100% of TH-cam revenues received by the Canadian Portfolio Manager channel have been donated to SickKids Foundation. If this video has helped save you a few dollars on fees or taxes, please consider donating a portion of your savings to SickKids Foundation: www.sickkidsfoundation.com/
Awesome! a Canadian Bogle-Head Channel, just what I have been looking for the last 6 months since I immigrate. I knew I wouldn't find these among the top viewing channels.
Don’t forget his biz partner Dan Bartolotti’s book: Reboot your portfolio. I just read it and passed on. Dan also has a great online blog. Larry Bates is a good Canadian investment specialist and author too. Best of luck.
Good info and insight. I can share my first hand recent experience when I transferred all myself direct portfolios to Fisher Investment December 2021 and what a mistake that was. Anyone considering paying wealth management firms should think twice - about the assurance (or lack thereof) of active manager being able to beat passive index ETF and not to mention the exuberant fee these firms charge for lack of performance.
Great video, Justin. I have believed in the efficient market hypothesis for almost 40 years. I would describe myself as an unrepentant indexer. Here is a question that has been on my mind for some time. I have read articles about an index bubble or tipping point and have come to the conclusion that there will always be a kind of equilibrium between active and passive investing. There will always be enough active investors to ensure price discovery. But what if there were no active investors left? Would it not be possible that the market would remain relatively efficient? I am reminded of Francis Galton's observation that the average of the guesses of the weight of an ox at a fair turned out to be within a few pounds of the actual weight. Or, think of guessing how many jellybeans in a jar. I think that most of the participants at the fair were not well-informed livestock experts. Maybe it's a silly question, but I just have this feeling that the trading even of unsophisticated investors would result in prices not far from the intrinsic value of the stocks.
@daviddalton8545 - Theoretically, if there were no active investors left, I (and many others) would start analyzing individual companies to make some easy money. In reality, as long as there is greed in the world, there will be active managers looking to profit :)
Thanks Justin. Now you know why we left RBC...it was way too difficult to understand what was going on with our cash moving between mutual funds and individual stocks. The reports were like mini phone directories, full of charts and tables, but slim on the fees details. I guess folks get drawn into the thrill of 'beating the market'.
@David Bateson - Yeah, the active management industry has done a bang-up job convincing investors their sole mission in life is to 'beat the market' (it isn't). Advisors should not be expected to beat the market (it's a completely unrealistic expectation). Their job is to provide good financial advice, which should include recommending low-cost and diversified securities, like passively managed ETFs or index funds.
@@JustinBenderCPM ...plus they love to sell and buy which incurs extra fees (especially stocks which the bank are promoting). We always left a meeting not understanding anything but had a ten page report that looked like it was written for a World Bank analyst. Very happy we moved...PWL
As I understand it, XUU is a fund-of-funds, but are they starting to hold the underlying assets directly? I ask this because it seems that the top 10 holdings is displaying stocks as well as the ETFs it holds. A few months back, the top 10 holdings only showed the underlying ETFs.
@LearnWithKris - I just spoke with a BlackRock representative, and they informed me that the individual U.S. stocks they've started to hold in XUU are to help address the short-term index tracking error of XUU (i.e., by filling in the largest missing securities in IVV/IJH/IJR). This was done as an alternative to realizing large capital gains within the fund.
Great vid. I have a question though. I’m really really new to investing and I made the decision to make monthly contributions into a Questrade QuestWealth portfolio of etfs for my TFSA - I went with this option because it requires very little effort on my part thanks to the automatic deposits, rebalancing, drip etc which made sense for me as someone just getting started. I considered going with Wealthsimple which offers pretty much the same robo-advisor option but the MERs are higher. My question is this - Questrade says that their Questwealth etf portfolios are “actively managed” whereas Wealthsimple says their etf portfolios are “passively managed” but Wealthsimple’s MERs are higher….what does this mean? How is this possible? I figure my best bet is to go with whatever option has the lowest fees but will active management negate this by underperforming the passive option in the long term?
@Sadie Moland - Great question! I think it's safe to say that both QuestWealth and Wealthsimple are both actively managed strategies (even if they might incorporate passively managed funds into their portfolios). The least actively managed option in my opinion are the Vanguard Asset Allocation ETFs (with the iShares Core ETF Portfolios a close second).
@@JustinBenderCPM thanks so much for responding to my question so quickly! That makes a lot more sense to me that both those robo-advisor portfolios would be considered active. I actually did decide recently to open a self directed investing account for a different investing goal from my Questwealth one, and for that one I have been buying shares regularly of the iShares ESG balanced etf portfolio so I’m glad you mentioned all asset etf portfolios like that as good options.
