Mutual Funds in Canada Are AWFUL: 5 Reasons to Avoid Them!
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- เผยแพร่เมื่อ 20 ก.ค. 2024
- Mutual Funds in Canada have some of the highest fees in the world.
I used to work for a mutual fund company in Canada, and in this video, I’ll go over all the reasons why I think you should avoid buying mutual funds.
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Let me explain why I think mutual funds are awful. I truly believe mutual funds are an insidious product that has cost the average Canadian billions of dollars in high-priced fees.
These fees have been used to line the pockets and fund the bonuses of mutual fund portfolio managers and high-powered financial executives to buy lakeside cottage and luxury cars.
I think it’s an inferior product to other options out there.
I must admit though, I used to part of the dark side or the problem. I used to work for a mutual fund company, one of the largest ones in Canada called CI Investments, as well as an advisor at the largest bank in Canada (RBC), and in both those roles I sold mutual funds.
In my brief time there, I saw all the inner workings and realized what a shady industry it is.
I know all the hidden tricks that these companies use to pull wool over the eyes of investors and I’m going to share it here with you.
1. Insanely High Fees of Mutual Funds
A report by Morningstar in 2017 shows Canadians have some of the highest priced mutual funds in the world, and we score Below Average when compared to 26 other countries.
While that’s better than the past, where we consistently ranked at the bottom of the barrel, it still means we are paying super-high fees unnecessarily.
The same report shows that the median expenses are 1.98% for equity funds per year, so almost 2%. This is super high.
Given a $100,000 portfolio, this is $2,000 per year you’ll be paying in fees (over 20 years, that’s almost $40,000 in fees saved!)
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I'm a new financial advisor (actually the role will be called Banking Advisor soon since I don't have my retirement courses done) for Scotiabank right now, and I am looking to the quit soon. Definitely agree with you on the whole "shady" part. I haven't sold a mutual fund yet as I'm still new, and I refuse to sell mutual funds under the guise of "doing what's best for the customer."
Mutual funds don't do as well and it's hard to beat the market even for professionals yet you still have to pay a huge fee regardless if your MF does well. So why pay higher fees for subpar results. You're better off with an index fund or an ETF that tracks the market because 1) you're likely to make a better return, and 2) you pay less fees which, again, gives you a better return lol. If i had the freedom to do so in my job, I would recommend customers to skip MFs but ofc I'm not allowed lol..
Excellent video! Thanks a ton for the info!
Thanks, I'm glad you liked it!
Great content thank you for sharing
Glad you enjoyed it!
Great Content! I'm learning a lot from your videos
Glad to hear it!
I have both Canadian and US stocks in my RRSP. I use *Norbert's Gambit* to buy US stocks so I don't have to pay the fees for exchanging CDN for USD. Recently I bought TD in my Canadian Dollar RRSP and then used those shares to buy TD US stock. No fees other than the fee to buy the shares initially. I recommend everyone use Norbert's Gambet when buying US stock.
Thanks! I have an article about that on my blog: wealthawesome.com/noberts-gambit-questrade/
Keep up the content!
Thanks!!
Appreciate your insider perspective. Hopefully people will watch your video... excellent! And I do want to say wall street brought their fees to some ETFs also. That shows up in actively managed, meaning the high amount of trades and higher fees.
Well said!
Really cool video. Thank you! Can you recommend some great platforms to buy U.S Stocks with flexibility?
Thanks! Questrade has a US Dollar account and flexible rates. You can also look at National Bank Financial but FX rates are a bit high.
If you have a TFSA through a major Canadian bank can you invest in stocks & ETF's instead of their mutual funds?
Hey Joe, yes you can, but only through their online trading platform, not at the bank branch, and you have to learn it yourself to buy ETFs and stocks. So for example, if you're with TD, you can use TD Direct Investing. I would recommend Questrade or Wealthsimple Trade though if you decide to go this route. Check out my review on the best trading platforms here: th-cam.com/video/sxzZHIWgsKM/w-d-xo.html
Nice work
Keep up 👍
What do you think about seg funds (vs. mutual funds)? Do the guarantees make the fees worth it?
I dislike seg funds even more than mutual funds, because of how often they are abused by people who sell them. The "guarantees" aren't guarantees of returns, and the even higher fees are outrageous (3% plus per year sometimes!) . It's good mainly for two things: bypassing probate when doing estate taxes, and protecting against creditors. I would recommend ETFs over mutual funds, and mutual funds over seg funds in most situations.
