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Fund investor focuses on consistency and costs

TONY MARTIN profiles Richard Ackerman, who likes TD's 'e' funds for his RRSP

There's probably a message in the fact that Richard Ackerman, who makes a living by keeping complex computer systems up and running, has chosen the "cheap and cheerful" approach to investing, namely focusing on keeping things simple, and his costs to a minimum.

"I'm not a professional trader, nor is investing a hobby for me," says Mr. Ackerman, 33, who recently completed his masters in computing science at Dalhousie University and rejoined the work force as a systems manager for the National Research Council in Ottawa. "Investing is just a tool to help ensure I have what I need to retire."
How he does it

For his registered retirement savings plan, Mr. Ackerman finds mutual funds make the most sense for tax reasons. He tried his hand at picking out actively managed funds, but found he made the not uncommon mistake of jumping on yesterday's winner.

So he now focuses on consistency and cost. A number of his funds are Toronto-Dominion Bank's "e" index funds. Buy and sell them over the Web -- and get all the related brochures and other bumph on-line -- and you get bargain-basement management expenses. TD's plain vanilla Canadian index fund, for instance, comes with a management expense ratio of 0.85 per cent. The same fund, bought as an "e" fund on-line, has an MER of just 0.31 per cent. "When you focus more on the long term, it seems worthwhile to keep the MERs as low as possible and find a fund with steady, predictable performance like an index or even a value fund."

Outside his RRSP is where you'll find Mr. Ackerman's stocks, but they were mostly sold to pay for his return to school. Still, he didn't get to the ivory tower in time to insulate himself from the tech mania . . . and meltdown. "I was in and out of things, watching CNBC, and following the market with a ticker on my computer screen," he says. "I had a lot of investments that made a little money and then lost a lot of money." He's now chosen to stick with the tried-and-true approach with stock stalwarts such as Bank of Nova Scotia and International Business Machines Corp. Mr. Ackerman says many of the well-off retired people he knows became wealthy not through earning huge sums nor banging out stock market home runs. Their secret? Nothing eye-popping nor overnight: "They just put money into good stocks every month, and reinvested their capital gains and dividends."

One thing he looks for is a steady history of dividend growth. But in addition to being blue chip, these stocks made it into his portfolio because they also fit his long-term, low-cost philosophy.

Except for 360networks Inc., some private company shares, and his ARC income trust fund units, all his stock investments offer a dividend reinvestment program, or DRIP. With a DRIP, any dividends are used to automatically buy you more shares. There are no commissions, plus you can own partial numbers of shares. (Many discount brokers restrict you to working with full shares, however.) In addition, his stocks -- including Charlottetown-based phone company Aliant Inc., Bank of Nova Scotia, Emera Inc., a Halifax-based utility company, and IBM -- offer share purchase plans, also called direct purchase plans, or DPPs. A DPP lets you purchase shares directly from the company, sometimes paying a small commission, and sometimes at no commission whatsoever.
Best move

ARC Energy Trust has been heating up Mr. Ackerman's returns since he bought it last summer. The trust offers indirect ownership in oil and gas properties, and currently has a yield of 11 per cent.
Worst move

Mr. Ackerman invested in 360networks in late December, 2000, at $18.95 a share. Within a month the stock was at $23.25, and he began muttering that old crazy tech times mantra, "Oh gee, I've only made a few bucks. I'll just wait until it goes higher." Not such a silly notion at the time, of course, except the bubble was already bursting, and the stock collapsed to the penny range.
Advice

"Try to focus on the meat and not the sizzle. Find steady performers with low expenses, and put money in year after year."
tony.martin1@sympatico.ca

© 2007 The Globe and Mail. All rights reserved.

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