It is clear that low cost funds beat hire cost funds. But what about retail investors who pick their own stocks, and manage to keep their funds low? Eg. WS Trade has comission free Canadian trades, and NBDB likewise has commission free trades. How would such retail investors perform on average vs. a passive fund?
@Mark Hermann - Research indicates on average active retail investors are being exploited by institutional active managers (like active mutual funds). The active mutual funds outperform the market before fees (by taking advantage of active retail investors). Of course, after fees, active mutual funds still underperform the market: www.advisorperspectives.com/articles/2021/09/11/the-suckers-at-the-investment-table
Thanks Justin. Great video and evidence-base. How do you respond to the argument that mutual funds lose because of the fees, but independent investors who employ 5-factor model investing and avoid frequent transactions and high fees, can still beat the passive benchmark?
@Aws AlMufleh - Any active strategy can still theoretically beat the index. Factor investing is active investing. And an investor employing this strategy will either underperform or outperform the index over their investment timeframe (but there is absolutely no guarantee of outperformance, even over longer periods of time).
@Andrew D. - If an investor is comfortable with the risk of a 60/40 portfolio in retirement (and they've had a financial planner run retirement projections and Monte Carlo simulations with reasonable return and standard deviation assumptions), I don't see an issue with this strategy.
@Ivan Bilicki - I wouldn't bother complicating a broad market-cap weighted index portfolio with a factor tilting strategy that has no guarantee of outperforming this simpler approach. A factor strategy is active management, and it will either underperform or outperform an index strategy over any period. Having said that, if you're going to invest in a factor-tilted portfolio, ensure it is broadly diversified, low-cost, and tax-efficient (DFA does this really well, in my opinion). And don't benchmark your factor portfolio against a broad-market index portfolio (it will just create behavioural issues, as there will be significant underperformance and outperformance from year-to-year, relative to a market-cap weighted index approach).
@@JustinBenderCPM right, it would have been either DFA now that they are public, or Avantis, but I am not really sure I am sold on the idea of factors. I'll probably stick to the plaid strategy :) Thank you for all the good work, as always.
I assume then the few actively managed funds that beat the market did so by a huge margin? Is there a strong reason why most active funds underperform?
@Tanah Merah - Most research has indicated the opposite - the actively managed funds that beat the market tend to do so by a small margin on average (but the ones that underperform the market tend to do so by a larger margin, on average).
@YB C - Stock market downturns are an inevitable part of investing. Perhaps you should review your risk tolerance, as you may not be as comfortable with your equity allocation as you initially had thought. We posted this video last year to encourage investors to not take more risk than they were comfortable with (feel free to check it out): How to Choose Your Asset Allocation ETF: th-cam.com/video/JyOqqtq12jQ/w-d-xo.html
Very interesting. Have you ever done a show on what you would consider a great retirement portfolio, and how you would withdraw 4% ( dividends or sell off shares), and what part bonds or covered call etf's would play, if any in that portfolio? Thanks
@HamiltonRb - There's no perfect retirement portfolio, but a low-cost broad/total market stock and bond ETF portfolio would be very close. The mix between stocks and bonds would differ for each individual investor, based on their personal situation. Covered call ETFs would not play a part in this portfolio.
@@HamiltonRb - Nope - I would first use interest from bonds/GICs and dividends from stocks to fund a portion of the withdrawals. I would then sell a portion of whichever asset class was up in value to fund the remaining distribution (i.e., a total return approach).
Hi Justin, love your channel and the work you and Ben are doing. I have a question about the recent popularity of the income funds that implement covered calls and even leverage for the high yields. Would you advise to stay away from them
@Vic Fontaine - I'm glad you've been enjoying the channel! It looks like you've already answered your own question - there's no need to seek other strategies or higher yields. Investors just need to embrace a low-cost broad-market index strategy and save.
100% of TH-cam revenues received by the Canadian Portfolio Manager channel have been donated to SickKids Foundation.
If this video has helped save you a few dollars on fees or taxes, please consider donating a portion of your savings to SickKids Foundation: www.sickkidsfoundation.com/
Going back through your archives! Great video Justin 👍
Awesome! a Canadian Bogle-Head Channel, just what I have been looking for the last 6 months since I immigrate. I knew I wouldn't find these among the top viewing channels.
Don’t forget his biz partner Dan Bartolotti’s book: Reboot your portfolio. I just read it and passed on. Dan also has a great online blog. Larry Bates is a good Canadian investment specialist and author too. Best of luck.
