# Tell me why I have Mutual funds in RRSP??



## Northof60 (Nov 22, 2010)

I worry that I am stuck in a dated approach.

For years my wife and I have had three BMO RRSP Mutual Fund Accounts: Mine, hers, and a spousal for her.

I have worked to keep them balanced properly, but with the management expense fees and ratios of ETFs compared to mutual funds, I am wondering if I should be changing my approach.

Would I be wise to open three RRSP BMO Investorline accounts, move the mutuals over and then migrate to ETFs from whichever companies I chose?

Is there any advantage to holding mutuals over ETFs now?

Any input would be appreciated.


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

Nice user ID - I loved that show.

I wouldn't say the mutual fund approach is outdated at all. This is a popular way to go for a lot of people who don't want to spend all their time logged in to investment websites. It's not intended for frequent switching and trading, beyond the occasional change. 

Anyway, if you look at BMO's lineup you should be able to find about three low-fee index funds, with ETF in the name. I think they have cdn, us and int'l etfs that you can simply switch to in your regular account. It is not necessary to get into the whole brokerage thing, as that is qutie time consuming to setup, lots of paperwork etc. You might not save much going that way if you are just a passive investor just buying index/etf funds. I recommend starting out with index/etf fund investing and see how it goes. Monitor performance etc. and decide if you want the hassle of switching to a more robust investment platform.


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## andrewf (Mar 1, 2010)

Like TRM said, it's probably a bit more work. You have to analyse whether the cost savings are worth it. What MER are you paying now? What's your portfolio size? Your MER minus about 0.5% times your portfolio is what you'd probably save--does that dollar amount make the effort seem worthwhile?


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## Eric (Oct 20, 2009)

The BMO Canadian Equity ETF fund charges 1% a year. The equivalent XIU ETF charges 6 times less. Over 20 years, you pay BMO a big chunk of your capital for no value at all.

Opening a BMO investor account and buying an ETF is no trouble at all. Their adviser could do it all for you in an hour.

In my opinion, mutual funds make sense only if you want to do something complex. I have the Mackenzie Cundill Recovery fund that specializes in international companies in a recovery stage. However, just to follow the market, EFT's are far superior. Most managed mutual funds cannot even match their corresponding index.

In an investor account you can have ETF's, stocks and even mutual funds from many companies. You can keep it as simple or as complex as you wish.


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## bltman (Aug 12, 2010)

Eric said:


> The BMO Canadian Equity ETF fund charges 1% a year. The equivalent XIU ETF charges 6 times less. Over 20 years, you pay BMO a big chunk of your capital for no value at all.


ZCN which is the BMO ETF upon which the BMO Canadian Equity ETF Mutual Fund is based only charges .15%. 

The difference between the MERs charged by Vanguard in the US for its indexed mutual funds and the equivalent ETFs is very small (if there is a difference) and accounts for the benefits that mutual funds provides (full dividend reinvestment and dollar cost averaging). On the other hand, the difference in the MER among BMO's indexed mutual funds and the ETFs upon which they are based is pathetic.


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## Brian Weatherdon CFP (Jan 18, 2011)

For me, the point of having mutual funds isn't to have them locked up inside one investment firm. My own plans, my wife's, etc, include funds where we have one platform to facilitate managing them, however with specifically selected fund firms so we can aim at the mandates we want expressed in our investing.

Plus we may be clearer about this "mandate" approach with funds than with ETFs. I've own ETFs at times but like many people it's a shorter term vehicle. Choosing an ETF is buying a swath of the market; buying a fund is believing what a specific management team will do in their segment of the market.


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## OhGreatGuru (May 24, 2009)

How times change. When Index funds started being popular the advice was to not buy any with an MER over 1.0%. This was considered pretty good compared to 2.5% for managed funds. Now people think it is too high, and want to drive it a lot lower. But ETFs have MERs too. Look at this page for example:
http://dan.matan.ca/TSX-TMX-Traded-Exchange-Traded-Funds-Fees-Chart 

Be cautious about going to the trouble of moving all your money for a diminishing return in "savings".


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## Eclectic12 (Oct 20, 2010)

the-royal-mail said:


> Nice user ID - I loved that show.
> 
> I wouldn't say the mutual fund approach is outdated at all. This is a popular way to go for a lot of people who don't want to spend all their time logged in to investment websites. It's not intended for frequent switching and trading, beyond the occasional change.
> 
> Anyway, if you look at BMO's lineup you should be able to find about three low-fee index funds, with ETF in the name. I think they have cdn, us and int'l etfs that you can simply switch to in your regular account. It is not necessary to get into the whole brokerage thing, as that is qutie time consuming to setup, lots of paperwork etc. You might not save much going that way if you are just a passive investor just buying index/etf funds. I recommend starting out with index/etf fund investing and see how it goes. Monitor performance etc. and decide if you want the hassle of switching to a more robust investment platform.


Good points about spending less time selecting investments, checking out websites and checking out BMO's lineup for something better.

However - for the "whole brokerage thing", I disagree that it is time consuming. I was done start to finish in under an hour, many moons ago when mine was setup. Others have posted a similar setup time. Just because I have the capability to spend hours looking at 100's of bonds does not mean I have to.

There will be a bit of a learning curve to how to go about order funds (and you'll have to make sure the ones you want are offered). Being able to choose when to buy/sell, as well as being able to jump on a wide range of investment opportunities, without waiting for the brokerage account to be setup, could be worth it. 

I'd recommend keeping an open mind, deciding what makes the most sense based on knowledge/short term plan and go from there.

Staying with BMO limits the choices where if you change your mind there will be a delay waiting for the brokerage account to be setup. 

Opening the brokerage account allows more options but likely adds commissions and a bit of work (i.e. you have buy/sell instead of phoning the bank).


Each option has different factors for different people. IMO, as long as it meets your needs and is relatively cheap, it is a good choice.


Cheers


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## Northof60 (Nov 22, 2010)

Thanks for all the input everyone.

Opening up an investorline account isn't the issue. My wife and I already have two each. One each for TFSAs, and once each for TPC that we use to invest in stocks and ETFs.

I think I probably just need to do some more reserach and dig a little deeper on the whole cost of ETF versus better management of mutuals. Regardless, by opening more investorline accounts specfic to RRSPs then I am not limited to BMO RRSPs, so that may be worth it right there.

Thanks again for all the input everyone.

PS. We took the time to set up TFSA investorline accounts, and I am glad we did....


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