There are also mediocre funds at low fees
To believe some, the investments whose costs are low are ALL great. Never, we are presented with all sides of the coin. With more than 5000 funds available in Canada, there are expensive cauldrons, but also affordable cauldrons.
In 10 minutes, I was able to find VERY affordable funds that are quite mediocre , thank you. Like a beautiful Good Finance, it’s cheap and it does not take us very far. In short, ridiculous funds whose expense ratio is just as important.
The Good Finance has a reasonable fee of only 1%. However, for the last 3 years, it has lost 2.8% a year while similar funds and its index are achieving more than 12% annually! Finally, this 1% is very expensive paid!
Low management fees
Good Lender also has low management fees, but as a bonus you get amazing value destruction. -12% per year, and this, for 5 years. If you had invested $ 100,000 in 2005, you had less than $ 65,000 as of November 30, 2011. But … its fees are reasonable. See how the reasoning does not work!
Another good example: The Honesty Bank currency fund . That one, he is aptly named! Very neutral indeed! In ten, he produced nothing. Except losses of 0.30% annually. Its benchmark achieved a measly 0.82% annually for the same sequence. In all periods (1 year, 2 years, 3 years, 4 years, 5 years and 10 years) he does less well than his peers and his index. If I had selected for its low fee of 0.65% I would have had royally! The cost criterion is important but must not be your basic criterion. You need an investment that will respect your profile, your tolerance and that will perform as well as the long-term average of NET fees AND taxes! This is where it gets complicated.
Index funds are not left out
So if you had invested $ 10,000 in 2001, today you would have only $ 9002, which is $ 1,650 less than the result of the index. Even its standard deviation, its volatility measure is higher than the index; 17.88 vs 15.42. In short, those who bought this fund CHEAP, have achieved results!
By scrutinizing the index funds, I realize that these anomalies occur frequently.
The added value of an advisor
I find that some media go round the corners to make advisors bashing. Curiously, the fact that advisors and planners encourage and allow their clients to stay in the market and earn far more in the long run than those who manage their own part-time savings is rarely associated. As an accountant allows you to save time and deductions that escape you, the financial professional with its peripheral vision offers a significant added value that is observed beyond the management costs of the financial product.