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Any ideas for Grandmother- Looking for monthly income?


kyleholmes
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Hello Boardmembers,

 

This is not my speciality so figured would as if anyone had any good ideas for me. My 75yr old grandmother is looking for monthly income with of course safety of principal. I have a few ideas, but are there any good, stable(she can't handle volitility!) Canadian(Wants to keep in Canadian currency) Income Funds, investment funds, etc. that would give her a decent monthly income without 'reaching for yield' unintelligently that anyone knows of?

 

Any ideas would be appreciated!

 

Thanks,

Kyle

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Buy GM Bonds.  Just Joking.  I beg you not to listen to 95% of Financial Advisers.   Personally I try to earn investors attractive risk adjusted absolute returns, which is code for: smart investing with the goal of doing better than the general market.  Therefore, I do not feel adequately competent to address your question as it relates to investing strictly for income-though I have some ideas.  I suggest you contact Tweedy Browne (tweedy.com).  They have a relatively new fund that focuses on income and should do very well for your grandmother, and they also have other options.  Though their high dividend yield fund is relatively new, they have operated a few large private accounts on the same basis for many years which have done very well.  Christopher Browne, the son of the founder of Tweedy Browne (which was initially a brokerage firm many years ago,) is one of the most honest money managers in the business and you can be comfortable that his group will put your interests 100% before theirs.  If they feel you have a better option that suits your needs outside their firm, they will tell you so.  They however are New York based, but I'm sure they can accommodate your currency needs.

 

Best of Luck.

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Kyle,

 

It depends on what her yield expectations are. A few months back, Cdn fixed/reset preferred shares (issued by the banks and lifecos) would have done the job very nicely. Many of them were issued at an initial fixed 5-year yield of 6.5% (which with the dividend tax credit advantage translates into a interest equivalent yield of about 9%).

 

The nice thing about these pfds, unlike the straight perpetuals, is that the dividend rates reset at 5 year intervals at historically high spreads to Govt bond yields which alleviates the interest rate risk to the holder (important if you are concerned about inflation going out).

 

I should point out that even these sold-off by about 20% during the market meltdown earlier this year so there is no guarantee of low volatility - but that was a highly unusual time when everything was being thrown out indiscriminately. These fixed resets have rallied with the markets since then and I am not sure what they are yielding now (probably around 6% still).

 

I think the biggest risk with them is that they get called by the issuers once the credit markets normalise and spreads tighten in 5 years time - then you will may have a reinvestment problem.

 

 

 

 

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