Investment

If we’re angry about high prices, why do we let the investment industry get off easy?

Published

6 months ago

May 1, 2024

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.

Tim Shufelt: Despite high fees, Canadians remain perplexingly loyal to mutual funds. Here’s why

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.

Canada’s worst and best performing ETFs over the last three months

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.

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Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

3 days ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

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Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

3 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

4 weeks ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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