Papasan Pickle Portfolios - low fee balanced funds, core portfolios, ETF wraps

Papasan Pickles make couch potato investors look motivated !
Papasan Pickle: <noun>, pronounced [papasan] ˈpɪkəl 

Definition: investor who is less motivated than a Couch Potato index investor, but who still wants to manage his portfolio (e.g., avoid high mutual fund fees)

Key features: complacent, sometimes-condiment, cost-conscious

We talked about the BlackRock Balanced Portfolio as a possible Papasan Pickle portfolio. Good thing there are alternatives with lower fees! did a review of 4 popular no-load, direct-to-client fund companies that offer a globally diversified balanced funds. These are actively managed funds with MERs ranging between 0.89% – 1.34%.  As a bonus, each firm provides investors with advice, great for the Papasan Pickle investor who can't peel himself off of his chaise to do his own research.

Here is a comparison of fees:
Leith Wheeler Balanced Fund1.23%
Mawer Balanced Fund0.98%
PH&N Balanced Fund0.89%
Steadyhand Founders Fund1.34%
BlackRock Balanced Portfolio1.55%
Bad wrap - hold the pickles!

Looking at core ETF portfolios instead you can try the iShares Conservative Core Portfolio Builder Fund (XCR) or iShares Growth Core Portfolio Builder Fund (XGR).  Their MERs are 0.63% (yield 2.52%) and 0.62% (yield 2.82%) respectively.  Note, these ETF wraps got a bad rap for wild swings in holdings, too much foreign income, etc:

Trailer fee rebate from Questrade on some balanced mutual funds.
Looking to lower fees even more? You could hold the Mawer Balanced Fund at Questrade and take advantage of the Mutual Fund Maximizer - this program returns part of your funds' trailer fees to you once you cover a certain quarterly amount.  This balanced fund returns 0.135% of the 0.98% MER to you. Over 15 years on $100k, that adds up to $3,300 in savings in the example to the left. Sorry, no trailer fee rebates for the other Leith Wheeler, PH+N, or Steadyhand balanced funds.  You can get higher trailer fee rebates on some good funds like from Dimensional Fund Advisor (core Canadian, US and International equity have 0.90% rebates), but they have no single balanced portfolio fund at Questrade.  More on DFA at Questrade here.

CMHC mortgage insurance for real estate investors

On May 30 the Canadian Mortgage and Housing Corporation says that as of May 30 it will be tightening mortgage insurance.  It will not offer insurance for self-employed workers without proof of income, and it will not offer insurance for those purchasing a second property (investors included).

This move is estimated to affect less than three per cent of the units it insures. And it is meant to support stability in the housing market says CMHC in a statement.  Like earlier moves, it will help temper excessive speculation in the housing market.  Earlier this year CMHC announced that it is increasing its mortgage loan insurance premiums for investors who will hold between one and four rental units.

The premium increase of about 15 per cent for all loan-to-value ranges applies to owner occupied and self-employed homeowners and comes into effect on May 1.
I don't know about you but DIY real estate investing is getting tougher and tougher if you want a good ROI.  We are going to stick with private REITS like Skyline as a great hands off alternative with consistent results:

Earn over 7% with Skyline REIT

Bank of Canada Key Interest Rate Remains at 1%

Key Interest Rate 2004 to 2010

The Bank of Canada will keep the Key Interest Rate at 1%.  It has been 1% since 2010.  Governor Stephen Poloz says he has not ruled out a future cut to interest rates.

This is good new for the REIT investor.  In 2013 the Bloomberg Canadian REIT Index had a total return of negative 5.6% in 2013 -values were down 10.8% for the year but were buffered by distributions.  The prospect of rising long term borrowing costs was to blame.

The Key Interest Rate is the Target for the Overnight Rate. The table to the right shows rates from 2004 to 2010.  The overnight rate is often referred to as the Bank's key interest rate or key policy rate.  It can influence other interest rates, such as for mortgages and consumer loans and mortgages.

Below is a chart of the BMO ZRE equal weight REIT ETF since January 2013.  There have been a 10% rebound since the summer 2013 lows.


Tangerine Orange Key $25 Bonus 40132831S1

Use this Tangerine Orange Key to earn your Tangerine bonus:  40132831S1

New Tangerine Forward Banking account names are: Tangerine Chequing Account and Tangerine Savings Account

Open a new Tangerine Account with a deposit of $100 or more and you can earn a $25 Bonus!

Commercial Property Cap Rate Q1 2014

Click to enlarge

Colliers has released a Cap Rate Report for commercial properties across Canada.

According to Wikipedia:

"Capitalization rate (or "cap rate") is the ratio between the net operating income produced by an asset and its capital cost (the original price paid to buy the asset) or alternatively its current market value."

The Colliers report shows the cap rate for downtown and suburban offices, and for Class A and Class B buildings.  It also shows the trend in rates.

What are these classes?  The SquareFeetBlog offers these descriptions:

Class A. These buildings represent the highest quality buildings in their market. They are generally the best looking buildings with the best construction, and possess high quality building infrastructure. Buildings also are well-located, have good access, and are professionally managed. They attract the highest quality tenants and also command the highest rents.

Class B. Class B buildings are generally a little older, but still have good quality management and tenants. Often times, value-added investors target these buildings as investments since well-located Class B buildings can be returned to Class A  through renovation (facade and common area improvements). They should generally not be functionally obsolete and should be well maintained.

The Cap
Class C. The lowest classification of office building - older buildings (usually more than 20 years old), and are located in less desirable areas and are in need of extensive renovation. Architecturally, these buildings are the least desirable and building infrastructure and technology is out-dated. As a result, Class C buildings have the lowest rental rates, take the longest time to lease, and are often targeted as re-development opportunities.

