A lot of Canadians own mutual funds because of their ease, comfort with a financial advisor, or a litany of other reasons. Us here at FinancialUproar.com (me and 27 hobos I picked up at the landfill) aren’t here to judge. Sure, we’d like you to invest in low-fee ETFs, but those aren’t for everybody. If you’re going to invest in a fund, put your money in the best ones. Is the TD Monthly Income Fund one of them? Let’s find out.

The skinny

  • Fund name: TD Monthly Income Fund
  • Assets under management: $7.8 billion
  • Minimum initial/subsequent investment: $100/$100
  • Recent price: $21.10/unit
  • MER: 1.48%
  • Other fees: 2% fee to withdraw within the first 7 days/2% switch fee (this fee may be waived, probably if you put your money into another TD Fund

Top Holdings

Note the fund has a 60/40 equity to fixed income split, which is a little more aggressive than the standard 50/50 split you’ll see from most balanced funds. Most of the top holdings are large Canadian banks and other dividend paying blue chips.

Note the fund’s top holdings are very similar to the top holdings of a TSX 60 ETF. Thus, it wouldn’t be particularly hard for investors to just hold that ETF to get equivalent exposure to the Canadian equity market.

Note that the 60% equity weighting includes some preferred shares, which are more like bonds than stocks.

I’m confident a portfolio consisting of a 50% TSX 60 ETF, 40% Canadian bond ETF, and 10% Canadian preferred ETF would get pretty close to the performance of this mutual fund while not charging nearly as much in fees.

Fee breakdown

The 2% early withdrawal fee is nothing to be worried about. That’s in place to protect TD just in case you change your mind. If you pull your money from an investment within a week you deserve to pay for the privilege, tbh. The 2% switch fee is more concerning. The company says they have the right to waive it, but I’m willing to bet they’re not going to if you pull your money out of TD’s asset management pocket.

The fund has a 1.48% management expense ratio, which is pretty reasonable in the mutual fund world. The average fee is somewhere in the 2% range.

Performance

Here’s what the fund has returned over the last 1,3,5, and 10 years, versus all the other balanced funds out there. Note all info comes from Morningstar, which is super helpful when comparing funds.

These are actually pretty solid results. I’m impressed. This is enough to get the fund a 4-star ranking over at Morningstar.

The Globe and Mail offers different return numbers. I *think* they include reinvested distributions, but to be honest I’m not 100% sure.

Finally, we have the return numbers on TD’s fund facts page. These only go up to October 31st, so maybe that’s the reason why they’re different still? I dunno.

One thing that makes it tricky for investors is many of these big funds have various classes of shares that offer slightly different things. It’s hard to compare apples to apples. This *might* be what’s happening here, but returns shouldn’t differ that much. There’s also no explanation why return numbers from Morningstar and the Globe and Mail should be different, since I made sure to compare the exact same class of the same fund.

The overall point is the TD fund has done pretty well compared to peers. If you’re going to own a balanced fund, you could do a lot worse than this one.

Monthly payout

Despite the thing being called the TD Monthly Income Fund, it really doesn’t pay out that much. Morningstar has the annual yield below 2%.

Overall impression

The TD Monthly Income Fund is a pretty solid balanced fund. It has historically beaten its benchmarks and does so while offering a fee that’s a full 25% less than the average Canadian mutual fund. You could do a lot worse than owning this one.

Still, there are some issues. The income coming from the investment (at least what I could find) is hardly impressive. That switch fee isn’t in an individual investor’s best interest either (although I’d bet it isn’t charged when you’re buying funds yourself using a discount broker).

Tell everyone, yo!