Canadians pay some of the highest investment fees on the planet. Most of the Canadian mutual funds charge very high fees. Those fees directly reduce your returns. Too much of the investment returns end up in the wrong pockets. The very good news is that in 2025 you can move to very good, very simple and very inexpensive investment options. Cutting your fees from the 2.0% area to 0.20% or lower is life-changing. It could even double your retirement nest egg. Who doesn’t want to retire with twice the financial security, twice the lifestyle? Canadians should avoid most mutual funds. It’s so easy to leave your mutual funds and your advisor behind; you can move to a better place.
Most Canadian mutual funds are offered by salespersons, not qualified advisors. These advisors at Canadian banks and other sales shops for the high fee funds have very low investment knowledge. Their only concern is selling you a product and lining their own pockets.
Beat the bank at their own game
That’s the premise and the truth told by former banker Larry Bates. Larry outlines just how poor are Canadian mutual funds, and the mutual fund industry. Have a read of …
Don’t give away half of your investments – Beat the Bank.
On wealth destruction Larry offers a humorous ‘quote’.
My investments put three kids through University. Unfortunately, they were my advisors’ kids – Anonymous
And there’s the crux, the punchline. When Canadians pay those high fees that average 2.2% annual or more, over an investment lifetime they will give away half of their investment wealth. Don’t be that investor. Don’t let your portfolio get crushed by fees.
Canada’s largest mutual funds, not so bad?
Canada’s largest mutual funds are offered by Canada’s largest bank – Royal Bank of Canada. When I first looked at the RBC Select Funds, including the RBC Select Balanced Portfolio I suggested they were ‘not so bad’. But over time the fees and poor portfolio management continue to take their toll.
In that post I compare the RBC funds to a simple and superior low-fee approach, using an ETF portfolio. An ETF is an exchange traded fund.
- Over the last three years the iShares Balanced ETF Portfolio (XBAL.TO) is up 7.4% compared to 5.2% for the RBC Balanced Fund.
- Over the last 5 years the iShares Balanced ETF Portfolio (XBAL.TO) is up 7.7% compared to 6.2% for the RBC Balanced Fund.
Scorecard: over the last 3 years the RBC fund underperformed by an average of 2.2% annually. Over the last 5 years the RBC fund underperformed by an average of 1.5% annually.
You’ll find other comparisons to RBC Select and dividend funds in that post link.
How bad are TD mutual funds?
Canada’s second largest bank says ‘hold my beer’. I can take your poor performance and go one better. This past week I looked at TDs very popular portfolio solutions known as the “Comfort” Portfolios. Once again, this is an attempt to create a diversifed global balanced portfolio in one offering. A one-fund solution.
Check out the GIC rates at EQ Bank
I compared the Comfort Portfolios to a simple Canadian ETF Portfolio. The following table lists the average annual returns.
The underperformance is tragic. We see the TD portfolios underperforming simple ETF models by 2%, 2.5%, 3.o% annual and more.
Earn 50% more? Double your money over mutual funds?
With an additional 2.5% annual over a 20-year period, you could retire with 59% more. Over a 25-year period you’re talking 80% more. Over 30 years we move to ‘twice as much’.
For the above, I used a simple investment calcuator comparing 6% and 8.5% annual returns. In the investment world your return advantage could be greater or less given the sequence of returns. But it gives us a very good idea of the potential for greater returns, and a much richer lifestyle in retirement.
How to invest in ETFs
lf you’re new to the Exchange Traded Fund (ETF) concept please have a read of …
An Exchange Traded Fund will allow you to own the companies within a market index, for example the TSX Composite (the Canadian stock market) in one fund, ticker symbol XIC. The fee for buying the Canadian stock market is 0.06%. Yes you read that right, that’s 6/100th of one percent.
You can buy and own the U.S. stock market, the S&P 500 buy the way of the ticker IVV. That index ETF allows you to own 500 of the largest and most profitable companies in the U.S. The cost of owning those 500 companies is 0.03%.
We can also own the international stock markets, bond markets and cash accounts by way of ETFs.
Once again, you can build your own ETF portfolio or you can use an all-in-one global portfolio solution.
They’re called asset allocation ETFs.
If you want advice, planning and low fee ETF portfolios take a look at Justwealth, Canada’s top ‘Robo’ Advisor.
If you want to learn more about ETFs, reach out by way of that Contact Dale button. I’m happy to conduct a tour (via a Zoom call) of this blog for interested readers. We can also go over how to do leave your high fee mutual funds behind.
And please share this post with friends and family.
Friends don’t let friends pay high fees.
