The Investor's "Must Have" list - Vote for your favorite mutual funds

(Four or so, in no particular order)
Also, name your favorite ETF, if any.

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To keep this organized and understandable, please use something like the following format to describe your preferences:


Name of fund:

• Advantages:
• Disadvantages:
• Interesting 'angle':

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If this thread gets enough interest, I will tabulate the most popular funds in a manner comparable to the "The Flashaholic's 'Must Have' List" by RichS.


Rules: Please keep to the topic at hand. My intent for this thread is for it to be moderated a little more strictly than normal:

• This thread is about mutual funds that you have a preference for. It is not a venue to talk about your investing prowess and/or luck.
• Please do not use this thread to brag about how you timed an investment perfectly and made a killing and/or avoided losses.
• Please do not use this thread to discuss individual stocks or other investment vehicles - housing, oil futures, etc.
• Please do not use this thread to say whether the market(s) will go up or down.
• Please do not use this thread for making nationalistic or macroeconomic arguments. In regards to China: It is an interesting investment opportunity that has gotten considerable media attention. However, any posts along the lines of "how China is 'taking over'" or some such thing will be deleted. Please feel free to use The Underground for that.

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So, my faves:



Dodge & Cox International Stock Fund (DODFX)

• Advantages: Outperformed its index (MSCI EAFE) since its inception date (May 1 2001), 8.8% vs 3.9% annualized. Low turnover rate (~20%). Relatively low expense ratio (0.65%).
• Disadvantages: None major, in my opinion.
• Interesting 'angle': Overweight in European countries that have high exposure to emerging markets. Modest exposure to emerging markets (23%).

Vanguard International Explorer Fund (VINEX)

• Advantages: Outperformed its index (S&P EPAC Small Cap) since its inception date (Nov 4, 1996), 10.4% vs 6.1%, annualized. Low expense ratio (0.45%)
• Disadvantages: Moderately high turnover rate (52%). High volatility (international small cap fund). High minimum investment ($25k). Relatively underweight in emerging markets (~11%)
• Interesting 'angle': One of the worst-performing Vanguard funds for 2008, but one of the best-performing for 2009. This fund had been 'closed' for years prior to reopening for new investments in late 2008.

Vanguard Emerging Markets Index Fund (VEIEX)

• Advantages: Provides exposure to emerging markets. Very low turnover (~12%). Low expense ratio (0.40%)
• Disadvantages: High volatility. One of the few Vanguard funds with a purchase fee (0.50%).
• Interesting 'angle': 'Admirial' shares now available at only $10k (w/ 0.27% expense ratio). 18% China exposure.

T.Rowe Price Africa & Middle East Fund (TRAMX)

• Advantages: A "Frontier Market" fund which provides exposure to a niche subset of emerging markets: the Gulf States and Africa.
• Disadvantages: Underperformed its index by approximately 6.5% annualized since inception (Sept 4, 2007). Relatively high turnover (~95%). Relatively high expense ratio (1.6%)
• Interesting 'angle': High exposure to resource-rich Sub-Sarahan countries which are of considerable interest to resource-intensive Chinese manufacturers.

ETF: Guggenheim China Real Estate (TAO)

• Advantages: An unmanaged index ETF that provides exposure to the high-growth Chinese real estate market. Modest expense ratio (0.65%) for such a niche product.
• Disadvantages: As a REIT, it must distribute nearly all of its income as dividends, and cannot retain earnings vis. long-term capital gains. Very dependent on the financials sector. Highly volatile.
• Interesting 'angle': One of the very few available financial products for investment in this sector.

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In conclusion, I would very much like to hear other folks' thoughts and/or insights on this topic. At last count, there are something like 10,000+ mutual funds out there, and while I attempt to follow my favorite fund companies (Vanguard and Dodge & Cox), it's a very complex field and I know there many worthy passively- and actively-managed mutual funds out there worth talking about.

