[Canadian] Simple investing with CIBC index funds?

[Le Barbu]

MIL asked me for investing advices for TFSA, RRSP and taxable. Everything was into GICs since 3 years (widowed) and she is ready to invest better now. No intention to transfer in another bank or self brokerage at CIBC.

CIBC have a "low fees" index funds line-up for investor who buy >50k$/funds. These funds are in the 0.4% MER range. The maximum exposure to stocks is about 25% (I would go up to 75% but, 25% stocks is better than 100% GICs...) Her pensions (employer + goverment) is in the 35k$ range and house is paid-off (worth 200k$) so, expenses are fully covered by theese including travels and luxuries. Investments are mostly for unknown future expenses (health issues, taking all the relatives to Disney, etc) or just grow inheritance stash!

RRSP worth 75k$, TFSA 52k$ and taxable is almost 100k$

Because of the difficulty level, I tougth about that less than perfect asset allocation: TFSA would be 100% invested in CIB587 (wich is a "balanced" index funds with 45%bonds, 35% Canadian stocks and the remaining 20% is US and Intl' stocks) and the same for the taxable account. The RRSP would go into CIB584 or CIB585 wich are respectively short and aggregate bond funds. The final split would look like this: 75% bonds, 15% Canadian stocks and 10% US & Intl stocks.

This is far from optimal to me but Probably the best I can do within boundaries and far better than 100% GICs or 2.5% MER mutual funds that professionnal financial advisor would push...

Any better idea?

[daverobev]

If she's 100% covered already, why not put it all into the balanced fund? I don't think it matters where you hold the bond fund vs the balanced, if she chose to split as you said.

[Le Barbu]

If she's 100% covered already, why not put it all into the balanced fund? I don't think it matters where you hold the bond fund vs the balanced, if she chose to split as you said.

This could be even simpler (I mean, holding the same balanced funds in all 3 accounts). What I do not really like about this "balanced" funds is the very high Canadian stocks vs US and Intl. Not easy to figure this out when you are used to work with ZCN, XAW, VAB and the like!

[daverobev]

If she's 100% covered already, why not put it all into the balanced fund? I don't think it matters where you hold the bond fund vs the balanced, if she chose to split as you said.

This could be even simpler (I mean, holding the same balanced funds in all 3 accounts). What I do not really like about this "balanced" funds is the very high Canadian stocks vs US and Intl. Not easy to figure this out when you are used to work with ZCN, XAW, VAB and the like!

Yes, but again, not really worth worrying about - if those are the tools you have to work with. Tax treatment of divis is better so in theory, all other factors aside, meh. I wouldn't, given the choice, but with no choice, it'll be ok. The fund will rebalance itself.

[RichMoose]

I noticed basically all of CIBC's "balanced" type funds have enormous relative exposure to Canadian assets. Too bad she doesn't want to broaden her horizons a bit.

On the bright side, it probably doesn't matter much from a longer term perspective. Either way she will outperform GICs. If it were me in your situation and given the limitations, I would recommend she put 100% of everything into the balanced fund as daverobev suggested. It's easy to manage and easy for her to understand.

[Le Barbu]

I noticed basically all of CIBC's "balanced" type funds have enormous relative exposure to Canadian assets. Too bad she doesn't want to broaden her horizons a bit.

On the bright side, it probably doesn't matter much from a longer term perspective. Either way she will outperform GICs. If it were me in your situation and given the limitations, I would recommend she put 100% of everything into the balanced fund as daverobev suggested. It's easy to manage and easy for her to understand.

Thank you Rich Moose,

Anything else than GICs will be considered a victory!

This family use to buy new cars at the dealership every 4 years (trading in the previous car), put a few thousands into GICs (when accountant tell them to use RRSP room) and complain about how expensive everything has became (when they realise they loose purchasing power)!

Otherwise, they are nice people who just suck with money!

[Heckler]

Death and taxes, eh?....

Really, the answer should depend on her age and goals, not yours. 

I'd make sure she has a cash flow plan before talking about allocation and fees.   When does she need how much?  IMO, GICs should be a strong component for stability if she plans to spend it in the next ten years. 

You don't want to have an ex-MIL on your hands if you "lose" all her money when interest rates go up 1% and the $C gets stronger than the greenback.  Then she can't afford to take everyone to Disney

[Heckler]

Thanks for the tip on CIB 587 though!   

http://quote.morningstar.ca/QuickTakes/fund/f_ca.aspx?t=F00000NDM1&region=CAN&culture=en-CA


My parents are heavy on CIB 512 with their CIBC planner who they are happy to have "take care" of them.   They will be getting a comparison of the two from me.   At a glance it looks like the two have a difference of 1% in performance, oddly enough the same number is the difference in fees!

http://quote.morningstar.ca/QuickTakes/fund/f_ca.aspx?t=F0CAN05LVX&region=CAN&culture=en-CA

[Le Barbu]

Does the +1% mer of CIB512 worth the advisor? If someone have a few thousands to invest, it's not an issue but with a couple hundred thousands, I really do not get it! In fact, I do not get the financial advisor thing anymore...since we have the Internet

Another relative in the financial business made a plan for MIL with a balanced fund carrying 2.35% mer! On top of that, he was selling a 100k$ life insurance for 6,500$/year to increase the estate (and probably his commission!)...

Honestly, I do not really care if she choose to stick with GICs or buy CIB587 shares. I want her to know that there is some options at CIBC with low fees and better expected return than GICs

She is 67 now and the 3 pensions are reliable and more than enough for comfortable COL. Investments will probably never be touched but who knows? If she dies in the next 5-10 years, any choice can be a wash. If she lives for another 25 years, the difference could be huge but who really care? Even my sons could be FI at this point!!!