On Saturday, I enjoyed Jon Chevreau's article regarding the relative costs of Canadian mutual funds, versus the Vanguard funds in the US. Chevreau points out the massive gulf between typical Canadian and American management expense ratios. Regular listeners will recognize this is a pet peeve of mine. The significant drag on an investor's portfolio caused by management expense ratios should not be forgotten, especially as time passes.
The web site that illustrates this best is www.investored.ca, which has a great calculator, indicating the long term costs of buying traditional retail mutual funds. Alternatively, you canfind the calculator and read my commentary on my blog. Over the long term, an investor could pay more in fees than their inital investment. Spound preposterous? Take your current portfolio, and calculate the fees at 2.5%, over 25 years, using an eight percent return. The results may shock you.
If you are interested in finding out your alternatives, speak with your advisor, or give me a call.
Sunday, October 11, 2009
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