Canadian Shareowners Association

[bill2009]

Does anyone here use this service? It apparently offers pooled buys and partial-share-drips.

I have separate full-service and discount brokerage accounts but I am attracted to CSA for a long term dividend portfolio build because of the low cost trades and quite frankly the limited stock selection and good analysis tools seem like a help.

https://www.shareowner.com/

[yielder]

Does anyone here use this service?

Yes. See http://www.dividend-growth.org/CSA.htm

I'm also a huge believer in the stock analysis techniques they and the NAIC use. If you're a long-term investor, this is how you want to go about it. Be warned though - it's about as boring and sexy as watching two tree sloths mate.

Mike

[bill2009]

Thank you. That web site was actually what got me interested - I didn't recognize your name.

[martingale]

I use it also. I care rather less for their stock selection methods; but I do use them to dollar cost average into ETF's. I have a "gold plan" set up in which I buy a basket of ETF's four times a year for $29 each time. Since there are more than four ETF's that I'm interested in buying it's an outright win.

My only gripe is that they don't carry the vanguard viper ETF's.

[yielder]

I care rather less for their stock selection methods;

I'm curious why?

Mike

[martingale]

I care rather less for their stock selection methods;

I'm curious why?

I'm not a believer in "great stocks" I guess; I'm not adverse to buying risk. I'm vaguely interested in value stocks since there's some research into that indicating that they have anomolously higher returns, but I'm not stuck on that either. My primary goal is to gain exposure to as many different asset classes as I can, and in this respect shareowner falls down--their selection method kicks out several important asset classes.

Nevertheless, I see them as a good way to dollar cost average into a bundle of ETF's. I just wish they carried the cheaper ETFs rather than the ones they do.

[yielder]

I'm not a believer in "great stocks" I guess; I'm not adverse to buying risk. I'm vaguely interested in value stocks since there's some research into that indicating that they have anomolously higher returns, but I'm not stuck on that either. My primary goal is to gain exposure to as many different asset classes as I can, and in this respect shareowner falls down--their selection method kicks out several important asset classes.

CSA's definition of a great stock is one that has smooth earnings and eps growth over an extended period of time - 10 years. If one is a stock picker, ISTM that's not a bad place to start. It's arguably preferable to a stock that has erratic earnings and eps growth over an extended period of time.

CSA doesn't fall down on asset class diversification. It simply isn't part of their specific orientation - stock picking. They don't reject asset class diversification. They simply don't address it. Their selection method doesn't kick out several important asset classes; it's a stock picking method not an asset class approach.

As an indexer, I can understand why you'd "care rather less for their stock selection methods"; you'd care rather less for any stock selection methods. However, to specifically focus on their stock selection method suggests that you should be able to identify its short comings.

CSA doesn't specifically advocate growth or value. They advocate buying great stocks, as defined above, when they become cheap and they provide a simple methodolgy that allows the investor to define cheap by assigning a PE and a future growth rate.

By their definition of a great stock, one looks at stocks like JNJ, ATD.SV.B, and TD.

Are they value or growth? I don't know unless I want to apply some of the mechanical rules. Can they be identified as cheap, fairly value, or expensive? Definitely. Are they of similar risks? Definitely not. Should that affect the assessment of value? Yes.

If one is going to reject the CSA (and the NAIC) approach to stock picking, I challenge anyone to find a better approach. "To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What's needed is a sound framework for making decisions and the ability to keep emotions from corroding that framework." This is the second paragraph to Warren Buffet's preface to The Intelligent Investor: The Definitive Book On Value Investing, Revised Edition. The CSA/NAIC approach is that solid framework and the analysis tool they sell (you can execute in a spreadsheet) goes a long, long way to dealing with the emotion problem.

Mike

[dakota]

Thanks for the post Mike. I looked at the video and thought it was interesting. I was going to open a new account with TDW (to make them even richer ) but this may be worth looking into. I've started to systematically withdraw from my RRSP and need a place to put the money. This may well be it.

BTW I have seen some comments about their software being somewhat difficult to navigate. How did you like it?

[yielder]

BTW I have seen some comments about their software being somewhat difficult to navigate. How did you like it?

Why not download the demo?

Mike

[martingale]

I challenge anyone to find a better approach

That's a wonderful word, "better". Every approach to picking stocks is better than any other--you just have to establish what your values are. If you want the highest long run return then the best way is to invest only in companies that are on the verge of bankruptcy. It'll be a bumpy ride, but over a long enough period of time you will get the highest available return.

Companies with low volatility, such as you are picking out, will be better for someone who cannot afford to take such risks. In exchange, you'll get a lower return. In other words, the return you'll earn is determined by your level of risk--this selection method picks out a particular risk level and earns the corresponding return. Of course you may also value the dividend income stream in its own right, which is another kind of better, depending on your circumstances.

