"The rise of ETFs is making life miserable for Canada’s mutual fund industry" - G&M

[ukbeliever220485]

Shift in the market:

Canadian mutual-fund sales will never again outsell Canadian exchange-traded funds in a single year, according to Matt Hougan, chairman of Inside ETFs.

[...]

Last year, ETFs outsold mutual funds in Canada for the first time in a decade. And nearly halfway through 2019, ETFs are on target to outsell mutual funds again. Already in the first five months, Canadian ETFs have seen net inflows of $10.4-billion in assets, while mutual funds have brought in $4.9-billion, according to data provided by Strategic Insight.

• https://www.theglobeandmail.com/inv...tsell-mutual-funds-but-is-it-a-lasting-trend/
• http://archive.is/0YxIH (in case)

At this point, the only mutual funds probably worth looking at are TD's eSeries (CCP Option 2): they're very handy for monthly auto-purchasing and have low fees. Just about everything else (AFAICT) is too expensive for what you get.

Of course not all ETFs are created equal: some have unreasonable (>1%) MERs as well:

• https://en.wikipedia.org/wiki/List_of_Canadian_exchange-traded_funds#ETF_Table

 

[aptay10r]

@ukbeliever220485 “The rise of automobiles is making life miserable for Canada’s horse and carriage industry.”

 

[jamie73]

@aptay10r This is more analogous to Amazon killing big box retailers.

Say what you want about mutual funds and financial advisors, but they did provide stable, decently high paying careers for a lot of Canadians. ETFs and self-directed online accounts are low cost and highly efficient, but they aren't going to sponsor local junior sports teams or hire thousands of new grads every year.

I get that this is what progress looks like, but I think we tend to be too quick to gloat when people lose their livelihoods.

 

[momofone1]

@jamie73 No, we gloat when people lose meaningless middleman livelihoods.

 

[resjudicata]

@jamie73 Amazon makes people wealthier. All the MF and financial advisors are taking money from people.

 

[byron1661]

@ukbeliever220485 Good.

 

[beekind]

@byron1661 Bueno.

 

[trophybottle]

@beekind Bien

 

[trustinghim2015]

@byron1661 Seriously. The fact that there was a whole 'industry' that just siphoned huge portions off of people's life savings is pretty ludicrous in hindsight.

 

[resjudicata]

@ukbeliever220485 Good, all those Questrade commercials are really hitting home for a lot of people. I have a family member who bought into a mutual fund decades ago and was still getting charged 4% when they took their money out. A lot of these places are predatory as fuck.

 

[aloap_aloap]

@resjudicata It is the fees that kill you. Each 1% MER cuts into roughly 20% of total profit. Buy a 3% mutual fund and you’re looking at over half the profit going to the mgmt of the fund with you putting up 100% of the money and accepting 100% of the risk. It’s disgusting.

 

[resjudicata]

@aloap_aloap Most funds with 3% MER are seg funds which an individual buys for reasons other than absolute return, like creditor protection, principal guarantees, beneficiaries. You're also assuming there's no Alpha, which is often Fair enough.

 

[werby]

@aloap_aloap I post this often enough, bit for anyone interested, Larry Bates developed a calculator to compare fund performance using return rates and MER. Great way to directly compare different products:

https://larrybates.ca/t-rex-score/

 

[mikeinchrist]

@resjudicata This handy calculator gives you a rough idea of how much MER fees cost you over any timeline. Note it doesn't include any fees or commissions that your advisor/salesperson may charge on purchase or withdrawal, so account for those in your maths too.

e: A quick example: say you have $10,000 to invest and will invest $10,000 more each year for 15 years. Assuming a typical mutual fund MER of 3%, an ETF MER of 0.5% and average rate of return of 6% for both (heavily equity weighted), you would pay:

• $48,363 in fees and have lost $73,309 in potential earnings with a mutual fund or
• $8,060 in fees and have lost $10,815 in potential earning with an ETF.

Let that one sink in.

 

[ukbeliever220485]

@mikeinchrist

This handy calculator gives you a rough idea of how much MER fees cost you over any timeline.

See also:

• http://larrybates.ca/t-rex-score/

 

[mormarw]

@ukbeliever220485 Good news, and the thing for those that are worrying that index investing will be less effective when everyone is doing it consider the following:

This is just new investments, mutual funds still greatly dwarf ETFs for total ownership and will continue to for decades to come.

There are still many individual investors active in the market, both big and small.

There are billions upon billions of dollars in pension funds and the like which are again still actively invested.

 

[resjudicata]

@ukbeliever220485 This morning I finally got set up on Wealthsimple.

It took me twenty minutes and I did it in pyjamas with a cup of coffee.

Within that time I transferred an RRSP, a spousal RRSP and a TFSA account out of my regular banking account and over to Wealthsimple.

I also set up the Rounding Up feature, which is a fun little way to add a bit more each month.

Meanwhile, my "personal banker" is calling me about setting up a time for either a call or a face to face to discuss mutual funds - a product that will cost me way, way more than ETFs over the long term.

I'm going to email her instead of calling I think.

 

[missiongirl24]

@resjudicata This is exactly what I’m in the process of doing. I’m been with a bank for 6 years and various financial advisors has been buying all these different mutual funds during that time. In 2016, I started to learn about couch potato and ETFs so I started tracking my rate of returns from 2013 against various ETF based portfolios (TDe, Mawer and Couch potato). I’m a somewhat conservative person so I like having data before making a big decision and I now had 6 years of data and to see my actively managed portfolio compared to the returns from the ETF options and it was sad. I was paying 2% MER and making 4-8% less. Yesterday I sold all my mutual funds down to cash and will be transferring to Questrade the minute they settle.

 

[kimas]

@missiongirl24 I want to do this. I have my Mutual Funds in a managed account with a big bank. Do I have to go through the advisor directly for this?

 

[missiongirl24]

@kimas I just logged in to my online banking and sold all the mutual funds. I had already confirmed earlier that I had no deferred service charges or anything. Once they settle, which should be in a day or so, I’ll login to Questrade and begin the transfer. I have a locked in GIC that I don’t want to sell and pay a penalty, hence why I’m dropping everyone to cash. I can tell Questrade exactly how much to take without screwing with the GIC. I think it’s easier that having the bank sell it.