One aliexpress is enough...
But I digress... Past performance means nothing; that is just an indicator how fund is managed - does manager gambles with your money or sticks with the plan.

You can have Mawer through the Bank or open account at Mawer directly. If you open account there is no fee to buy/sell units of your preference. Through Bank you have to pay trading fee when selling... I go through the Bank, for the time being as do not plan to sell in the next 10-15 years.

March 18, 2016
2:07 pm
Bill
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Note you need at least $50K for an account directly with Mawer. Probably about $5K at the discount broker.

March 18, 2016
6:23 pm
Norman1
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Some discount brokers, like Scotia iTRADE and BMO InvestorLine, don't charge any redemption fee on mutual funds after one holds them for at least 90 days.

March 19, 2016
9:35 am
Norman1
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Loonie said

Thanks, Norman. That really helps.

So, while past years for this fund, based on calendar year, have been very positive, they could also have been lacklustre if the year had ended in, for example, February, instead - at least for this past year.

In addition, by fiddling again with that graph, it looks like the gains in calendar 2015 were really in the first 2 months. Since then, not much happening, but a well-timed spike at the end of December significantly improved the picture for the calendar year.

People have obviously done well with this fund, but of course one never knows what is coming next. It does illustrate that you really have to look at results over longer term.

Changing the starting month of the twelve-month periods only affects individual periods. There is no difference over multiple adjoining periods. Any better months at the start of one twelve-month period are simply moved to the end of, and improve the results of, the previous period.

This table shows the monthly returns of the Mawer fund along with three different twelve-month returns. The one-year results hide a lot of volatility. Having March-February one-year periods instead of calendar year January-December periods would just shift the great January 2015 and February 2015 months to the previous March-February period:

Mawer Balanced Fund Series A
Simple returns
2015 Jan 4.6% 10.6%    
Feb 2.9% 3.8%  
Mar -0.2% -0.5%
Apr -1.6%
May 1.7%
Jun -1.3%
Jul 3.5%
Aug -2.6%
Sep -1.2%
Oct 2.3%
Nov 1.3%
Dec 1.0%
2016 Jan -1.8%  
Feb -1.3%    
March 19, 2016
12:29 pm
Bill
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The idea with a fund like this is you're in for at least a few years so monthly or even single yearly volatility is of no relevance to me. One way or another you're betting in the world economy casino if you've made the decision to buy a fund like this so you need to take at least a multi-year view to have reasonable odds of success. I guarantee that if you scrutinize the micro-moves of any equity or bond investment you will ALWAYS find at least one reason not to buy.

March 23, 2016
1:02 pm
Loonie
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Very interesting. I appreciate what Norman and Bill are saying.

March 29, 2016
12:18 am
Loonie
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I was going to start a new thread, but, really, this belongs here as it relates directly to the original topic.

Interesting story of retirees who got inappropriate advice. We all know this happens. In this case, the bank in question pulled up their socks, at least temporarily, and made good, under the strain of bad publicity.

However, I am posting it largely because of the other interesting references in the story.
http://www.cbc.ca/news/thenati.....-1.3510125
I don't know how long they leave these stories up, so, apologies in advance if it has gone when you get here.

March 29, 2016
5:15 am
Bill
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They appear relatively sophisticated (have US investments they want to transfer to a Canadian RRSP) and don't look poor. Plus two banks already told them the manoeuvre won't work so they opinion shop until they get the answer they want. Apparently, even after the previous advice from the other banks, they had no interest in contacting CRA to see if this was ok or to do any research themselves. BMO did err and had to pay once this couple ran to CBC. Typical media spin, 100% focus was on BMO, not a word or question re any responsibility these adults had for their own decisions.

March 29, 2016
10:28 am
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There is something very fishy about this story. These people who are not naive 20 year olds received APPROPRIATE advice from 2 advisors, decided not to take that advice, and went to BMO who allegedly gave them incorrect advice which they chose to follow - perhaps in an effort to circumvent paying withholding taxes. In this case, I do think this couple bears some responsibilty. It would seem they consciously chose the route they wanted.
The article is not telling us the whole story - as Bill says "typical media spin".

March 29, 2016
2:36 pm
Norman1
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There's a more detailed CBC Go Public article at CBC (Toronto): BMO financial planner's 'erroneous' advice loses Ontario couple almost $50,000.

The Ratcliffes may not have been that sophisticated. The husband is a US citizen. So, he likely was from the US and it would not be a stretch for him to have assets in a US 401(k) or IRA account.

Apparently, the couple spoke with branch staff from CIBC and RBC and were told there would be substantial taxes to be paid in the US and in Canada.

In contrast, a financial planner at a BMO branch in Belleville gave them a different answer and provided supporting material from the website of a competitor, Pacifica Partners Capital Management! There's a link to a copy of the provided material in the above CBC article. I don't think Pacifica Partners would be too happy with such use of their material.

The wife did ask why only a 20% US withholding tax needed to be paid and no Canadian taxes. She was given this malarkey:

"I asked her [the BMO Belleville financial planner] why it [Canadian income taxes] wasn't a problem," Gloria Ratcliffe told Go Public. "And she said, 'Because BMO is such a big organization, we can do things other people can't do.'"

I don't know if the investment advice the couple received from the BMO Belleville was appropriate or not. For sure, the tax advice they received was incompetent.

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