I have a Questrade TFSA account and would like to invest in mutual fund/s. There are so many funds and so many with 5 star ratings on Morningstar, etc. How would you go about it. Any recommendations on something that is somewhat conservative and pays a bit more than banks? How will be RBC Canadian Equity Income and Fidelity Monthly High Income Series S8?

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You may want to seek a "large cap dividend fund" which would potentially offer both the benefits of capital appreciation (since the fund is invested in mostly growth oriented robust corporations) and a decent "income" in the form of dividend. These funds tend to be balanced - neither aggressive such as growth equity funds not too passive such as bond funds.

One such example (not an attempt to endorse this fund) is the AGF Canadian large Cap Dividend fund. You'll find lot of other fund companies offering a large cap dividend fund. Hope this helps.

Equity income funds are also a good choice as they balance both growth and income.

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Dimple2001

Hi rajcanada,

Questrade is the only Canadian brokerage that refunds the trailer fee back to the mutual fund unit holder.
The trailer fee is a componet of the MER, therefore, you get part of the MER back.
It's true that Questrade charges a trading fee for mutual funds, unlike other discount brokerages, but then the refund could add up substantially over a period of time.
If you are a buy-and-hold mutual fund investor, the $9.99 you pay for buying mutual funds is pocket change.

As to the selection of funds, please evaluate the returns and holdings of actively managed mutual funds compared to low-cost ETFs.
You will find that the holdings of most actively managed Canadian equity mutual funds are similar to those of TSX based ETFs or index funds.
The Canadian large cap market mostly comprises of the 5 banks, the insurance companies, the energy and material companies.
Therefore, an ETF containing between 25 - 35 stocks probably covers the majority of the Canadian large cap market.
For instance, look at the XIU ETF.
It mirrors the TSX 60 index.
It's 10 year returns beat the majority of actively managed Canadian mutual funds.

In order to beat an equity index (whether TSX or S&P), a mutual fund will have to generate returns that is at least 4% more than the index.
Actively managed funds charge anywhere between 1.5% to over 2% in MER.
Then there is the hidden TER, which adds even more to the cost for Canadian mutual funds.
Assuming a fund is able to generate the 2.5% or so more than an equity index, it then needs to generate another 2% at least to make it worthwhile for investors to continue holding it for extending periods of time.
After all, if an actively managed fund merely beats an index by say 0.5%, what's the incentive for holding it.

The fees for an ETF in the case of Questrade are probably lower than mutual funds because it as very low trading commissions.

Having said that, RBC and TD have amongst the best (IMHO) low cost income funds.
The RBC Income Fund and the TD Monthly Income fund have fees in the range of 1.5% and veru good returns for 10 years or more.
They mostly hold a combination of dividend paying stock, preferred shares and bonds.
That gives them low volatality, high liquidity and stable returns.

In my opinion, when choosing income funds, anything more than 1% is too much.
You can easily replicate similar performance using a combination of XIU, CPD and XCB.
This three will give you good diversification among asset classes, as well as decent income yield.
Chances are, you will beat or match most standard 5* rated mutual funds over a period of time.

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