# Low cost mutual fund companies



## PharmD (Dec 21, 2011)

I know from reading here that most of you here do not invest in mutual funds and quite frankly disagree with others doing so, however I was wondering if anyone here has had experience dealing with any of the low fee mutual funds in Canada, in particular PH&N, Mawer, Leith Wheeler, or Steadyhand? If so, what was your experience like? Did you find them helpful in selecting an appropriate asset mix, selecting the best mix of funds for at asset mix, performing portfolio reviews, and just generally providing calm advice during highly volatile times? I do not have enough to invest to qualify for discretionary management.

Please no discussions on the merits or lack thereof of mutual funds. I do index as well and have traded individual stocks in the past, but this is the approach that works best for me. Thanks for any help.


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## andrewf (Mar 1, 2010)

It's an oxymoron. MFs are inherently high cost.

I find most of them to be closet indexers who just collect their fees, write the discussion once a quarter and then go vacation on their yacht.


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## dogleg (Feb 5, 2010)

I agree with andrew . I have one MF and only hold it because it is available to me through a pension fund at 1.3% MER . Directly it has a MER of 2.6% . It is a monthly income fund holding mainly Canadian stocks and has good performance . If interested I will gladly supply more details .


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## OptsyEagle (Nov 29, 2009)

I think that you need to understand the difference between most high cost funds and low cost funds. The difference is usually a financial advisor. Part of those higher MERs are supposed to go to pay for the investment advice and ongoing support and hand holding, etc. If you need this advice then you should be prepared to pay for it.

I can't say whether some of the firms you mentioned wouldn't talk to you on the phone for 15 minutes, go over a useless questionaire and then drop your money in whatever fund package the useless questionaire directed them to. I do doubt that if you ever had a problem with the funds or had a question, I doubt you would get the same person to talk to again, who you spent the time to talk to in the first place.

Anyways, if you want to have advice to go along with the money management, you should be prepared to pay for it. The low cost funds are really for do-it-yourselfer's, if you ask me.


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## slacker (Mar 8, 2010)

I hold TD e-series mutual funds, and a work group RRSP mutual fund with Manulife. They're pretty low cost, 0.31% and 0.25% respectively.

Mutual funds are better than ETF's because they don't require trading commission.


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## jwsmith519 (Dec 13, 2009)

slacker said:


> I hold TD e-series mutual funds, and a work group RRSP mutual fund with Manulife. They're pretty low cost, 0.31% and 0.25% respectively.
> 
> Mutual funds are better than ETF's because they don't require trading commission.


That's why the best thing to do is to buy into a mutual funds throughout the year. Then redeem your units and one an ETF. One annual commissions.

I agree though--commissions are as much killers as high MERs. For some reason people ignore commissions or something. I stopped ignoring it when I realized I was trading enough, that it pretty much wiped out my annual dividends. Since then, no way will I let commissions be more than $100 a year. Anything more is crazy.


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## dotnet_nerd (Jul 1, 2009)

jwsmith519 said:


> That's why the best thing to do is to buy into a mutual funds throughout the year. Then redeem your units and one an ETF. One annual commissions.
> 
> I agree though--commissions are as much killers as high MERs. For some reason people ignore commissions or something. I stopped ignoring it when I realized I was trading enough, that it pretty much wiped out my annual dividends. Since then, no way will I let commissions be more than $100 a year. Anything more is crazy.


Commissions are KILLERS??

I pay a penny a share with Interactive Brokers.

Let's see, on a $20 ETF...

.01 / 20 = 0.05% commission

Not to mention you can buy an ETF with a limit buy order below the current price and, more often than not, it will fill during the interday "noise". 

MF's are fixed-priced during the day and you can't take advantage of dips.


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## jwsmith519 (Dec 13, 2009)

dotnet_nerd said:


> Commissions are KILLERS??
> 
> I pay a penny a share with Interactive Brokers.
> 
> ...


I guess all this matters if you like to trade. But most people are (and should be!) buy and holders.

As for limit orders on ETFs, sure I don't use market orders. But really unless you're a day trader, it doesn't matter in the long run.


