Thanks to high-fee mutual funds, Canadians are leaving a lot of money on the table. While superior ETF investment options have been available for more than two decades, Canadians are slow to help themselves out. Those fees are wealth destroyers. We’re not making the move to ETFs at the pace of the rest of the developed world. It’s a no-brainer. Canadians can find investment options at less than 1/10th the cost. But too much money is still going into the wrong pockets – that of advisors and the mutual fund providers. We’re leaving too much money on the table, in the Sunday Reads.
Here’s the graphic that shows Canada is slow on the uptake …
The irony is that Canadians need to embrace low cost index funds more than most people on earth. We pay some of the highest fees on the planet. And those high-fee mutual funds most often come attached to an advisor that offers no advice, or poor advice. They are salespersons, not real advisors. From the Globe & Mail piece …
Canadian investors, on the other hand, have been far slower to shift their allegiances to indexing. Since 2013, Canadian passive funds increased their market share from 10.4 per cent to just 15.5 per cent currently.
The article also reported that there is currently more than $1.4-trillion of Canadians’ wealth residing in high-fee, actively managed mutual funds carrying an average management expense ratio of about 1.5 per cent. On the other hand, the average weighted MER on passive funds in Canada is 0.25 per cent. That amounts to more than $17-billion in fees each year – money that is up in smoke. Money that is going into the wrong pockets.
The advisor …
Most Canadians actually pay in the 2% range or more, in fees, and we can build an ETF and stock portfolio for much less that 0.25%.
These investment options make it easy to break away from your poor performing funds.
- Build an ETF Portfolio.
- Go with an all-in-one asset allocation ETF.
- For advice, planning and lower-fee ETF portfolios check out Justwealth, Canada’s top Robo advisor.
And of course, it’s also surprisingly easy to build a simple but effective portfolio of individual stocks.
The Canadian bank battle
Here’s more onthe Canadian banks. Improved efficiencies thanks to technology now battle against economic, regulatory and government sector-specific tax targeting concerns.
One of the bullish arguments in favour of Canadian bank stocks is that the biggest banks have improved their efficiency ratios over much of the past decade, as they modernized their operations with beefed-up technology and gave customers more options for banking on computers and smartphones.
Efficiency setbacks challenge this bullish case, and they arrive at a time when banks are facing a number of obstacles this year.
Moving onto the pipeline space, here’s a short thread on Enbridge. After time to digest the recent acquisition, almost all of the analysis lands in this camp …
The Enbridge acquisition should be cash flow accretive to earnings in year one. It diversifies their income stream setting the stage for future dividend growth and capital appreciation. That said, they do have to manage the debt.
In the Globe & Mail, John Heinzl offered …
Cory O’Krainetz, an analyst with Odlum Brown, called the bought deal price “disappointing.” But he said the acquisition, which will nearly double Enbridge’s lower-risk utilities business and create new avenues for growth, was “an opportunity Enbridge couldn’t refuse and … should be value accretive to shareholders. We expect Enbridge shares to trade at or below the equity offer price over the near term, but we see significant upside over the long term.
Tourmaline acquires Bonavista …
And if you like the idea of Tourmaline (one of my favourties) you can add more shares and sign up for special dividends. The next payment will again be $1 per share, payable on Nov 1, 2023 to record holders on Oct 24, 2023. They also hiked the regular dividend by 7.7%.
Super 7 stocks vs the rest in the U.S.
More Sunday Reads
At My Own Advisor Mark looks at the Statscan report that shows Canadians are investing more in the TFSAs and less in RRSPs. That’s likely good news and bad news. Canadians are not putting away much for retirement on average. There’s so much unused TFSA and RRSP space, Canadians are struggling to fill those core plans.
Do the necessary exploration to find the free cash flow to invest, and then keep your fees low.
I will have to update the post to reflect inflation 😉
Heres’ the week in review courtesy of Dividend Hawk. That’s a robust report as earnings season is picking up the pace south of the border. Earnings have been solid, but not enough to lift markets. They were down over 3% in the U.S last week. The TSX was down about 1.75% for the week. International markets declined almost 3.0%.
Bond yields keep spiking, and that is spooking the markets this October.
Banker on Wheels delivers the podcasts and reads of the week.
Jonathan Chevreau offers that the popular Canadian Financial Summit is underway. I am in the mix with a podcast, chatting about retirement funding strategies.
On FiPhysician, a priceless retirement revelation.
At stocktrades.ca, Dan offers 10 of the best Canadian dividend stocks for 2023 and beyond.
Cut The Crap Investing – and help yourself
Earn a break on fees by way of many of these partnership links.
CANADA’S TOP-RANKED DISCOUNT BROKERAGE
Cut the Crap Investing readers can earn a break on fees at Questrade by way of that partnership link. At Questrade, you can buy ETFs for free.
Here’s Canada’s top-performing Robo Advisor, Justwealth. You can get advice, planning and l0w-fee ETF portfolios all at one shop.
Consider Justwealth for RESP accounts. That is THE option in Canada with target date funds that adjust the risk level as the student approaches the College or University start date.
CASHFLOWS & PORTFOLIOS
The self-directed investor might consider the service provided by Mark Seed from My Own Advisor. He runs Cashflows & Portfolios where they will provide options for that optimal retirement funding strategy. That service is provided for a very reasonable fee.
If you do head to Cashflow & Portfolios (as do many Cut The Crap Investing readers), be sure to tell them Cut The Crap Investing sent ya.
OUR SAVINGS ACCOUNTS
Make your cash work a lot harder at EQ Bank. RRSP and TFSA account savings rates are at 2.5% and 3.5%. You’ll find some higher rates on GICs, recently updated and increased to 3-5%. They also offer U.S. dollar accounts. We use EQ Bank, they have been awesome.
OUR CASHBACK CREDIT CARD
We make between $40 to $70 every month! And that’s on everyday spending. There are no fees with …
For August we received $60 in cash.
While I do not accept monies for feature blog posts please click here on the mission and ‘how I might get paid’ disclosures. Affiliate partnerships help me (try to) pay the bills for this site. But they don’t, ha. That will allow me to keep this site free of ads and easy to read.