Investing

Top 3 low cost mutual funds

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  • Dec 20th, 2019 7:16 pm
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Dec 2, 2019
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Top 3 low cost mutual funds

Thought the bargain investors here might like these. I wasn't expecting fees so low for mutual funds!

Two of them are U.S. equity funds. I'm interested in the global dividend one though.

https://www.morningstar.ca/ca/news/1980 ... funds.aspx

Dimensional Fund Advisor’s US Core Equity Class F (0.27%)

Dynamic Global Dividend Class F (1.11%)

RBC’s QUBE Low Volatility U.S. Equity Fund F (0.76%)
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F class funds are intended to be sold through advisor channels. At most financial institutions, only fee based advisors have access to sell them. And fee based advisors usually charge an additional fee as a percent of assets. Dimensional funds are only sold by advisors approved by DFA. I seem to recall that one of the independent discount brokers will sell F class funds, but not sure if that's true. Maybe someone else can comment.

The A class version of Dynamic Global Dividend Class has a fee of 2.23%

You could try looking for D class funds, which are intended for the discount broker channel. If you try to by an advisor class or investor class fund at TDDI it will automatically route you to the D version of the fund if it exists.

There's no free lunch in investing... oh wait a minute.... yeah there is.
I solemnly swear, to never assume I have an inkling at which direction the market will head, and to never make any investments based on a timing strategy.
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Deepwater wrote: F class funds are intended to be sold through advisor channels. At most financial institutions, only fee based advisors have access to sell them. And fee based advisors usually charge an additional fee as a percent of assets. Dimensional funds are only sold by advisors approved by DFA. I seem to recall that one of the independent discount brokers will sell F class funds, but not sure if that's true. Maybe someone else can comment.

The A class version of Dynamic Global Dividend Class has a fee of 2.23%

You could try looking for D class funds, which are intended for the discount broker channel. If you try to by an advisor class or investor class fund at TDDI it will automatically route you to the D version of the fund if it exists.

There's no free lunch in investing... oh wait a minute.... yeah there is.
Good point, thanks! Is there a minimum asset amount that fee-based advisors need? I don't mind paying a little more if I'll save more in the long run. I wonder how much that extra fee is that fee-based advisors charge, and how it compares to DSC fees, which I understand we should try to avoid.

I'll check out D class funds as well. Sounds like a good middle-ground for someone who doesn't have a big portfolio.
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Asset based advisor fees vary widely and they usually don't post fees on their website. Fees are typically in the range of 0.5% to 1% of assets per year. Fee would be tax deductible in a non-registered account, but not deductible in RRSP or TFSA. The fee would usually include any trading commissions, but MERs and TERs would be extra.

Many of these advisors have high minimum assets to take on a client, like $500k. And to get 0.75% fee you would have to have $1M with a lot of advisors.

And yes, avoid DSC funds.
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LazerHawk wrote: I'll check out D class funds as well. Sounds like a good middle-ground for someone who doesn't have a big portfolio.
To put the MERs into perspective, take a look at the RBC’s QUBE Low Volatility U.S. Equity Fund:

F series = 0.76
D series = 1.03
A series = 1.87

So if you don't have a managed account to buy F series, then def buy D over A for the 84 basis point savings.
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Deepwater wrote: Asset based advisor fees vary widely and they usually don't post fees on their website. Fees are typically in the range of 0.5% to 1% of assets per year. Fee would be tax deductible in a non-registered account, but not deductible in RRSP or TFSA. The fee would usually include any trading commissions, but MERs and TERs would be extra.

Many of these advisors have high minimum assets to take on a client, like $500k. And to get 0.75% fee you would have to have $1M with a lot of advisors.

And yes, avoid DSC funds.
Thanks, that's helpful. Seeing as I have a ways to go to get a F series advisor it seems like the D series funds are the way to go.

Are D series funds only available online through discount brokerages? Seems like low asset investors are in a tough spot if they want advice otherwise if they are stuck with DSC.

*Edit: I missed the post from westcoastyvr. I see A series could be another option to ask for those with managed low asset accounts.
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D series funds are made specifically for the Discount broker channel.