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## Belguy (May 24, 2010)

If you haven't already done it, you might consider setting up a 'Watchlist' at the Globe and Mail website consisting of some low fee managed funds and some comparable ETF's from the same sector to compare their relative performances.

For example, some of the funds that I track are:

AGF Emerging Markets

Beutel Goodman Canadian Equity D
Beutel Goodman Income D
Beutel Goodman Small Cap D

Mawer Canadian Equity
Mawer World Investment

McLean Budden Cdn Equity Value D

National Bank Small Capitalization

PH&N Bond D
PH&N Dividend Income D

RBC Canadian Equity Income D
RBC Global Precious Metals D
RBC Global Resources D
RBC Monthly Income D
RBC North American Value D
RBC O'Shaughnessy All-Cdn. Equity

Then add ETF's for similar sectors.

With some of these managed funds, you are getting the same managers as some of the large pension funds use.

Sometimes, managed funds are especially useful for small caps, specialties and emerging markets investments while ETF's might be a lowest fee choice for North American Large Caps.


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## Four Pillars (Apr 5, 2009)

jwsmith519 said:


> I agree though--commissions are as much killers as high MERs.


This is only true for smaller portfolios or very active traders.


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## PharmD (Dec 21, 2011)

OptsyEagle,

I agree that if financial planning is what a person needs then they should pay for just that. The reality for myself, however, is that I am still under 30 years old and am not at this point too concerned about things like estate planning and all the tax implications involved once it is time to draw down my money. I am just focused on accumulation of wealth at this point. Once I am older consulting a financial planner is definitely something on my list of things to do. What I am looking for is something between full financial planning and DIY.

I am concerned too about what you mentioned in terms of never getting the same person which is one reason that I am more interested in Steadyhand as they have an extremely small staff and have told me that I would be dealing exclusively with one person there. PH&N has stated the same thing although I am not sure about the other two companies.


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## PharmD (Dec 21, 2011)

Belguy,

I do use the Globeinvestor site and find it useful. Tracking day to day changes is not something I think is beneficial, but its good for looking at longer periods of time. It's interesting that the Steadyhand people even told me that they recommend that I use an ETF for exposure to the US market as they find little value in active management in that market. I agree the biggest benefits are in small caps, international markets, and I would even say bonds (thinking of PH&N bond funds or Steadyhand Income fund).

My other option I am considering is just dumping a bunch of money into Mawer's balanced fund which actually has a lower MER (0.98) than if the parts were held separately with about 50% of my funds and index the other 50% and then slowly sell my other positions at appropriate price points. The problem with this approach is that it is not flexible, but MAW104 is an exceptional fund and would probably work for now.


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## dogcom (May 23, 2009)

Sometimes higher MER mutual funds are the place to be. In the specialty areas like small caps, value, precious metals and so on a good manager can make you some serious returns. So belguy does have a good point there.


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## cannew (Jun 19, 2011)

If one had a $500,000 portfolio even a 0.025% fee cost you $1,250, never mind Cap Gains(loss) if the fund is selling during the year.

I much perfer the NO FEE option.


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## HaroldCrump (Jun 10, 2009)

dogcom said:


> Sometimes higher MER mutual funds are the place to be. In the specialty areas like small caps, value, precious metals and so on a good manager can make you some serious returns.


But has that been the case truly?
In theory, sure, but has it panned out?
I look at some of the regular managed small cap funds offered by our big banks and the returns are pretty mundane.
In fact, you'd have done better with an unmanaged large cap ETF like XIU, esp. once you account for the stable dividends of the large caps.

There _may_ be excellent managers that run small cap funds among the specialized mutual fund companies, but those are few and far between.

IMHO, a large managed mutual fund in the small cap space works against itself.

The diversification hurts, because for every 1 small cap that succeeds, 10 others bite the dust.

Secondly, as the fund gets larger and larger, it can't truly buy small caps any more.
If it does manage to find a couple of diamonds in the dust, the impact of even a 10 bagger stock within the portfolio will be marginal.

It will either need to buy majority controlling stakes in those firms or will have to start diversifying more and more or will have to start increasing the min. market cap limit it considers for investments, soon making it a mid cap and then eventually making it yet another regular, ho-hum equity fund.