So, which mutual funds do you like? :huh:

Portfolio 21 (PORTX)

• Advantages: Invests 100% in socially responsible companies based on a series of selection criteria. Low expense ratio.
• Disadvantages: Its not a special purpose (market segmented) fund, so its not as easy to portfolio balance.
• Interesting 'angle': The selection criteria leave a variety of companies about half in the US and most of the rest in Europe. While not 'inflation protected' per se, the value goes up when the dollar goes down.

Canadians have major problems buying US mutual funds and vice versa.
But there are a lot of Canadians in this forum so here goes.

PH&N (Philips Hager and North) Dividend Income Fund
Advantages:
Only buys stocks that pays dividends 2X the TSX average. Portfolio consists of companies that actually make money and pays out the profits as dividends.
If the stock market goes down 10% the stock value of this fund goes down 10%. But dividends increase the value of the fund 5% so the fund only goes down 5%.
Disadvantages:
'Financial advisors' used to avoid this fund because they get no commission. Have to buy direct with a $25,000 minimum. The Royal Bank has bought the company and the fund is now available through the Royal Bank.
Interesting angle:
US investors can use this approach by looking up and buying a basket of 'Dividend Achievers' stocks. An explanation of 'Dividend Achievers' here:
http://www.indxis.com/DividendAchievers.html
Vanguard has made it easier with
Vanguard Dividend Appreciation Index Fund
and
Vanguard Dividend Appreciation ETF
Saves you going out and buying all 50 stocks in the index.

CI Signature Dividend-X Formally the BPI Dividend income Fund.
Advantages:
Holds mostly preferred shares so are less affected by the stock market ups and downs. Dividends are taxed the least in Canada (vs capital gains or interest) so if held outside an Registered Retirement Savings Plan the tax on yearly distributions is minimal.
Disadvantages:
Growth is mostly from reinvested dividends so is slow.
Interesting angle:
Rule of thumb - invest your age in fixed income, the rest in stocks. This fund can be considered tax advantaged fixed income for Canadians.

BERKSHIRE HATHAWAY
Advantages:
Canadians can buy it on the NYSE.
Managed by one of the best money managers in the world.
Disadvantages:
Initial cost.
Profits from it do not qualify for Canadian tax laws breaks. Not a problem if inside an RRSP.
Interesting angle:
Not a mutual fund but a basket of diverse stocks just like a mutual fund.

Other thoughts
I repeat:
Rule of thumb - invest your age in fixed income, the rest in stocks.
Reason: As you grow older and older you have less and less time to recover from any losses. After you retire you can not afford to lose any money.
In Canada GICs (CDs in the US) are insured for up to $100,000. So a 5 year ladder of GICs or a 10 year ladder of Government of Canada bonds keep your capital secure.
I would stay away from other fixed income instruments at this time. Asset Backed Commercial Paper (those bonds backed by sub-prime mortgages) show some fixed income products are more dangerous than stocks.

Are you allowed to buy ETF's (exchange traded funds) in Canada?

hkfrost said:

Are you allowed to buy ETF's (exchange traded funds) in Canada?

Click to expand...

Slightly off topic.

Any ETFs traded on the TSX, NYSE or Nasdaq can be bought in Canada.
But ETFs are treated differently by the tax system depending on whether you buy a Canadian ETF or US ETF. The same rules apply to stocks.

There is a withholding tax by the US government. It is a pain to get the money back. This is waived if inside your RRSP assuming your broker did all the right paperwork.

All money coming out of your RRSP is taxed as income so it does not matter what you hold in there.

Outside your RRSP though:
Capital gains and dividends from foreign sources are treated as foreign INCOME and taxed at the highest tax rate.
Capital gains and dividends from Canadian sources are taxed at a lower rate because the Canadian companies have already paid taxes on their earnings.
So while a US ETF may make more money gross, after taxes it will be a very different story. There are Canadian ETFs that trade on the Toronto Stock Exchange.