Do you have a video on how to get out of a mutual fund if you already invested with a bank? Will i lose money if i withdrawl everything now? It’s been 1-2 years
hello very helpful video. I want to close my account with he bank for TFSA MUTUAL FUNDS how do I go about doing this please thank you
I would recommend transferring in kind to another brokerage such as wealthsimple trade, then you can sell it there and buy whatever you want. Get a $50 signup bonus here: wealthawesome.com/recommends/wealthsimple-trade
5 STARS VIDEO THANKS
Glad you liked it!
I think index funds which allow you to broadly invest in the entire market are a great idea particularly TD E series which have MERs of 0.28%. What are your thoughts on these?
Yeah I am a big fan of these for their simplicity, but 0.28% is a bit high. Check my picks for the best all-in-one ETF portfolios, you can see my video here about it: th-cam.com/video/YJe8hr6IwBA/w-d-xo.html
Can i invest in ETF through rrsp? I have RRSP and not sure where to invest it. Thanks
Yes, you can invest in ETFs in your RRSP, and TFSA!
I am looking to transfer my BMO mutual funds from my RRSP and TFSA to Questrade. I don't think these portfolios are allowed to be transferred "in-kind", so is it safe to transfer these liquidated "in-cash" without inferring a lot of fees or penalties? I am not performing any withdrawals, these will be transfers. I just want to make sure I'm not losing thousands of dollars just moving it over. Even though I really really want to move them out of these mutual funds.
That should be ok, double check with Questrade though before you do it!
Since this comment was made. Did you transfer your funds all over to Questrade? Were there any fees from BMO?
What do you think of RBC div fund series D?
Looking at it's info, it doesn't impress me. It has average performance, and still a pretty high MER at 1.05% per year. See here: www.rbcgam.com/en/ca/products/mutual-funds/RBF1014/detail
I have mutual funds in my RRSP account that my financial advisor has invested for me but I'm looking to transfer my funds out into a DIY brokerage. What should I do with my existing mutual funds?
The best option is to transfer in kind if possible. Speak to the brokerage for exact steps and options - many have excellent support
Great video Chris! I just recently started trading with wealth simple after years of just investing in mutual funds and RRSP's. This is what I needed to hear :)
Also didn't we go to high school together? 👀
Hey great to hear about that! Wealthsimple Trade is a good choice. I'm glad you like learning about investments. I'm not sure, did we? What high school did you go to?
@@WealthAwesome Ross. Sheppard. You look familiar.
Are you still with the mutual fund and wealth simple? I just open wealth simple too but scared to invest in them as I have one with scotia bank right now
@@sithakhounborinh5181 yep still with wealthsimple. Love it!
Co -Vid came and I lost $3000 in 1 month in my mutual fund . The bank told me don't worry , it will come back . Come back , with the thousands of dollars that I lost ??? NOT !!!!!
same thing here.I am thinking of withrawing my money. And just try the wealth simple
What do you think of the BMO U.S Equity fund?
The M.E.R is insanely high at 2.49% a year, so I don't like it
It happened to me and I deal with TD Bank
Thank you so much for this well informed video. I was thinking of buying some MF's from my bank, but not any longer!
Even without the management fee, mine is only hitting a 2.2% YOY return (almost 3% during 2020). Disappointing.
Is that from a mutual fund? Yeah that's a pretty bad return given the strength of the market in the last year.
@@WealthAwesome Yup! Self directed I hit maybe 24% YOY or so? I got lucky on a few trades. I went with Questrade because they had the lowest fees, and looking at how high the fees are for my mutual fund (TD), I'm probably going to scale back my monthly contribution significantly.
@@WealthAwesome Come on. If you're as smart as you say then at least acknowledge that there are different types of funds. Maybe this guy has a bond fund or something that is naturally not going to get great returns or high returns. Stop with the irresponsible "mutual fund". I have mutual funds that have averaged 18% plus over the last 20 years. Good years, bad years different cycles different types of funds. You are so irresponsible in your comments. Also, just having a self directed RRSP isn't going to get a 24% return. That is just stupid gross misinformation. A specific investment will do that but that investment will do the same 24% inside an RRSP or TFSA or non registered account. I can't believe the level of stupid uninformed comments here and you don't correct anyone.
@@aliman1146 yeah you’re totally right. These seem to be more opinions more that actual facts. If you’re going to a bank expecting to out perform the market then idk what to tell you. This video is kind of misleading.