Therefore, I believe over a long period of time, managed small cap funds will revert to the overall market average.

That doesn't mean there's no place for small cap stocks for an investor.


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## Cal (Jun 17, 2009)

An article showing how a higher MER can eat away at average returns:

http://www.theglobeandmail.com/glob...your-investment-over-25-years/article2280899/


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## Sampson (Apr 3, 2009)

cannew said:


> If one had a $500,000 portfolio even a 0.025% fee cost you $1,250, never mind Cap Gains(loss) if the fund is selling during the year.
> 
> I much perfer the NO FEE option.


Which one is that? At $500k what options do you have for no fee?


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## OhGreatGuru (May 24, 2009)

PharmD said:


> ...
> Please no discussions on the merits or lack thereof of mutual funds. ... Thanks for any help.


So much for PharmD's hopes. Maybe he will have to try another forum to get an answer to his question. This thread has been hijacked by the usual suspects in the MF/Anti-MF debate.


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## jwsmith519 (Dec 13, 2009)

OhGreatGuru said:


> So much for PharmD's hopes. Maybe he will have to try another forum to get an answer to his question. This thread has been hijacked by the usual suspects in the MF/Anti-MF debate.


I'm pretty sure one of my responses was quite reasonable:

"That's why the best thing to do is to buy into a mutual funds throughout the year. Then redeem your units and one an ETF. One annual commission."

Buy your banks fund with $0 commissions and viola, you have lower cost funds. When you do your annual ETF purchase, you move into super cheap ETFs. Of course, I'm assuming that PharmD is purchasing throughout the year, which for most people who don't follow the market, is the best way to invest.


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## Sampson (Apr 3, 2009)

jwsmith519 said:


> Buy your banks fund with $0 commissions and viola, you have lower cost funds.


It really depends on how much money is involved here. Keeping money in MFs (even low cost ones) creates a drag on returns based on the length of time and amount you hold in them.

If the OP is buying $10k quarterly, or even $5k, then why bother with the MFs at all, go right to the ETFs.


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## jwsmith519 (Dec 13, 2009)

Sampson said:


> If the OP is buying $10k quarterly, or even $5k, then why bother with the MFs at all, go right to the ETFs.


So let's assume buying into 4 funds with $10k on a quarterly basis. And let's assume an ETF has an MER of 0.17% (eg. XIU). While a bank index fund has an MER of 0.71% (eg. RBC Canadian Index Fund RBF556). And let's assume that commissions are $10 per trade. Let's also assume that MERs are consistent across all 4 funds.

With the ETF:
Commissions of 4 funds x 4 times her year x $10 = $160
MER on $10,000 = $17
Total = $177

With the Mutual Fund:
Commissions = $0
MER on $10,000 = $71
Total = $71


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## Four Pillars (Apr 5, 2009)

jwsmith519 said:


> So let's assume buying into 4 funds with $10k on a quarterly basis. And let's assume an ETF has an MER of 0.17% (eg. XIU). While a bank index fund has an MER of 0.71% (eg. RBC Canadian Index Fund RBF556). And let's assume that commissions are $10 per trade. Let's also assume that MERs are consistent across all 4 funds.
> 
> With the ETF:
> Commissions of 4 funds x 4 times her year x $10 = $160
> ...




Do you think there might be a possibility that the asset balance increases over time?


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## jwsmith519 (Dec 13, 2009)

Four Pillars said:


> Do you think there might be a possibility that the asset balance increases over time?


I think you missed the point about buying into funds and then switching to ETFs once a year thus minimizing commissions. Either that, or I don't know what you're saying.


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## cannew (Jun 19, 2011)

Sampson:

The no fee option is to invest on your own, preferrably in Dividend Growth stocks. Find good ones with a long history of dividends, div growth, buy when value priced and hold. The only fees are trading commissions.


