While many were watching the solar eclipse this past week, I had my eyes on Canadian mutual fund fees that can eclipse the peak value of your portfolio. That is celestially incredilbe. Or incredibly troubling that is. Those high fees can block out your portfolio returns. But most Canadians are in the dark with respect to fees eating into their returns. I could write about the gravity of the situation if I wanted to quickly exhaust my lunar puns and word play. Readers of this blog will know that there is a better way – using ETFs and simple and effective stock portfolios. Don’t pay fees that eclipse the portfolio value – plus the Sunday Reads.
Here’s the chart I shared on Twitter/X that comes our way thanks for Fred Vetesse …
I added that chart to this permanent page on Cut The Crap Investing – why low fee investing matters.
Total fees that eclipse a Canadian’s peak portfolio value. Just wow.
But then along comes a better mousetrap – ETFs.
Blame it on Canadian banks, for starters
From Tim Shufelt at the Globe & Mail on why Canadians cling (subscription) to high-fee mutual funds.
Canada’s banking oligopoly explains a lot. Many Canadians get financial advice through their banks, where advisers are heavily incentivized to peddle the bank’s own lineup of mutual funds. These sales are far more lucrative to the banks than ETFs. In fact, most banks do not even allow their branch-based advisers to sell ETFs to clients.
But beyond the banks there are many guilty culprits. The AGF funds are terrible, ditto for Investor’s Group – and on and on. Most mutual funds are just a terrible wealth-destroying idea. The peddlers are salespersons, not advisors.
A better mousetrap
It is not difficult to leave those funds behind. You can own an all-in-one global asset allocation ETF or build your own Canadian ETF portfolio.
If you are ‘stuck’ in high-fee mutual funds feel free to contact me (Dale) via the Contact Form on this page. I’m happy to help.
Buy ETFs at no cost at Questrade
If you want advice and planning and low fee ETF portfolios, you can have it all thanks to Justwealth – Canada’s top robo advisor. They will help you every step of the way.
The problem in Canada is awareness. You can help by sharing your knowledge with friends and family. Plus share good blogs and investment resources. A few examples …
- My Own Advisor
- MoneySense
- Findependence Hub
- Get Smarter About Money
- Tawcan
- Million Dollar Journey
- The Dividend Guy
- Stocktrades.ca
U.S. earnings estimates
And while we don’t know the future, it’s nice to see that earnings prospects for the S&P 500 constituents are looking solid according to analysts.
Oil stocks hedge inflation and global risks
Canadian oil and gas stocks have been on a tear (again). And that might accelerate as inflation remains sticky in many parts of the world and the war in the middle east escalates. Iran launched more than 300 drones and ballistic missiles againsts Israel. There is likely to be a retalitory response.
Oil and gas stocks (XEG.TO) have been a wonderful hedge, tripling the rate of return of the TSX Composite from when I put that idea on the table for readers – in late 2020. In how to protect against inflation I also offered up the Purpose Real Asset ETF, ticker PRA. That is a wonderful one-stop diversfied inflation-fighting ETF.
Gold was also mentioned. The shiny yellow metal has moved to new highs in recent months and weeks. Readers will know that I like gold as a portfolio diversifier, but mostly choose bitcoin as a portfolio asset.
More Sunday Reads
We’ll kick things off with the weekly wrap at Dividend Hawk.
And then we’ll glide over to the posts and podcasts of the week at Banker on Wheels. BoW takes a look at asset class returns since 1970.
In last week’s Sunday Reads I took a look at your asset allocation and how that determines most of your total returns and risk level. From that Banker post …
On average, 90 percent of the variability of returns and 100 percent of the absolute level of return is explained by asset allocation.
Roger G. Ibbotson, Professor Emeritus in Practice of Finance, Yale School of Management
Also in the mix, Vanguard looks at why the U.S. dollar remains the king of currencies. That’s just one of the reasons to include a very health allocation to U.S. assets. If a Canadian is overweight or exclusively invested in Canadian stocks and bonds – they are putting their future in the hands of the Canadian dollar and Canadian economic growth prospects. It’s simply and obviously not a good idea.
Will U.S. stocks and the U.S. save 2024?
Debt vs investing
Jonathan Chevreau offers a very timely post on paying down debt vs saving for retirement.
Now a new report from Mercer Canada released earlier this week — the fifth annual Mercer Retirement Readiness Barometer (MRRB) — warns that millennials and younger Canadians who divide their disposable income between saving for retirement and paying down debts could find themselves delaying their retirement by one or two years compared to if they focused solely on paying down debt in the short term.
Paying down debt offers a tax-free return. My wife and I first concentrated on quickly strangling our mortgage while only repaying the Home Buyer’s Plan amounts. Once the first mortgage was almost eliminated within 5 years, we then moved on to the investment front. I had a few years with a 40-50% savings rate. That then allowed me to coast in many years and then move to consulting.
If you like Canadian dividend stocks, Dan at stocktrades takes a look at his favourites.
Vacations in retirement?
At The Retirement Manifesto, Fritz and the Mrs. are going on vacation. Contrary to popular belief, retirement is not a permanent vacation. I also like the idea of treating these trips as vacations – keep them special.
Here’s my favourite shot from my recent vacation. I was playing the Pepper’s ‘Floridavacation’ 😉
Tweet Tweet
On the Canadian dollar, quoting Tom Petty …
BlackRock, one of my 3 U.S. stock picks …
You can follow me on Twitter / X.
Cut fees – cut the crap
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. It is a good place to build your stock portfolio as well.
Advice, planning and low-cost portfolios
Here’s Canada’s top-performing Robo Advisor, Justwealth. You can get advice, planning and l0w-fee ETF portfolios all at one shop. You can have it all.
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 3.0%. You’ll find some higher rates on GICs up to 5.2%. 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 …
The Tangerine Cash Back Credit Card
For March we received $80 in cash back. There was a boost thanks to my trip to Florida. I invest my cash back in a TFSA account at Wealthsimple.
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.
zasid
Don’t forget all the RRSP employer contribution based insurers like Sunlife the fee is just ridiculously highly and there is nothing much anyone can do about it as there are only few key players (thanks to Canadian policy encouraging low to no competition like telecom, banks , grocers etc)
Dale Roberts
Good point. It is a shame that companies don’t bring in low-cost index based fund options for their employees. That said, employees should bring this to the attention of their employers.
Colette Le Fort
We’d like to move away from our big bank advisor in order to reduce money market funds. We feel uninformed about arranging the annual monthly drawings from our LIFS and RIFS and pensions and don’t want to incur tax penalties for doing it wrong. Our big bank advisor sets that up every year for us. If we moved to wealth simple who would advise us about setting our monthly download amounts?
Dale Roberts
Hi Colette, I will send you an email. I’m happy to help you out, and find the right info.