Jun 192016
 

Before You Continue Reading – Are Mutual Funds For You?

Are you lacking time to learn basic investment skills? Do you trust other people managing your money? Are you okay with paying high fees for mediocre returns? Then mutual funds might be for you.

Or maybe you already have them, or maybe your employer’s group RRSP only offers mutual funds like mine does with RBC. However you ended up with mutual funds, don’t use ignorance as an excuse to keep them. Do your research on what they are and how they work and why you should avoid them:

Why You Should Avoid Mutual Funds

Unjustified high fees. When I say high fees I mean tens of thousands of dollars over your lifetime. You’ll never see a line item of FEES: $15,000, you’ll see MER: 3% which will equate to $15,000 PER YEAR on your nest egg of $500,000.

The truth is that passively managed index fund will nearly always give better returns over the long run. I go into more detail here and here.

Managed funds must consistently outperform the market by 2-3% for their 2-3% fees to be worthwhile. This almost never happens. Here is a comparison of an index fund and mutual fund from one of my previous posts:

VCN-IGI

You can see that the passively managed ETF VCN is basically 20% higher than the actively managed IGI489 after only 2 years!

Okay Whatever, I’m Still Buying Mutual Funds

So you’re still going for it despite the evidence. Ok then let’s get into it. For the analysis I’ve separated TD’s funds by colour according to their category:

TD Fund Legend

I’m reviewing them based on 3 criteria:

  1. Best Return Since Inception (long term gains)
  2. Best 5 Year Return (short term gains)
  3. Best Return During the 2008 Crash (options for conservative funds)

Now KEEP IN MIND that I’m analyzing past returns which are no guarantee of future returns. Who knows, maybe my #1 recommendation will lose 50% of it’s value the day you buy into it. Invest at your own risk.

CLICK HERE for an image of all funds for reference.

And awayyyyyyyyyy we go!

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May 242016
 

People (mostly bloggers) write and talk about how mutual funds are basically scams but they rarely show proof. Well I finally found some. I present to you the story of TD Global Asset Allocation Fund, TBD158.

Part 1 – Fund Inception

TD Global Asset Allocation Fund was created on January 13, 1998 as noted on this snapshot of the TD website from Nov 1, 2001. The fund’s objective was to maximize long term capital growth by actively trading futures contracts in the global market. If you wanted in on this groundbreaking fund you paid heavily with a MER of 2.95%. The fund also had the power to enter and exit geographic regions at the manager’s discretion, thereby giving him a lot of power over the $210 million worth of assets in the fund. That’s a lot control for one guy and clearly it didn’t go well in the early years:

1999 did okay, but massive losses followed in the two subsequent years. Blame the Y2K bug! Source

The managers blamed the latest losses partly on global uncertainty after the 9/11 terrorist attacks. That might explain losing 9% in 3 months but what about the other -7% that year? and -5% in 2000? Ok the dot com crash had started in 2001 but the fund was still below its benchmark.

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