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Rebalancing my investment portfolio

Now that I’ve had a few days to go over the recommendations put forth by the financial advisor, I can share with you what he has told me about my investment portfolio. Please read my previous post, “Financial advisors: do you have one?” or my two posts on Moneyville about my experience with my financial advisor: “Why I decided I needed a financial advisor” and “How I heading for Freedom 55.”

First, here’s a background of what I’m invested in:

Holdings in TD Mutual Funds (mostly e-series): CDN Money Market, Canadian Index-e, U.S. Index-e, European Index-e, Japanese Index-e, CDN Bond Index-e, International Index-e, TD Dividend Growth.

  • Asset allocation
    • 91.7% stocks
    • 2.7% bonds
    • 5.6% cash
  • Geographic allocation
    • 51.6% Canada
    • 24% U.S.
    • 24.4% International

I learned that while my geographic allocation is good, my asset allocation is too risky. The financial advisor recommended rebalancing to 70% stocks and 30% bond funds, and advised that my portfolio is over-diversified. For example, the allocations contained in both the European and Japanese index-e funds are contained within the International index-e fund.

He also¬†called me out on investing in the Dividend Growth fund, which is boasting a lame 2.03% MER. :) I always meant to take care of that, but you know. Things happen. That was the original fund I held when I first opened up my mutual funds and hadn’t yet invested in the e-series funds. And as for the CDN Money Market fund, that was a left-over “placeholder” fund for when I was taking out my money for the Home Buyer’s Plan. I meant to re-distribute back into the e-series funds, but had problems because my investor profile wasn’t in sync with what I wanted to invest in. Then I got frustrated, and just left it.

The financial advisor told me that I should simply my portfolio from 8 mutual funds down to just 4, and suggested this allocation:

  • 20% Canadian Index-e
  • 25% U.S. Index-e
  • 25% International Index-e
  • 30% CDN Bond Index-e

Based on my $80,000 projected income this year, I’m saving 13% of my gross annual income into my Retirement Portfolio (which is around $400 bi-weekly broken down into $300 RRSP/$100 TFSA). The financial advisor told me that if I really want to retire by the age of 55, I will probably need to start saving more aggressively. He suggested I might need to go higher than 20% of my gross annual income. I already knew I wasn’t saving enough, but hearing it from somebody else is still a little disheartening. I’m already almost 30 (maybe), and my goal retirement age is only 25 years away.

As soon as I max out my Emergency Fund at $10,000 (I’m at around $7,000 right now), I will funnel that cash ($100 bi-weekly) into my Retirement Portfolio. That will bring me to around 16%, which isn’t ideal, but it’s a good first step. Once I’m there, I’ll figure out my next move.

Financial advisors: do you have one?

Most of you know that I really want to figure out what I should do about my (lack of an) investment strategy. It’s been really bothering me over the last 6 months. In fact, a goal of mine for November was to read 10 articles about investing. Well, I figured I’d be reading about mutual funds, ETFs, stocks, and some sort of basic strategy. But instead, I found myself researching investment advisors.

I personally think an investment advisor is the best way for me to go. I decided to look into a “fee-only” advisor, because I’m confident that – once given a plan – I can execute it myself. And, because I have a small portfolio that doesn’t need constant managing by a professional. Fee-only advisors are expensive though. Through my research, I saw them charge anywhere from $100-500 per session. To get an analysis of your entire financial well-being, as well as a strategy for the future? Even though it might seem expensive, I feel like it’s completely worth it.

Even though, up until recently, I didn’t believe in paying someone for financial advice. I figured I was young enough to do it on my own through trial and error, and besides, I had the basics down. I knew I was invested in the right mutual funds, and I had a basic understanding of what I needed to do. But as I creep closer to 30, I realize that I need a professional to help me. Nobody has ever seen my investments before. I need validation and a plan.

Now this is what I call perfect timing: earlier this month, my editor at the Toronto Star asked if I wanted to be the Moneyville guinea pig and get some complimentary advice from a fee-only financial advisor. I said yes, of course. And I’m excited to share what I’m learning with all of you soon.

Have you ever considered hiring a financial advisor?

My mutual fund problem with TD Canada Trust

I am so irritated with TD Canada Trust. In fact, I’ve had this problem with them since 2007, but I haven’t done much with my account until the past year or so, when I’ve wanted to switch up my mutual funds and buy a bit more aggressively for the long term.

Basically what is happening is, every single time I want to purchase higher risk mutual funds, I get the following decline e-mail:

Order # XXXXXX-XXXX-XXXXX

Dear Investor,

[…] We have not fulfilled your request because it may not be suited to your current investor profile. We have based this assessment on the information you provided us regarding your personal circumstances, investment knowledge, objectives, time horizon and risk tolerance. Not only do we want to help you make the best investment decisions, we are required to assess the suitability of all mutual fund¬†account transactions.

Please contact a TD Investment Services Mutual Funds Representative to review and update the information we have regarding your Investor Profile.

Thank you,

TD Investment Services Inc.

The fact that I have to call in to fund my mutual funds is bad enough – especially when TD Canada Trust’s website states: “create and manage your own online portfolio or have us manage it for you. The choice is all yours.” Well apparently I don’t get a choice because I am not being allowed to buy the investments I want to buy.

When I called into customer service this morning, I got routed to a call centre in India. And fine, I get it, that’s what a lot of companies are doing. But I really could not understand what he was saying, and that’s a problem when it has to do with my money. He made me go through 10 or 11 questions to update my Investor Profile – which would be okay except that they make me go through those exact profile questions every single time I call in. It is a long process. And when I asked him to complete my transaction, he refused! He said I wasn’t allowed to do it online, and he wouldn’t do it for me. He said the mutual fund was too risky.

I asked him if there was something I need to do in order to have the freedom to buy whatever mutual funds I want to buy, and he said no. He said every single time I buy something that is high risk, I will get a decline e-mail and have to call into customer service, where they will also decline the transaction. This has happened 3 times in the past year. Do I need to switch over to a TD Waterhouse account? Why aren’t I able to spend my money on what I want?

Maybe I should make an appointment with a financial advisor.

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