Q&A With Gordon Pape: Dealing With A Disappointing Fund

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Gordon Pape advises a reader who isn’t happy with an under-performing fund.

Q – I am 83, have invested $100,000 with BMO mutual funds since 2006 (Retirement Conservative Portfolio). I am not very happy with the performance. Should I wait and see or invest in a GIC? Please advise. – Eugene S.

A – I checked out the history of BMO’s retirement portfolios. They were only launched in 2015 according to the documentation I could find, so your money must have been in one of their other funds prior to that.

The Conservative Portfolio is designed to protect your capital, with modest growth potential. The portfolio is weighted towards fixed income securities, with 55.4 per cent in bonds as of July 31. The one-year return to July 31was -0.29 per cent, clearly much less than you would have received from even the most stingy five-year GIC.

With such a short history, it is impossible to predict how this fund will perform over time, although given the current interest rate climate I expect returns will be minimal for a while. A GIC would give you a better return at this point.

The best five-year rate currently on offer is from Home Capital at 3 per cent. It is covered by deposit insurance up to $100,000. However, remember that Home Capital recently experienced a major financial crisis and had to be bailed out by Warren Buffett. If you’re not comfortable putting your money there, look for some alternatives although you wont find as high a rate.

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