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Email this10:07 am
March 30, 2017
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Mutual funds is just a horrible place to put ur money. 95% of mutual fund do NOT outperform index in the long run, simply because of the stupid fee. All you do is make the fund manager rich.
ETFs are the way to go to mirror the index. With fees at 10-20 bps, its a no brainer way to do it.
10:38 am
October 15, 2015
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I agree. I don't understand why more people don't use them. I feel if i can invest in index etfs anyone can. However i know my sister invests in mutual funds at TD. She trusts the bank and actually thinks they are safe as they are from a bank. I think she is also a busy mom and doesn't want to spend any time doing it or thinking it. Still i think investing in etfs is increasing. Now my concern is that this switch to commission free trading will have people trading more instead of buying and holding.
11:51 am
April 6, 2013
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100% of the ETF's don't beat their index. So, don't take the propaganda from the ETF companies too seriously.
The statistics I've seen are that about 40% of the managers outperform their benchmark. The number goes up to about 60% if one filters out the "closet" indexers.
12:18 pm
March 30, 2017
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Norman1 said
The statistics I've seen are that about 40% of the managers outperform their benchmark. The number goes up to about 60% if one filters out the "closet" indexers.
What is the "benchmark" they choose ? If its an index return, that number is a lot lower than 40%. I am talking equity mutual fund, not bond or some special purpose mutual funds (like Chinese focused funds.)
This is cut and paste from Morningstar.com
"Looking back over longer horizons yields useful signals--data that investors can put into practice while selecting active funds. In general, actively managed funds have failed to survive and beat their benchmarks, especially over longer time horizons. Only 24% of all active funds topped the average of their passive rivals over the 10-year period ended June 2020."
https://youngandthrifty.ca/index-funds-vs-mutual-funds/
Per this article, 88% of actively managed fund failed to beat SPTSE over 10 year horizon
100% index etf wont beat the index cuz the fee. They mirror an index better than 99%. If it does not, its a $hit one.
2:25 pm
October 27, 2013
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It is true most, if not all, actively managed mutual funds do not beat their representative indices over long periods of time. A manager simply cannot be that lucky/good to overcome MER headwinds in perpetuity.
Index funds, whether mutual or ETF, match the returns of the indices they follow, less their MER. These days, many broad market ETFs can be had for 4-5 bp MER. That is a mere pittance in management fee. If one is wiling to pay 22-25bp, one can let Vanguard, Blackrock of BMO do the asset allocation and re-balancing on an ongoing basis.
Investing has gotten simpler and simpler over time. An investor could have only ONE of the asset allocation ETFs in their entire portfolio for dozens of years and never look back. Given the asset allocation range is everything from 100% equity (e.g. VEQT) to 20% equity (e.g. VCIP), there is something for everyone. The problem is so few people care to learn about how simple this can be, or just as likely do not believe it can now be this simple. That means the predatory mutual fund industry and even the new ETF industry with slice and dice boutique offerings will be alive and well probably forever.
4:45 pm
March 30, 2017
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The problem is so few people care to learn about how simple this can be, or just as likely do not believe it can now be this simple. That means the predatory mutual fund industry and even the new ETF industry with slice and dice boutique offerings will be alive and well probably forever.
People are lazy in nature, and even worse believe in the advisors’ preaching “let the professionals handle it for you cuz it’s complicated”
What amaze me is people complains about salary too low, living expenses too high, yet willingly piss away 1%+ of their investments every year to fund the advisors’ Porsche, the fund manager’s Ferrari.
6:44 pm
October 27, 2013
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More people are learning, aka the increasing use of robo-advisors, but it will be a very slow process. That all said, a millenial family member has had those discussions with millenial friends regarding robo-advisors and has bounced that all off me.
By all means, start with a robo-advisor at ~0.3% to 0.6% and take it from there when one is so inclined to potentially go solo. Robo-avisor portfolio packages pretty much mirror the asset allocation choices I previously mentioned. It's a good start and there is hope for better things to come!