There's another way to manage risk, though, and that is to play around with the ratio of stocks to short-term bonds in your portfolio. You could hold fewer bonds, but take a more conservative equity position, and wind up with the same overall risk as someone with a less conservative equity portfolio but more bonds.

[martingale]

Two asset classes that CSA is lacking, just off the top of my head, are precious metals and energy stocks. Neither of those ever have long-run stable earnings and so CSA's selection method kicks them out.

Nevertheless it's important to have exposure to these asset classes, despite their overall poor showing--especially the metals. The reason why is their behavior during a downturn: they tend to go up. That provides you with funds to buy cheap assets at a time when everything else--including your bonds--has tanked.

I'd be much happier if CSA just provided access to the top 60 stocks on the TSX by market cap and let me choose for myself (I'd choose them all, in proportion by market cap!). I realize they can't do that for the US market and so I forgive them for picking out stocks there. Meanwhile, I'll stick with my index ETFs.

[yielder]

If you want the highest long run return then the best way is to invest only in companies that are on the verge of bankruptcy. It'll be a bumpy ride, but over a long enough period of time you will get the highest available return.

Not according to this, page 6. Not only is the return higher but the volatility is lower.

CSA's definition of a great stock will typically apply to S&P's A+-rated stocks. If you focus on these kinds of stocks regardless of whether they have an S&P rating, you will likely have similar results to the S&P study.

Every approach to picking stocks is better than any other--you just have to establish what your values are.

OK, if you are looking for returns that exceed the index for the same risk, this is a better approach.

I'd be much happier if CSA just provided access to the top 60 stocks on the TSX by market cap and let me choose for myself (I'd choose them all, in proportion by market cap!).

You'd gain the 17 bps but have one hell of a time maintaining the weighting. 17 bps seems a good deal for a simpler portfolio.

Mike

[yielder]

Two asset classes that CSA is lacking, just off the top of my head, are precious metals and energy stocks. Neither of those ever have long-run stable earnings and so CSA's selection method kicks them out.

These aren't asset classes; they're industry sectors within the equity asset class. CSA's stock selection method has nothing to do with the index funds that they offer. In fact, the current list suggests that they are offering index funds for the classic reason of constructing asset class portfolios. The increased product offering suggests they are recognizing the slice & dicers as well.

Mike

[martingale]

These aren't asset classes; they're industry sectors within the equity asset class.

I think of distinct classes of equity as distinct asset classes. You apparently think otherwise. I'd rather not quibble over terms.

they are offering index funds for the classic reason of constructing asset class portfolios.

Yes, and it's a wonderful way to purchase ETFs. However, in the REIT and energy sectors in particular it doesn't make sense to purchase those ETFs, they contain so few securities that it is cheaper to buy your own index via direct purchases of the underlying shares. In the case of the energy iUnits, you only really need to purchase the top three or four.

It would be much more fun if CSA made the top couple of stocks/trusts in iREIT and iEnergy available for dollar cost averaging. However, owing to their selection rules, they don't. So I say they fall down in this department (I called it the asset class department, you can call it something different.)

[jacko]

Deleted.

[martingale]

And yet trusts are not an asset class?

Sorry, perhaps I didn't express myself clearly. What I mean is that, to me, if an oil corporation hires a lawyer and rewrites its charter so that it becomes a trust instead of a corporation, I don't think it has become a different asset class. I think the entire value is still derived from the underlying oil operation, no matter what legal structure is draped over top of it. Sure there are differences, especially tax-wise, but I think it's absurd to list trusts as a separate asset class on an asset allocation chart. There's no reason to think that oil trusts and food service trusts will have the same good and bad years--aside from some legal mumbo jumbo they are utterly unrelated.

[yielder]

This is the current list of ETF's available through CSA. Any combination from one through all can be bought using a systematic dollar cost averaging approach for a total commission of $29 for each "trade". For example, anyone buying XGV, XIC, SPY, and XIN four times a year would pay 4x$29 = $116 vs 4X$29x4 = $464 at TD Waterhouse. Dividends rec'd in a CSA account are fully re-invested (fractional shares) at no cost.


Canadian Bond-Fund

Gov. of Canada 5yr Bond Index (XGV)
Canadian Bond Broad Index (XBB)

Canadian Equity-Fund

S&P/TSX 60 Index (XIU)
S&P/TSX 60 Capped Index (XIC)
S&P/TSX MidCap Index (XMD)

Canadian Sector

S&P/TSX Energy Index (XEG)
S&P/TSX Financials Index (XFN)
S&P/TSX Gold Index (XGD)
S&P/TSX Information Tech (XIT)
S&P/TSX iREIT Index (XRE)

Foreign Bond-Fund

Lehman U.S. Aggregate Bond Index (AGG)
Lehman U.S. Treasury Bond Index (TIP)

Foreign Equity-Fund

Dow Jones Industrial Avg. (DIA)
S&P 500 Index - US$ (SPY)
S&P 500 Index - C$ (XSP)
S&P MidCap 400 Index (IJH)
S&P SmallCap 600 Index (IJR)
NASDAQ-100 Index (QQQQ)
S&P Latin America 40 Index (ILF)
MSCI United Kingdom Index (EWU)
S&P Europe 350 Index (IEV)
MSCI Germany Index (EWG)
MSCI Japan Index (EWJ)
FTSE/Xinhua China 25 Index (FXI)
MSCI Emerging Markets (EEM)
MSCI International Index - C$ (XIN)

[Bylo Selhi]

Some comments/questions...