Good info and insight. I can share my first hand recent experience when I transferred all myself direct portfolios to Fisher Investment December 2021 and what a mistake that was. Anyone considering paying wealth management firms should think twice - about the assurance (or lack thereof) of active manager being able to beat passive index ETF and not to mention the exuberant fee these firms charge for lack of performance.
Great video, Justin. I have believed in the efficient market hypothesis for almost 40 years. I would describe myself as an unrepentant indexer. Here is a question that has been on my mind for some time. I have read articles about an index bubble or tipping point and have come to the conclusion that there will always be a kind of equilibrium between active and passive investing. There will always be enough active investors to ensure price discovery. But what if there were no active investors left? Would it not be possible that the market would remain relatively efficient? I am reminded of Francis Galton's observation that the average of the guesses of the weight of an ox at a fair turned out to be within a few pounds of the actual weight. Or, think of guessing how many jellybeans in a jar. I think that most of the participants at the fair were not well-informed livestock experts. Maybe it's a silly question, but I just have this feeling that the trading even of unsophisticated investors would result in prices not far from the intrinsic value of the stocks.
@daviddalton8545 - Theoretically, if there were no active investors left, I (and many others) would start analyzing individual companies to make some easy money. In reality, as long as there is greed in the world, there will be active managers looking to profit :)
So, did the video about why not just invest in the winning funds ever come out? I couldn't find it on the channel.
Thanks Justin. Now you know why we left RBC...it was way too difficult to understand what was going on with our cash moving between mutual funds and individual stocks. The reports were like mini phone directories, full of charts and tables, but slim on the fees details. I guess folks get drawn into the thrill of 'beating the market'.
@David Bateson - Yeah, the active management industry has done a bang-up job convincing investors their sole mission in life is to 'beat the market' (it isn't). Advisors should not be expected to beat the market (it's a completely unrealistic expectation). Their job is to provide good financial advice, which should include recommending low-cost and diversified securities, like passively managed ETFs or index funds.
@@JustinBenderCPM ...plus they love to sell and buy which incurs extra fees (especially stocks which the bank are promoting). We always left a meeting not understanding anything but had a ten page report that looked like it was written for a World Bank analyst. Very happy we moved...PWL
As I understand it, XUU is a fund-of-funds, but are they starting to hold the underlying assets directly? I ask this because it seems that the top 10 holdings is displaying stocks as well as the ETFs it holds. A few months back, the top 10 holdings only showed the underlying ETFs.
@LearnWithKris - I just spoke with a BlackRock representative, and they informed me that the individual U.S. stocks they've started to hold in XUU are to help address the short-term index tracking error of XUU (i.e., by filling in the largest missing securities in IVV/IJH/IJR). This was done as an alternative to realizing large capital gains within the fund.
@@JustinBenderCPM Thank you for the information.
Great vid. I have a question though. I’m really really new to investing and I made the decision to make monthly contributions into a Questrade QuestWealth portfolio of etfs for my TFSA - I went with this option because it requires very little effort on my part thanks to the automatic deposits, rebalancing, drip etc which made sense for me as someone just getting started. I considered going with Wealthsimple which offers pretty much the same robo-advisor option but the MERs are higher. My question is this - Questrade says that their Questwealth etf portfolios are “actively managed” whereas Wealthsimple says their etf portfolios are “passively managed” but Wealthsimple’s MERs are higher….what does this mean? How is this possible? I figure my best bet is to go with whatever option has the lowest fees but will active management negate this by underperforming the passive option in the long term?
@Sadie Moland - Great question! I think it's safe to say that both QuestWealth and Wealthsimple are both actively managed strategies (even if they might incorporate passively managed funds into their portfolios).
The least actively managed option in my opinion are the Vanguard Asset Allocation ETFs (with the iShares Core ETF Portfolios a close second).
@@JustinBenderCPM thanks so much for responding to my question so quickly! That makes a lot more sense to me that both those robo-advisor portfolios would be considered active. I actually did decide recently to open a self directed investing account for a different investing goal from my Questwealth one, and for that one I have been buying shares regularly of the iShares ESG balanced etf portfolio so I’m glad you mentioned all asset etf portfolios like that as good options.
Fantastic! I always feel better about VGRO and chill after watching your videos. Thank you for the excellent content.
@Scott Shafer - I'm glad you enjoyed it! :)
It is clear that low cost funds beat hire cost funds. But what about retail investors who pick their own stocks, and manage to keep their funds low? Eg. WS Trade has comission free Canadian trades, and NBDB likewise has commission free trades. How would such retail investors perform on average vs. a passive fund?
