Posted By
By Dale Roberts
Special to Financial Independence Hub
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 diversified 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 per cent.
You can buy and own the U.S. stock market, the S&P 500 by 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 on my site. 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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ETFs / Stock Portfolios / Retirement Strategies / Wealth Creation/ Retirement Club
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Dale Roberts is a former advertising writer and creative director and long time index investor. In 2013, he followed his passion to become an investment advisor, and then trainer at Tangerine Investments. He won Advisor of the Year in his first year. He left Tangerine in 2018 to start Cut The Crap Investing, where he helps investors learn how to use ETFs, simple stock portfolio models and Robo Advisors to full advantage in the accumulation stage, and especially in retirement. A ‘hyper-focuser’ Dale has spent thousands of hours studying retirement – from the financial planning aspects to the portfolio models that make it happen. Early in 2025 he co-founded Retirement Club for Canadians, described in this Findependence Hub blog. Keep in mind Dale is not a financial planner. Retirement Club provides ideas and learning for consideration. As we know, self-directed investors are responsible for their own investment decisions. This blog originally appeared on Cut the Crap Investing on Feb. 23, 2025 and is republished on Findependence Hub with permission.