Who is trying to sell you DSC funds? Even Investors Group stopped selling DSC funds. You may see Front-end Load (FEL) funds listed, but the sales rep should have discretion to set the load at 0%. Just tell the advisor you won't pay any DSC or FEL fees. If they won't accept that, find another advisor.

Have you considered DIY investing with ETFs? Canadian Couch Potato has some very simple ETF portfolios with much lower fees. Questrade especially has low fees for buying ETFs. If a mutual fund has a 2% fee and the market goes up 6 to 8% a year, the MER is taking 1/4 to 1/3 of the return in fees. That's a huge handicap for any manager to overcome.
https://canadiancouchpotato.com/model-portfolios/

What type of advice are you looking for? Much of the advice you will get from advisors at banks, investment companies and mutual fund dealers will be to buy mutual funds that have high costs and pay them ongoing trailer fees.
I solemnly swear, to never assume I have an inkling at which direction the market will head, and to never make any investments based on a timing strategy.
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westcoastyvr wrote: To put the MERs into perspective, take a look at the RBC’s QUBE Low Volatility U.S. Equity Fund:

F series = 0.76
D series = 1.03
A series = 1.87

So if you don't have a managed account to buy F series, then def buy D over A for the 84 basis point savings.
To understand the different products:

F-series: only the fund company gets paid; they don't remit anything to an advisor or discount broker, thus 0.76%. Advisors generally charge 1%, give or take on top of this as their advice fee.

D-series: fund company pays a trailing commission of 0.25% to a discount broker or a commission-based advisor who accidentally bought the wrong fund series. Discount brokers take a discount to the regular 1% advice fee for administration of the fund.

A-series: fund company pays a full 1% commission (in place of above advice fee) to the advisor

I gotta say the article on Morningstar is pretty low quality for them. It reads almost like an AI-generated story that simply lists 3 funds it found with low MERs and high past performance. It doesn't pay any consideration to what someone previously said, that DFA funds are only available through DFA advisors and that F-class in any case are only available to advisors.
Money Smarts Blog wrote: I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
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Deepwater wrote: D series funds are made specifically for the Discount broker channel.

Who is trying to sell you DSC funds? Even Investors Group stopped selling DSC funds. You may see Front-end Load (FEL) funds listed, but the sales rep should have discretion to set the load at 0%. Just tell the advisor you won't pay any DSC or FEL fees. If they won't accept that, find another advisor.

Have you considered DIY investing with ETFs? Canadian Couch Potato has some very simple ETF portfolios with much lower fees. Questrade especially has low fees for buying ETFs. If a mutual fund has a 2% fee and the market goes up 6 to 8% a year, the MER is taking 1/4 to 1/3 of the return in fees. That's a huge handicap for any manager to overcome.
https://canadiancouchpotato.com/model-portfolios/

What type of advice are you looking for? Much of the advice you will get from advisors at banks, investment companies and mutual fund dealers will be to buy mutual funds that have high costs and pay them ongoing trailer fees.
Thanks for this! I'm using the same advisor my parents have for a long time (Edward Jones). I had a hard time getting the big picture on fees so I'm considering doing it myself.

I'm definitely keen to take the ETF route as well. Convenience is a big factor as well.

Advice-wise, I want someone to suggest an idea allocation between fixed income and equities for my age (mid-30s) and perhaps a second opinion on my sector exposure (I keep finding myself holding a lot of tech stocks and I'm worried about the downside risk in a recession).
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What is the Edward Jones advisor have your money invested in?

I would only go with an advisor who will keep a portfolio in ETFs and individual stocks/bonds.
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Why pay high MER when you can get cheap Index funds from TD e series between 0.3% and 0.5%
TDB900 - Canada
TDB902 - SP500
TDB908 - Nasdaq
TDB911 - International
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Yea aren’t most F series funds less than 1% MER in general?
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Based on my experience with Edward Jones, I would move on from them. I now hold Mawer, e-series, and dividend paying stocks; none of which Edward Jones could offer me. Our "trusted" advisor had us in high MER, DSC funds that set us back a number of years. I blame myself for not educating myself and asking more questions. I've learned a lot from some of the more knowledgeable posters in this forum and wish I hadn't started so late on this journey.
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@Deepwater @Thalo or anyone who knows about F class funds.

