Managing your own portfolio, and a Money Fund?

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peter31's picture
Status: Bronze Member (Offline)
Joined: Apr 1 2009
Posts: 34
Managing your own portfolio, and a Money Fund?

Good morning

I have an observation and a question.

Observation: in a recent podcast Chris M commented that if you think you have control over your own investment portfolio, try making some trades and see what happens when the "rubber meets the road".  I did this, and I was quite surprised by the result.  I thought I had 24/7 online access to my portfolio, which I do, er, well, sort of.  Turns out I can access it 24/7 and see how it's doing in considerable detail, but I can only make changes during a fairly short time window in the day, 10am-4pm, because the traders have to be at their desks, the markets have to be open and all my trading instructions have to be actioned manually by a trader.  So if I'm going to avoid losing money in a crash, I have to take avoiding action in advance.  Having said that, it's better than nothing, but I would encourage people to heed Chris' advice on this.

Now the question.  The portfolio is in Canada and it is a tax sheletered retirement portfolio similar to what you would call a 401k in the US, which means that I can move money around within the account fairly freely but I would pay a tax penalty if I took it out.  The investment choices within the portfolio include mutual funds, cash, equities and GICs.  The latter are Guaranteed Investment Certificates in Canada, otherwise known as time or term deposits in other countries.  I am trying to crash-proof my portfolio in advance of what is probably going to happen to Greece and the global financial system.  

The mutual funds in the account were already doing badly, losing a substantial amount of money in the last quarter, my so called financial advisor didn't seem to be doing anything about them so I converted them to cash and used the cash to buy some GICs from  a spread of different institutions at a 5 year rate of around 2.5% per annum.

Most of the money, however, is in something called the MD Money Fund, and it wasn't clear to me exactly what this was, or how safe it was in the face of a financial / banking crash.  So here is my question to my financial advisor, and her reply:


"One more question: what kinds of investments are contained in the MD Money Fund?  When I looked at a description online, it looks as though 72% of the fund is a “cash equivalent” but then there is a list of a large number of Canadian banks.  What is a “cash equivalent” and does this mean shares or some sort of equity in the banks listed?"


"The Money Fund holds things like Cad. Treasury Bills, Term deposits, bonds (both corporate and domestic) as well as Bankers Acceptance notes. The things that you are seeing issued by banks are not shares (or stocks) as these are equities and equities are not held in money funds. The bank issues you see would be things like term deposits, Bankers Acceptance etc.  

 Basically the investments held in money funds are income producing investments, most can readily be converted to cash by the fund managers and there is minimal volatility as they are not tied to the markets the way equities are."

What do people think about this, and does it sound safe to leave the money in there?

Thanks, Peter

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