Alas, nothing from Vanguard, nothing broader than S&P500 for the US, nothing to slice and dice, and no EFA (US$ EAFE)

systematic dollar cost averaging approach for a total commission of $29 for each "trade"

So if I were to make irregularly-timed or irregular amount purchases of several ETFs at the same time would I be charged a separate $29 fee for each ETF?

How hard is it to transfer (presumably whole only) shares to a big-bank broker? IOW, using your comparison with TD WH, would it be practical to transfer shares once a year to TD WH (and transfer dividend cash from TD WH back to CSA)?

Does CSA offer separate US$ accounts for US ETFs and stocks?

[yielder]

Alas, nothing from Vanguard, nothing broader than S&P500 for the US, nothing to slice and dice, and no EFA (US$ EAFE)

They've only fairly recently started offering ETF's, probably in response to flavour of the week demand. Slicers and dicers are a relatively small group so the demand might not be there for smaller slices.

So if I were to make irregularly-timed or irregular amount purchases of several ETFs at the same time would I be charged a separate $29 fee for each ETF?

The whole point of CSA is to encourage systematic savings/investment regardless of market direction, ie, no timing. You only get the pooled trade commission under their Gold plan. This plan and the Silver and Bronze plans all have lower commissions because the orders are pooled and executed on specific days of the month. If you want immediate buying/selling, then you will pay $29/trade like TDW.

How hard is it to transfer (presumably whole only) shares to a big-bank broker? IOW, using your comparison with TD WH, would it be practical to transfer shares once a year to TD WH (and transfer dividend cash from TD WH back to CSA)?

As easy or as hard as transferring in from any broker. Whole shares only. The fractions only exist on CSA's records. The custody accounts hold only whole shares because that's all that companies issue. I suspect if you do a lot of transferring in and out, CSA might refuse your account. They're a pretty low cost operation with minimal staffing overhead so this would cost them money.

Does CSA offer separate US$ accounts for US ETFs and stocks?

Hard to tell. There's a sample account

here.

[martingale]

They've only fairly recently started offering ETF's, probably in response to flavour of the week demand. Slicers and dicers are a relatively small group so the demand might not be there for smaller slices.

The trouble is what is missing is the BIGGER slice. The Vanguard total market and the Vanguard S&P 500 ETF's are glaring omissions. Instead they only have SPY, which has a higher MER than the Vanguard S&P 500. Maybe you can argue for SPY instead of the Vanguard version based on something, but the omission of VTI is troublesome.

Does CSA offer separate US$ accounts for US ETFs and stocks?

No; or at least, if they do I don't know of it. So far this hasn't been a problem for me because I only buy, I never sell. I do use CSA but I do not use it exclusively because of what's missing.

Another annoyance is that for an RRSP account they never waive the administration fee no matter how much money you have invested. That's $59/year (outside the RRSP). So, I have it set up to run six times a year. That means I pay them a total of $233 ($29 * 6 + $59) to average me in to a basket of ten securities, or effectively $3.88 per trade. Actually, since the $59 is after tax dollars, call it $272 assuming a 40% marginal rate.

The alternative is to save money in a fund all year and then execute 10 separate $29 trades to buy into these ETFs which would cost $290 (plus part of a year's MER on the fund, and any other fund fees). In my estimation it is not worth running every month with CSA because then it would cost $407 which is more than averaging with a fund and then making a once time purchase.

If you are cheaper still you can buy in four times a year instead of six and get your total cost down to $175 ($214 at 40% marginal). Obviously if you are interested in direct purchase of the stocks they offer so that you are buying more than 10 each pop it becomes a much better deal.

[yielder]

Changes. Still a good deal. Just not as good as the previous $29. Although the $9/single trade is a great deal better than the previous $29 and way ahead of the everyone except Interactive Brokers.

Added: It looks like they're in the middle of updating the site. Screens are changing almost from click to click and there are recurring and non-recurring error messages.

[Bylo Selhi]

Changes.

One has to be a member to view that. You might want to cut and paste for the rest of us.

[Shakespeare]

??? I could see the page in Mozilla.

[Bylo Selhi]

??? I could see the page in Mozilla.

Hmmm... It's working now for me too (using Firefox.) Before I was getting an Internal Server Error. I assumed that because it was an https page that access was by login only.

[yielder]

Hmmm...

Note my added comment up thread.