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:
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:
I’m reviewing them based on 3 criteria:
- Best Return Since Inception (long term gains)
- Best 5 Year Return (short term gains)
- 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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