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 […]
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 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 […]
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 […]
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 […]
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 […]
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%), […]
Do ETFs distort market efficiencies? You gave a great overview of ETFs and S&P yesterday that was really helpful. This article that I am linking talks about some inefficiencies that are being created by money flowing into ETFs and most people avoiding active investments. As per the article, this pattern is creating inefficiencies that can […]