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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 who 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 on the 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.
Dale Roberts is the owner operator of the Cut The Crap Investing blog, and a columnist for MoneySense. This blog originally appeared on Cut the Crap Investing on Oct. 22, 2023 and is republished on the Hub with permission.
