Funny enough from a guy who manages his own brokerage account since the age of 21 (13 years ago!), I must admit; I left others to manage the money for my children’s tuition. It made sense for a while since I found it easier for me to let someone else take responsibility for these funds. I hired the best to do the job, to make sure my kids could all become doctors if they wanted to…
Why I Invested in Mutual Funds (OMG!)
Yeah… this is what I did… I invested in high fee funds managed by professionals (or so they say! Hahaha!). However, I didn’t do this because I thought the portfolio managers could do a better job than me (we already had a great discussion about this…).
I knew that fees would eat up a part of my returns, but I didn’t find any better investment options for a while considering the way RESPs (tax sheltered accounts to pay for children tuitions) are setup. First, I was putting $225 per month in that account. This makes it hard to buy individual stocks in the first place. Then, there is a 20% subsidy coming from the Federal Government and another 10% from the Provincial Government. You can guess that everything is simple with the Governments and both subsidies are paid at different moments. Managing the account at this point was very demanding and the benefits weren’t important enough.
When you think about it, even if I could generate 5% in return more than a mutual fund, 5% of $3,510 ($225 per month plus the 30% subsidy) is only $175.50. This is why I waited to have enough money in the account before making any serious moves.
Mutual Funds Vs DIY Dividend Growth Investing
When I built my children’s portfolio, I opted for a growth strategy including 75% of my investments in equities (equally divided between small caps, Canadian and American stocks) and 25% in preferred stocks. I did this for three years and decided to compare my results between my retirement account and the RESP account before making a final decision. Guess which portfolio is which between:
3 Years: 8.26% Vs 17%
1 year: -2.85% Vs 10%
Did I beat crush mutual funds over 3 years or did I get whipped?
Here’s the detail return of each year and the answer to this question:
|Mutual Funds||My Dividend Growth Portfolio|
Yeah…. I crushed the professionals for three years in a row!
That was the final argument to convince me it was the right time to switch the holdings to my brokerage account. I opened my account and am now waiting for my money to be transferred. This should take a few weeks. This gives me enough time to think of what my portfolio will look like.
My Next Portfolio will Look Like this…
My children’s tuition fund will be worth about $10,000 at the time of the transfer. I expect to buy 4 maybe 5 companies following my DSR portfolio design. However, since I’m not a beginner investor, I will be more aggressive. At the moment, I intend to initiate positions in 3M Co (MMM), BlackRock (BLK), Apple (AAPL) and Canadian Railway (CNR.TO or CNI for US investors). I might add a fifth company but I’m not sure yet. What do you think?