Thank you for the video and sharing your opinion about Mutual Funds. I myself have invested in a few Mutual Funds through a direct investing platform and my selection of these funds is based on their 10 to 15 year performance which have all shown to beat their benchmark indices consistently. I am not a big fan of mutual funds, but I also do not believe ETF is a great alternative. All ETFs are market index funds, which means they give you the market perfomance. Also, there are considerable fees (MER) associated with ETFs too in Canada compared to the ones in the US. Also, when you talk about fees, what do you mean by "paying these fees"? If you are talking about MER, then isn't the NAV already a net value after deducting the MER? That's the price you would pay indirectly to get the selection of equities to outperform the market. So nobody actually "pays" any fees. The performance of a fund is after the fee has been taken out everyday. Isn't that correct?
I am also keeping asset allocation portfolio ETFs such as VEQT and XEQT in my radar and may switch to them if I feel my mutual funds were not the right ones, in another 2 years.
ETFs are undeniably less expensive than mutual funds. You do "pay the fee," basically it's deducted before the returns are given to you. There is a mountain of evidence that shows on average mutual funds do NOT beat the market, mostly because of these high fees. See this unbiased research paper by S&P for more info: www.spglobal.com/spdji/en/documents/spiva/spiva-canada-scorecard-year-end-2020.pdf
@@WealthAwesome I do not understand the basis of saying "expensive". The performance of both ETFs and Mutual Funds are after the "fee" is removed, therefore, the only basis for comparison should be the performance. If an ETF has 0.25% MER and a Mutual Fund has 2.5% MER, it really does not matter if you choose a mutual fund that has outperformed the ETF, after deduction of fees. That is how I have chosen my mutual funds. Yes, the MER for a mutual fund is higher because people actually work to select equities, whereas an Index ETF is a computer algorithm that is once set and forgotten. The MER is not "paid" by the customer. The MER is removed from the returns of the equities that form the fund, isn't it? The only fees that would be paid by the customer are front/back loads, sales charges and commissions, which should be completely avoided. Now, I agree that there is a risk factor in mutual funds, the risk that the fund manager may not perform the same in the future. A fund that has outperformed a similar ETF in the past may underperform the same ETF in the future. That is the only reason I have a few asset allocation ETFs in my radar, to transfer from my mutual funds into these ETFs or just 1 asset allocation ETF.
@@lawrence0101 Could you please share some mutual funds code that you recommend? I am also looking to invest in mutual funds due to their convenience of automatic purchase which is not available in ETFs. Also do you know any good S&P 500 mutual funds. Thank you
@@Unshackled-drive I have a mutual fund with an MER a tad over 3%. Oh my God. Even so, since 1997 it has given me an average return almost 21% while the index would have given me 8%. I'll pay my 3% MER to get 20 plus % and you can keep your low fee index fund and earn 8%. Also, mutual funds were not created to beat an index or to compete with an index. Apples and oranges.
@@aliman1146 what is the name of this mutual fund where you are averaging 20%+ gains every year since 1997? I would like to study this mutual fund and look at the data to see if this is true. Without evidence, you could claim anything you want. That is, I could claim I am invested in a mutual fund since 1988, where I am averaging 45%+ gains every year while paying 5% MER. Do you believe me? I don’t believe you either. If what you say is true, show me the proof! State the name of your mutual fund, and I will go look at your funds past performance, and see if what you claim is even remotely true. I strongly doubt it !
I hate mutual funds! I want to get my money out of the mutual funds I do have & the best way to do this? Can I role them into something else? Are breaking them out before they mature really that bad?
Yes you can put them into something else. They don't mature, but if you sell you might have to pay taxes on them so that's something to consider.
I realized I made a mistake investing my money on mutual funds. Can I still withdraw my money?
Hey Stephanie, yes you can sell the mutual fund and invest in something else. It takes a couple days usually to sell the fund.
@@WealthAwesome Thank you. I am learning so much from your videos. Will I be charged by the bank if I withdrew it? Thank you
index funds are the way to go as far as mutual funds go. completely agree otherwise! Great job Chris!
Thanks Nate!
I switched out a lot my MFs for ETFs.
That's great, I hope this helped!
I am sorry my friend there is a lot of misinformation in this video. I assure you of you speak with me in person I can clarify a few more of your doubts. Thanks.
Thanks for sharing
Like it
thanks!
Dave Ramsey says its good and you can get 10% in return lol
haha. Check out ETFs instead!
@@WealthAwesome lol ok