Hi, I need some more clarification, hope you can help.
Let's say for a non-registered account I have $200k in a fund with 0.85% MER (F series). Every month I can see that they deduct ~$200 (management fee + HST).
1) Is this the actual MER being deducted?
2) So in addition to the $200 / month I'm paying, the advisor's fees are hidden? How much am I actually paying them in the example above?

Thanks!
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yohyohy wrote: Hi, I need some more clarification, hope you can help.
Let's say for a non-registered account I have $200k in a fund with 0.85% MER (F series). Every month I can see that they deduct ~$200 (management fee + HST).
1) Is this the actual MER being deducted?
2) So in addition to the $200 / month I'm paying, the advisor's fees are hidden? How much am I actually paying them in the example above?
The item you see listed on your statements is the fee the advisor is charging you. If it is a monthly fee, multiply by 12 then divide by the total $ invested to get the advisor's fee as a percent. So in the example you gave, $200/mth x 12 / $200,000 = .012 = 1.2% including tax. Say you are in Ontario with 13% HST: 1.2% / 1.13 = 1.06 is the advisory fee before tax. The advisory fee should be specified as a percent on the advisor's contract.

The MER will not be listed on your monthly statements. You can find it on the fund's website. It will also be listed in the fund's Management Report of Fund Performance (MRFP). In your example, the MER is 0.85%.

There is another fee called the Trading Expense Ratio that is rarely mentioned, For most funds it will be a small percent , unless it is a very active fund that does a lot of trading. You can find the TER on the fund website or in the MRFP.

Your total fee will be the MER + TER + advisory fee
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Thank you so much for the clarification @Deepwater ! Previous I was on the I series (Investor's series), which was even worst. So at the end of the day I'm still paying 2%, the only benefit I'm seeing is that the advisor's fee is tax deductible. What's so special about F class funds then that requires you to have certain amount invested before you are qualified to switch?

I'm considering switching to PWL Capital and I'm wondering if anyone here has used their service. They charge 0.75% plus a very small amount for product fees since it's ETF. Maybe I'll open a thread to get some feedback.

Thanks again @Deepwater !
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yohyohy wrote: Thank you so much for the clarification @Deepwater ! Previous I was on the I series (Investor's series), which was even worst. So at the end of the day I'm still paying 2%, the only benefit I'm seeing is that the advisor's fee is tax deductible. What's so special about F class funds then that requires you to have certain amount invested before you are qualified to switch?

I'm considering switching to PWL Capital and I'm wondering if anyone here has used their service. They charge 0.75% plus a very small amount for product fees since it's ETF. Maybe I'll open a thread to get some feedback.

Thanks again @Deepwater !
I believe PWL has a $1 million minimum, but if you inquire with them, they might be able to point you in the right direction.

From your post it sounds like you're a TD customer and previously had their I-series (no load commission based, meaning they don't include front or back end commissions, but still have around a 1% trailing commission built into the MER) and went to an advisor with F-class. Perhaps (based on 0.85% MER and 1.1% fee) TD's Strategic Managed Portfolios.

If you're not getting much in financial planning from your advisor, you might want to consider a couple othe routes: a) Robo-advisor, which will put you into an auto-pilot portfolio of ETFs and charge a smaller advisor fee (generally 0.5% or lower), or take control of your portfolio yourself via discount brokerage and put it all into a balanced ETF that suits your risk level.
[/quote]
Money Smarts Blog wrote: I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
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ownthesky wrote: Low cost mutual fund thread without Mawer or Steadyhand mentioned? lol wut

https://www.steadyhand.com/funds/
https://www.mawer.com/funds/explore-funds/
+1 to this. It's too bad Mawer doesn't anymore have a direct-to-consumer offering like Steadyhand, but at least most discount brokerages save for TD Direct Investing let you buy them. ;)

Cheers,
Doug

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