The Sunday Reads
It was another busy week for the portfolio of Dividend Hawk. Manulife delivered a very strong quarter …
Manulife Financial Corporation (TSE:MFC) Reports Full Year and Fourth Quarter 2024 Results; MFC reports Q4 core EPS of C$1.03, topping the C$0.94 consensus, rose from C$1.00 in the prior quarter and C$0.92 in Q4 2023. APE sales rose 42% to C$2.25 billion in the quarter, compared with C$1.55 billion last year. Adjusted book value per common share climbed to C$37.02 from C$34.97 in Q3 and C$32.19 a year ago. Global WAM net inflows of $1.2 billion in 4Q24, increased $2.5 billion compared with net outflows of $1.3 billion in 4Q23.
We hold MFC in my wife’s Canadian stock portfolio. The stock is up over 34% over the last year. The insurers have been on a wonderful run.
Emera also reported …
Emera Incorporated (TSE:EMA) Reports 2024 Fourth Quarter and Annual Financial Results; EMA reported Q4 Non-GAAP EPS of C$0.84, up 33% versus prior year and C$0.08 above estimates. Reported a lower net income of 154 million Canadian dollars, or C$0.52 a share, down from C$289 million, or C$1.04 a share, in the comparable quarter a year earlier. Management maintains its targeted 5%-to-7% average adjusted EPS growth through 2027 and still expects to deliver on its C$20 billion five-year capital plan to drive a 7%-to-8% rate base growth.
At Banker on Wheels weekend reading you’ll find the global equity returns to date in 2025.
Beating U.S. stocks
We’ve flipped the script with the U.S. lagging other markets. Also from BoW this Morningstar post that suggests three reasons to carefully consider commodities.
I’m not going to argue with that. On the commodities front Dan at Stocktrades offered this post on Canadian commodity ETFs.
Related read from 2020: investing in the Canadian energy space.
Fritz at The Retirement Manifesto considers 3 levels of retirement readiness. Where to you stand? From Fritz … As I often say, “The money side is necessary but not sufficient.” To be fully prepared for your transition into retirement, it’s critical to include non-financial aspects in your planning, such as…
- Creating the right amount of structure to your day.
- Replacing relationships you’ll lose from work.
- Adjusting to spending 24 hours/day with your spouse.
- Dealing with your loss of identity.
I will certainly be sharing that post with our Retirement Club.
In addition to Zoom calls we have an online community space (our private island) where we learn, share and chat.
AT Findependence Hub – The slow track or fast track to wealth?
If you’re looking to de-risk Million Dollar Journey offers the best investments if we have a recession in Canada.
Last week on this blog we were looking at the wonderful benefit of abundent free cash flow – Show me the money on the Sunday Reads.
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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’s a great place to build your stock portfolio.
Here’s Canada’s top-performing Robo Advisor, Justwealth. You can get advice, planning and low-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.
OUR SAVINGS ACCOUNTS
Make your cash work a lot harder at EQ Bank. RRSP and TFSA account savings rates are at 2.0%. You’ll find some higher rates on GICs up to 4.00%. 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 December we received $45.46 in cash. You can select 3 categories for 2% cash back. The rest pays at 0.50%.
That cash went into my TFSA account to buy some bitcoin and chips / CHPS.TO, ha.
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Hello. Thank you for always helpful and insightful posts. Would you consider TD e-series funds a suitable alternative to ETFs? They are also free to purchase and MER fees are much lower than that of traditional mutual funds sold through TD. Thank you!
Hi Archie, the TD e-series are very good. But I understand it is difficult to obtain them and manage them as TD likes to hide them. All said, you’re better off with building your own ETF portfolio or the asset allocation ETFs.
But it you can get the TD e-series, yes.
Dale
hi
my wifes & my investments are with td waterhouse webbroker accounts .our US , INTL ,& BOND funds are in the td e series funds.More of our investments are in the webbroker account but we directly own our canadian stocks.
fees on td e series funds are around 0.45 percent .yes i can get a better rate with another etf but most of our investments are in canadian companies we own.
it was easy for me to set up , i went in person to td at don mills & lawrence & the manager set up entire webbroker accounts.
Thanks for sharing Steve. Glad to read they were able to help you out. Most of the advisors at TD would never have even heard of the e-series.
Dale
For a commodities ETF – PRA.
The fund seeks to provide shareholders with exposure to a diversified portfolio of asset classes that are directly or indirectly linked to physical assets with positive correlation to inflation and are expected to maintain their real (after inflation) value over time. These assets may include precious metals and related equities; industrial, energy and agricultural commodities and related equities; real estate investment trusts (REITs); emerging market (EM) currencies; real return bonds and treasury inflation-protected securities (TIPS); and cash.
Thanks John, yes I’ve long suggested PRA as a one-stop shop for inflation fighters. It is a very good ETF. I like overweighting some oil and gas stocks as well – that’s the most reliable equity sector for inflation.
Dale