For other important Cap Rates - click the link: "Cap" takes down Hydra agents at a rate of 1 every 7 seconds!!!.  Check out this elevator scene in the new Captain America The Winter Soldier movie.

Find Equivalent ETFs with Interactive Brokers' Mutual Fund Replicator

Here's a tool that let's you pick ETFs that track your favourite mutual funds!  Use this to get the same, or similar, stock performance but at much lower ETF management fees.

From Interactive Brokers: "The Mutual Fund Replicator finds an ETF(s) whose performance parallels that of a user-specified mutual fund. Once you enter the mutual fund name or ticker symbol, the replicator scans the market and returns the top single and compound ETFs (in the recommended quantity) whose performance most closely follows that of your submitted mutual fund. The Performance Analysis and Return Comparison panels display performance correlation characteristics including the correlation, tracking error and a comparison of management fees."

Below is a screen capture of the application.

Now can you tell me when we can expect to get a real replicator, yes like on Star Trek? Apparently food replicators are in the works already: Business Week 3D Printer Food.  So if you are considering Fidelity Investments' Select Leisure Portfolio (Symbol: FDLSX) which holds stock in McDonalds, Yum Brands, and Starbucks you could maybe replicate the returns and nibble on these fast food related ETFs instead:
  • PowerShares Dynamic Food & Beverage (NYSEArca: PBJ): McDonald’s is 5.3%; Yum Brands (NYSE: YUM) is 5.5%; Papa John’s  (NYSE: PZZA) is 2.9%, Chipotle (NYSE: CMG) is 3%
  • PowerShares Dynamic Leisure & Entertainment (NYSEArca: PEJ): McDonald’s is 5.4%; Yum is 5.1%; Ruby Tuesday (NYSE: RT) is 3.1%; Cheesecake Factory is 2.9%
  • SPDR Consumer Discretionary (NYSEArca: XLY): McDonald’s is 7.6%, Yum is 2%

Heartbleed Bug Protecting Your Financial Account Information

You may have heard about the Heartbleed bug — a security flaw affecting some websites using Open SSL security. Many of your financial sites are safe from this (,,, while others have been patched reportedly (e.g., Intuit Turbo Tax).

But if you use the same login info for multiple sites including a financial site, other non-financial sites may have been affected. And it is a long list of sites that were vulnerable including popular social media sites: Facebook, Instagram, Pinterest, Tumblr, Twitter, Google, Yahoo, Gmail, Yahoo Mail, GoDaddy, Dropbox, Minecraft (I told my kids this last one was evil!).

So to protect sensitive financial information you should consider changing your financial institution login information.  If another non-financial external site has been affected, this will ensure your financial website information and services cannot be compromised.

Investors Group Juggles Portfolio

Investors Group is re-balancing its Alto and Allegro portfolios.  In 2011 they rolled the  Investors Government Bond Fund into the Investors Canadian Bond Fund.  Now the Investors Canadian Bond Fund is being dropped from the Alto Conservative and Alto Moderate Portfolios (-5% each).  It is being replaced by the Investor's Canadian High Yield Income Fund.  Funny - our advisor told us to stay away from the high yield fund because it was too frothy.

In Allegro Portfolios the Investors Mortgage and Short Term Income Fund is being cut 5% and is also being replaced it seems by the IG Putnum U.S. High Yield Income Fund.

With a 1.8% MER on the bond fund it is no wonder it has to be replaced with something that puts earnings in the owners pocket instead.  In comparison, XBB - iShares Canadian Universe Bond Index ETF has a MER of 0.33% and a Weighted Average Coupon (%) (the mean of the coupon rate of the underlying bonds in a portfolio) of 3.83% - that means you keep about 3.5% of the returns.  With the Investors Canadian Bond Fund you split the returns in half with them!

Papasan Pickles! BlackRock Strategic Portfolio Series - Funds of ETFs

Compared to Papasan Pickles, Couch Potatoes are motivated!
Are there any furniture and vegetable combinations that could describe investors in the BlackRock Strategic Portfolio Series Funds of ETFs?  We have "Couch Potato" already for those who want to assemble their own ETF investment portfolios and don't mind buying a handful of ETFs and balancing them from time to time (check out ).

Strategic Portfolio Series Funds investors are maybe "Papasan Pickles" .. its a deeper form of seating, making it harder to get off your behind to get up and make  a few trades. Like Papasan Pickles, Strategic Portfolio Series Funds investors don't have to do anything! 

The Fund seeks to provide its unitholders with a balance of long-term capital growth and income by investing in a diversified and balanced portfolio that is comprised of Canadian and global equity securities and, to a lesser extent, Canadian fixed income securities. The Fund will invest primarily in iShares® ETFs (or other mutual funds) that are managed by BlackRock Canada or an affiliate (the“underlying funds”), but may also invest directly in fixed income securities, equity securities, and cash or cash equivalents.

The BLACKROCK BALANCED PORTFOLIO for example holds these index ETFs to the right.

What do you pay for this bundle?  The Fund Fact sheets shows a management fee of 1.4%.  Compare that to a balanced Couch Potato portfolio.  That is a real ETF portfolio, not the April fool The Couch Potato Mutual Fund that has the same 1.4% MER.  The weighted MER of a Complete Couch Potato portfolio is 0.23% - saving you 1.17% a year, or 26% over a 20 year time horizon.

Pickles portfolios do come out ahead on calories, but that's it.

Couch Potato - 77 calories
Papasan Pickle - 8 calories

So do the math, haul your pickle out of that papasan and love your potato portfolio!