The high cost of food and mortgage payments crushes household budgets these days.
The high price of investments just hurts your retirement.
It’s human nature to worry more about what’s happening today versus the future, but retirement could last 30-plus years. You owe it to your future financial security to get more militant about investing fees. Try channelling some of your anger about high grocery prices.
A recent report from Canada’s securities regulators shows that fees for two bedrock investing products have fallen in recent years. The inference made in the report is that upgraded disclosure requirements for mutual funds and exchange-traded funds have led to more cost-conscious decision-making by both investors and the investment industry.
The declines on an industry-wide basis are minor and will remain so in future until investors demand better. But at the same time, there’s a thriving low-fee investing niche here in Canada. It’s small, but it has everything you need.
Back in 2016, securities regulators began requiring investment companies to disclose how much clients pay for investment advice, and how their accounts have performed. A just-released study commissioned by the Canadian Securities Administrators shows how mutual fund and ETF fees changed.
On an asset-weighted basis, giving more emphasis to bigger funds, the average change in management expense ratios was a decline of 0.13 percentage points from 2013 to 2016 and 0.16 percentage points from 2017 to 2020. For ETFs, the average MER change was a decline of 0.03 points from 2013 to 2016 and 0.04 points from 2017 to 2020. The lower decline for ETFs results from the fact that they already have comparatively smaller fees.
Investment industry polls show there’s still some uncertainty about fees investors pay and what precisely is covered and not covered by the new fee disclosure rules. But with fees, it can be more productive to look at the small picture as opposed to the big.
A good example can be found in the balanced fund category, which is popular because it combines a diversified blend of stocks and bonds in a single convenient product. The CSA study shows that asset-weighted MERs for balanced mutual funds fell steadily from 2013 through 2020 from 2.1 per cent to 1.78 per cent.
The ETF version of the balanced fund is called the asset allocation fund, and it typically comes with an MER of 0.2 per cent to 0.35 per cent. About $25-billion has been invested in these funds since they were popularized about six years ago, which is small but still encouraging. Even if you pay a commission to a broker to buy an asset allocation, the low MER still means significant savings. Note that mutual fund fees include a segment to cover advice and service, while ETFs are self-serve.
Commissions charged by online brokers to buy stocks and funds can be as much as nearly $10 per buy and sell transaction. But there are some zero-commission brokers – Wealthsimple, National Bank Direct Brokerage, Desjardins Online Brokerage and, with some limitations, TD Easy Trade. Use one of these brokers or apps to invest in asset allocation ETFs and have a low-cost, diversified investing plan you can follow for decades.
You can now set up an account at an online broker or trading app without the need to visit a branch or mail in forms. Bank branches do exert a powerful influence on investors, though. The RBC Select Balanced Portfolio, available for purchase through the Royal Bank of Canada branch RY-T network, had assets of close to $52-billion as of early May.
The MER for the branch-sold version of this fund is 1.94 per cent, a lot of which goes to cover advice. If you’re not feeling the vibe of that service, consider the cheaper asset allocation ETF you buy on a self-serve basis.
A risk in raising awareness about fees is that you end up shaming people for their investing decisions, which isn’t a great motivator for change. So, let’s try this: You’re investing? That’s great, but do you know how much you pay in fees and how this amount compares to alternatives? If you pay less, you have a strong chance of keeping more returns for yourself.
Accumulated savings on lower fees could very well mean a more comfortable retirement. Making this week’s groceries more affordable is the more urgent task, but saving on fees will pay off.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
