RSP's vs Stocks

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RSP's vs Stocks

Post  Fred on Fri Aug 06, 2010 10:17 am

OK, so I have a bunch of RSP's. I think they are "stable" in the sense that I won't loose much, but they would be considered a long term investment. I also think they perform relatively poorly in comparison to stocks. I'm thinking of selling them and re-investing in something that is still quite stable, but pays a good dividend or something along those lines. Does anyone have any suggestions, recommendations or general comments on the subject?

Fred
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Re: RSP's vs Stocks

Post  Max on Fri Aug 13, 2010 10:08 pm

Yes, those SunLife mutual funds are OK, but you really get a lot of the bad diversification along with the good. These are 100% auto-pilot index funds only with all the management fees of an actively managed fund.

I can see your problem though: Where to find a stable company that pays a good dividend yield and will be more or less safe? It just doesn't exist anymore. All companies are a risk in the current environment.

I like your suggestion of REITs. I have been put off of them because of the income trusts that were doing a return of capital as part of the return (i.e. Ponzi scheme), but if you find a good one, they can probably be a good investment.

Mutual funds vs picking your own stocks is a big question. How much could you improve on the fund portfolio by eliminating a couple of obvious bad performers and adding a couple of good ones? How much better could you time your purchases if you were not forced to earn a return on continuous inflows of cash like a mutual fund is?

Do you assume you can consistently beat the market average by picking your own stocks, or should you pursue extreme diversification in order to match the market average as closely as possible? You wouldn't have much of a forum if you choose the former, so I think you know the answer.

Dump the mutual funds and transfer to a self-directed portfolio. Doesn't mean you can't go back to indexing into the exact same portfolio as the mutual fund, but at least do it in an ETF with much lower fees.

-Eric

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