None of this is likely to affect the more senior crowd who are entrenched but that no longer matters much. It's time to get the millenials and potentially Gen-Xers on the right track.
9:08 pm
April 6, 2013
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savemoresaveoften said
What is the "benchmark" they choose ? If its an index return, that number is a lot lower than 40%. I am talking equity mutual fund, not bond or some special purpose mutual funds (like Chinese focused funds.)
This is cut and paste from Morningstar.com
"Looking back over longer horizons yields useful signals--data that investors can put into practice while selecting active funds. In general, actively managed funds have failed to survive and beat their benchmarks, especially over longer time horizons. Only 24% of all active funds topped the average of their passive rivals over the 10-year period ended June 2020."https://youngandthrifty.ca/index-funds-vs-mutual-funds/
Per this article, 88% of actively managed fund failed to beat SPTSE over 10 year horizon.
…
So what?
The PH&N Canadian Equity Fund (Series D) is one of those funds. 7.4% per annum for the 10 years ending June 30, 2021. Within 0.05% of the 7.4% per annum from the S&P/TSX Capped Total Return Index in those same 10 years.
5:52 am
March 30, 2017
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Norman1 said
savemoresaveoften said
What is the "benchmark" they choose ? If its an index return, that number is a lot lower than 40%. I am talking equity mutual fund, not bond or some special purpose mutual funds (like Chinese focused funds.)
This is cut and paste from Morningstar.com
"Looking back over longer horizons yields useful signals--data that investors can put into practice while selecting active funds. In general, actively managed funds have failed to survive and beat their benchmarks, especially over longer time horizons. Only 24% of all active funds topped the average of their passive rivals over the 10-year period ended June 2020."https://youngandthrifty.ca/index-funds-vs-mutual-funds/
Per this article, 88% of actively managed fund failed to beat SPTSE over 10 year horizon.
…So what?
The PH&N Canadian Equity Fund (Series D) is one of those funds. 7.4% per annum for the 10 years ending June 30, 2021. Within 0.05% of the 7.4% per annum from the S&P/TSX Capped Total Return Index in those same 10 years.
<br
An actively managed fund in the top quartile (return wise) and its return ended up mirroring an index.
It just prove the point 75% of the funds do not beat the index. The fund you managed has a MER of 0.75%, so while it may not hurt the investor as it "matches" an index, there is no extra value in it either. Buying a ETF that mirror the same index gives you the same index, although you may not get the free box of chocolate from your advisor each year cuz he/she does not get the kickback from the active funds....
8:45 am
April 27, 2017
Online
Norman1 said
savemoresaveoften said
What is the "benchmark" they choose ? If its an index return, that number is a lot lower than 40%. I am talking equity mutual fund, not bond or some special purpose mutual funds (like Chinese focused funds.)
This is cut and paste from Morningstar.com
"Looking back over longer horizons yields useful signals--data that investors can put into practice while selecting active funds. In general, actively managed funds have failed to survive and beat their benchmarks, especially over longer time horizons. Only 24% of all active funds topped the average of their passive rivals over the 10-year period ended June 2020."https://youngandthrifty.ca/index-funds-vs-mutual-funds/
Per this article, 88% of actively managed fund failed to beat SPTSE over 10 year horizon.
…So what?
The PH&N Canadian Equity Fund (Series D) is one of those funds. 7.4% per annum for the 10 years ending June 30, 2021. Within 0.05% of the 7.4% per annum from the S&P/TSX Capped Total Return Index in those same 10 years.
You absolutely can get lucky, put your money into an expensive mutual fund and beat the index over 10 years. Happens. Be aware though that to do that mutual fund managers need to take quite a bit of extra risk. The manager has to take bets to beat the market. Often works during the period of bull markets (what we have since 2009). Funds using momentum strategies will have done exceptionally well. But you really need to evaluate risk-weighted return and thats when expensive Canadian mutual funds look even worse.
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