The Case Against Mutual Funds Part 6
At Least We’re Not in Last Place Anymore. Great News! Canada no longer ranks dead last in the international ranking of how much mutual-fund investors pay in fees. According to global rankings released recently by Morningstar Canada is now only “below average. Both Italy and Taiwan fell below Canada in the latest rankings as countries that […]
Yes! You Can Buy the Entire Stock Market
Today, it’s extremely easy to invest in products called “index funds” that accurately track the S&P 500 (or many other market indices). The best news of all is that most index funds are extremely efficient and costs very little to own.
The Case Against Mutual Funds Part 5
The Zero-Sum Game. Investing in a stock is participating in the profits of a company. It is possible for a group of shareholders to buy stocks in a company and all win together. Ideally, there are no losers as all shareholders participate in the value creation of the company and its employees. Correspondingly, investing in […]
The Case Against Mutual Funds Part 4
Checking Historic Performance. As we’ve already discussed, the combination of short-term performance constraints and the fees charged makes it nearly impossible for all but the luckiest of fund managers to succeed. Here’s the sad truth from some recent research . The good news is that 7.8% of funds actually outperformed the S&P 500 over that […]
The Case Against Mutual Funds Part 3
Comparing Their Top 10. So is there indication of “closet indexing” in the mutual funds you own? Most, if not all, mutual funds publish a marketing fact sheet that details fees, historic performance and their top holdings. As an example, it would be instructive to compare the largest companies in the S&P500 against the top […]
The Case Against Mutual Funds Part 2
How Money Managers Keep Their Jobs. Mutual funds make money by charging its unit holders a fixed percentage each year (typically between 1% to 3%) for managing its investment portfolios. Total revenues of the fund company is a fixed percentage of all Assets Under Management (AUM) of the company’s funds. The greater the AUM, the […]
The Case Against Mutual Funds Part 1
How 1% becomes 30%. Mutual funds make money by charging fees to unit holders. Good or bad, up or down, fees are deducted from unit values. Management Expense Ratios (MER) typically range from 1% to as much as 3% each year. This means that even if you’ve purchased the lowest costing mutual funds (e.g., MER=1%), […]
The Power of Time Part 3 – Why 11%
Today’s interest rate on savings is less than 1%, here’s why I keep using an 11% annual compound rate of return in most of our examples.
The Power of Time Part 2 – Would You Rather
Would you rather invest $50K to earn $1.1M or $125K to earn $570K?
Most people choose the latter.
The Power of Time Part 1 – A Dollar a Day
Most of us can afford to put aside $1/day. It doesn’t seem like much, but 40 years of saving just $1/day results in a substantial amount of money.