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## zylon (Oct 27, 2010)

jwsmith519 said:


> "Dividend Growth" stocks? Never heard of those


http://canadianfinanceblog.com/dividend-yield-vs-dividend-growth/


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## the-royal-mail (Dec 11, 2009)

I know what Guru is saying about having to pay for the advice component of these funds, but as I mentioned in another thread, I am not really seeking much advice these days when I buy MFs. I usually like to make my own decisions about which funds I am buying. I am not at the point yet where I start messing with brokerage accounts and the like, so as I had asked in the other thread I wish there were some middle ground funds with low fees that I could purchase through the same channel as retail MFs. I know these exist and I do have some of them, such as some index funds and some bond ladder ETFs, but the selection is very limited. Here's hoping the banks can continue to expand the middle ground of cheaper funds for those in my demographic.


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## Four Pillars (Apr 5, 2009)

jwsmith519 said:


> I think you missed the point about buying into funds and then switching to ETFs once a year thus minimizing commissions. Either that, or I don't know what you're saying.


I don't see that in your post.

If that is your plan, then yes, I agree you could save some money. Especially if you are doing monthly contributions.

That's essentially what I do in fact through a group rrsp at work. Except I only switch to ETFs (at Questrade) every two/three years or so.

The only way this works is if you can transfer the money from the mutual funds to the ETFs without any transfer fee (ie within the same company).

Personally, if I didn't have the group rrsp option, then I would just buy ETFs and not bother with the mutual funds. 

I pay $5 per trade, so if I did an ETF trade every couple of months - I'm fine with that cost.


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## Sampson (Apr 3, 2009)

RE: Buying MFs first, then switching to ETFs.

What if that is suddenly $10k per fund (4 in your example), per quarter? Like I mentioned, depends on the sums OP is using. Also why rebalance quarterly? I have seen studies comparing rebalancing frequency, and nothing definitively suggests quarterly is advatageous over semi-annually or annually. this means the drag from higher cost MFs have a larger influence.

It just depends on the sum we are talking about.

RE: no fee options. Trading costs? again, depends on sums. Small accounts, these fees are far from nothing. also, trading frequency is critical


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## Sampson (Apr 3, 2009)

jwsmith519 said:


> So let's assume buying into 4 funds with $10k on a quarterly basis. And let's assume an ETF has an MER of 0.17% (eg. XIU). While a bank index fund has an MER of 0.71% (eg. RBC Canadian Index Fund RBF556). And let's assume that commissions are $10 per trade. Let's also assume that MERs are consistent across all 4 funds.
> 
> With the ETF:
> Commissions of 4 funds x 4 times her year x $10 = $160
> ...


This math is incorrect.

In your example, you have invested $40k, not $10k. The fee paid on the MF would be 4 times what you show = $284. but even that is not 100% correct, since you haven't owned the funds/ETF for the entire year, but the effect should be similar among ETFs and MFs.

Also, the main issue I have with your example is the frequency of trading. In accumulation phase, there is no need to make 4 purchases quarterly. Just add to a single lagging asset class, 1 trade per quarter and you'll be fine. I never find it necessary to have an exact % breakdown in a portfolio. So in your example, one could reduce the commissions on ETF portfolio to $40-$100 per year.


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## PharmD (Dec 21, 2011)

Thanks to everyone who replied to my questions. Clearly the answer is that no one has had any experiences with these companies, but that's okay.


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## zylon (Oct 27, 2010)

*Bump - December 2015*

I suppose *resources sector* has been beaten down enough to start considering a place to enter.
Post #9, Belguy mentioned *RBC Global Resources D*; this would be a good place to start while waiting for a bottom - perhaps 2016(?)

"The fund will invest in companies that are involved directly or indirectly in the exploration, development, production or distribution of natural or other resources."


RBC Global Resources Sr D (RBF1041:CAD)
MER 1.27%
Inception : July 2007
Energy : 57%
Basic materials : 37%
US equities : 54%
Non-US : 43%
Minimum investment : $500 for RBC and PHN clients
Manager : Chris Beer


*Recent top-10 disclosed holdings:*
Total SA 5.47% 
Suncor Energy Inc 4.19 
EQT Corp 3.86 
Halliburton Co 3.06 
EOG Resources Inc 3.02 
Dow Chemical Co 2.94 
Anadarko Petroleum Corp 2.92 
Concho Resources Inc 2.79 
Exxon Mobil Corporation 2.62 
BHP Billiton PLC 2.59


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