@Mark Hermann - Research indicates on average active retail investors are being exploited by institutional active managers (like active mutual funds). The active mutual funds outperform the market before fees (by taking advantage of active retail investors). Of course, after fees, active mutual funds still underperform the market:
www.advisorperspectives.com/articles/2021/09/11/the-suckers-at-the-investment-table
Thanks Justin. Great video and evidence-base. How do you respond to the argument that mutual funds lose because of the fees, but independent investors who employ 5-factor model investing and avoid frequent transactions and high fees, can still beat the passive benchmark?
@Aws AlMufleh - Any active strategy can still theoretically beat the index. Factor investing is active investing. And an investor employing this strategy will either underperform or outperform the index over their investment timeframe (but there is absolutely no guarantee of outperformance, even over longer periods of time).
Hi Justin.
What are your thoughts on XBAL as the only fund in a retirement portfolio ? Thanks for a great content.
@Andrew D. - If an investor is comfortable with the risk of a 60/40 portfolio in retirement (and they've had a financial planner run retirement projections and Monte Carlo simulations with reasonable return and standard deviation assumptions), I don't see an issue with this strategy.
@@JustinBenderCPM Thank you
What's your view on tilting your passive index portfolio towards factors?
@Ivan Bilicki - I wouldn't bother complicating a broad market-cap weighted index portfolio with a factor tilting strategy that has no guarantee of outperforming this simpler approach. A factor strategy is active management, and it will either underperform or outperform an index strategy over any period.
Having said that, if you're going to invest in a factor-tilted portfolio, ensure it is broadly diversified, low-cost, and tax-efficient (DFA does this really well, in my opinion). And don't benchmark your factor portfolio against a broad-market index portfolio (it will just create behavioural issues, as there will be significant underperformance and outperformance from year-to-year, relative to a market-cap weighted index approach).
@@JustinBenderCPM right, it would have been either DFA now that they are public, or Avantis, but I am not really sure I am sold on the idea of factors. I'll probably stick to the plaid strategy :) Thank you for all the good work, as always.
But...the indices have been bearing down for 6 months now. How is that good?
@Betty Angwenyi - So stocks are cheaper than they were 6 months ago? Sounds pretty good to me.
I assume then the few actively managed funds that beat the market did so by a huge margin?
Is there a strong reason why most active funds underperform?
@Tanah Merah - Most research has indicated the opposite - the actively managed funds that beat the market tend to do so by a small margin on average (but the ones that underperform the market tend to do so by a larger margin, on average).
stock is in free fall, what can we do now?
@YB C - Stock market downturns are an inevitable part of investing. Perhaps you should review your risk tolerance, as you may not be as comfortable with your equity allocation as you initially had thought.
We posted this video last year to encourage investors to not take more risk than they were comfortable with (feel free to check it out):
How to Choose Your Asset Allocation ETF:
th-cam.com/video/JyOqqtq12jQ/w-d-xo.html
Very interesting. Have you ever done a show on what you would consider a great retirement portfolio, and how you would withdraw 4% ( dividends or sell off shares), and what part bonds or covered call etf's would play, if any in that portfolio? Thanks
@HamiltonRb - There's no perfect retirement portfolio, but a low-cost broad/total market stock and bond ETF portfolio would be very close. The mix between stocks and bonds would differ for each individual investor, based on their personal situation. Covered call ETFs would not play a part in this portfolio.
@@JustinBenderCPM Thanks So you would sell off 4% of the portfolio to cover expenses?
@@HamiltonRb - Nope - I would first use interest from bonds/GICs and dividends from stocks to fund a portion of the withdrawals. I would then sell a portion of whichever asset class was up in value to fund the remaining distribution (i.e., a total return approach).
You may want to be mindful that the additional capital gain may trigger an OAS clawback.
@@JustinBenderCPM Vanguard offers the VRIF which I consider using for my own portfolio during retirement
Hi Justin, love your channel and the work you and Ben are doing. I have a question about the recent popularity of the income funds that implement covered calls and even leverage for the high yields. Would you advise to stay away from them
@Vic Fontaine - I'm glad you've been enjoying the channel! It looks like you've already answered your own question - there's no need to seek other strategies or higher yields. Investors just need to embrace a low-cost broad-market index strategy and save.
@@JustinBenderCPM thanks Justin, they seem so tempting. Keep up the great work
Lol. I beat the market consistently
@anthonybondo94. If this were true, you'd be famous.
@@JustinBenderCPM just a regular guy who actually tries