Personal Finance

Invest only in 5* Morningstar ranked mutual funds???

  • Last Updated:
  • Sep 22nd, 2009 7:55 pm
Tags:
None
[OP]
Member
Apr 17, 2009
471 posts
81 upvotes

Invest only in 5* Morningstar ranked mutual funds???

I'm a newbie in invest in mutual funds and I have only 5k to invest in mutual funds. To begin, I project to put 1k in five 5 stars rated funds. I can change the funds at no fees so when they will change to 4 or 3* I will swap them in an other 5* funds.

What do you think???
10 replies
Deal Addict
Aug 21, 2009
1330 posts
72 upvotes
Transient
Are you with BMO?

I initially looked at those ratings as well and I definitely wouldn't make trades solely based on them

I recommend you look into ETF's. Or if you are stuck on mutual funds TD E-series funds will save you a lot in fees
[OP]
Member
Apr 17, 2009
471 posts
81 upvotes
high_octane wrote: Are you with BMO?

I initially looked at those ratings as well and I definitely wouldn't make trades solely based on them

I recommend you look into ETF's. Or if you are stuck on mutual funds TD E-series funds will save you a lot in fees

I'm with TD e-series.


And sorry but what ETF means? It's a type of funds?
Deal Fanatic
Feb 17, 2007
5837 posts
2014 upvotes
Mort Réal
ETF is an Electronic Traded Fund. It's like a mutual fund but it's traded just like stocks (it has a symbol) and the MERs are much lower than a traditional mutual fund. But you pay comission fees on those purchases just like you would for stock purchases. If you intend to make one big fund purchase, it might be a good alternative. If you intend to make regular contribution (weekly or monthly, etc) then a conventional mutual fund will probably work better for you.

As for the original question, there are a lot more factors to consider, includung the MERs.

a 5-star fund won't necessarely perform better than a 3-star. If the MERS is too high, it reduces your effective yield.

Also, you can llok at past performance, quartile ratings. If a fund is consistantly in Q1 ratings, but is a 3-star, and has lower MER, it might be worth taking a harder look. Find out about the fund manager(s), portfolio, etc...
Deal Addict
Aug 1, 2008
1554 posts
78 upvotes
Ottawa
WHO wrote: ETF is an Electronic Traded Fund. ...
So is a regular mutual fund....the 'E' actually stands for 'Exchange' so an ETF
is an Exchange-Traded Fund
Deal Addict
User avatar
Feb 17, 2005
4822 posts
2099 upvotes
Markham
If anyone listened to the OP, he has 5k to invest. If he chooses 5 ETF's, the commission cost would be a drain on his return just like the MER. e-series is the way to go if index style is what you want. You need to have much larger portfolio to generate savings over e-Series via ETF.

Are you going to add more funds over time OP?
Deal Fanatic
Feb 17, 2007
5837 posts
2014 upvotes
Mort Réal
evoviii wrote: If anyone listened to the OP, he has 5k to invest. If he chooses 5 ETF's, the commission cost would be a drain on his return just like the MER. e-series is the way to go if index style is what you want. You need to have much larger portfolio to generate savings over e-Series via ETF.

Are you going to add more funds over time OP?

I agree and understand for the ETFs, that's exactly what i explainined I my post, but I don't get your point for mutual funds. If the MER is 1.5%, it's 1.5% on 5k just as it would be for 5 million$. It doesn't drain your return like you suggest.
SpillOnAisle9 wrote: So is a regular mutual fund....the 'E' actually stands for 'Exchange' so an ETF
is an Exchange-Traded Fund
Thanks for correcting me. I stand corrected. Mental mistake :embarrassed:
Deal Addict
Aug 21, 2009
1330 posts
72 upvotes
Transient
If it was me I would just put all $5k into 1 ETF. Pay a $5 fee to buy and then a lower MER than mutual funds

Before long the lower MER far outweighs the $5 fee no?

The OP also didn't say how long this will be invested, but he did say 5 x $1000

The only real benefit to mutual funds is many small investments right
[OP]
Member
Apr 17, 2009
471 posts
81 upvotes
evoviii wrote:
Are you going to add more funds over time OP?
Not for the next year.

high_octane wrote:
The OP also didn't say how long this will be invested, but he did say 5 x $1000

The only real benefit to mutual funds is many small investments right
For 3 or 4 years.

Mutual funds are safer than investing in stocks because as you said it's many small investments and it's a way less expensive.
My goal is to beat the 1.05% of ING...


And sorry for the stupid question but did someone know what is the french term for ETS? I'm looking for them on the TD website and I can't find anything...
Deal Addict
User avatar
Apr 2, 2007
1330 posts
386 upvotes
Toronto
Toule wrote: Mutual funds are safer than investing in stocks because as you said it's many small investments and it's a way less expensive.
My goal is to beat the 1.05% of ING...

And sorry for the stupid question but did someone know what is the french term for ETS? I'm looking for them on the TD website and I can't find anything...
Mon ami, mutual funds are not safer than investing in stock - just google mutual funds and scam, scandal, fraud and you will have a lot to read.

If you only want to beat the 1.05% ING and you have only 5k to start - why you do not start with TFSA ([url=http://www.tdwaterhouse.ca/fr/discountbrokerage/celi/]le compte d'
Deal Addict
User avatar
Aug 1, 2007
1416 posts
210 upvotes
Make sure you understand that Morningstar * ratings for funds are solely based on past risk adjusted performance. Just because a fund did well over the past 5 years doesn't mean that will continue. You can argue that managers/funds that have a record of regular outperformance are more likely to continue to outperform, but just be sure you know why you're making your decisions.

Top