Would you pay $80 for a Café Latte?

By March 10, 2017Uncategorized

Yikes!   My friends…

I need to share a little simple math with you that almost every single Canadian over looks when considering buying mutual funds inside their investment portfolios.

You see, the financial industry is the only place where your neighbor could be paying over 20X times less for their investments than you.

Here is an example…The investment Funds Institute of Canada (IFIC) stated that in 2016 the average Mutual Fund management expense was 1.24 %  This excludes trailing commissions, taxes, and other soft costs charged to you as a client either.

Buy investing in such mutual funds you are voluntarily paying an “asset manager” 1.24% of your assets in order to choose what stocks and bonds are best for you.

Here’s the problem…

96% of mutual funds do not match the market over a 10 year period.  Therefore, if you wanted to simply obtain the return of the overall market and invested inside an index tracking exchange traded fund,  you would outperform 96% off all active money managers over a decade.

Crazier yet?

The cost of investing is the passive strategy….

Many S&P500 Index investments can be purchased for as little as .06%

Yup…6 one hundredths of a percent!!!

Over 20X less than the active manager would cost.  And yet, you would have over 96% chance of outperforming that particular managers investment returns.

Some examples of daily items that would cost 20X  ???

  • A cafe Latte   $80
  • Winter tires   $16,000
  • Netflix subscription   $199
  • Litre of gas   $18

I think you get the picture….

Now you might still think that the difference is trivial.  I mean, it is just over 1% right?  Please understand that you would earn 38% less over a 30 year period.

So if you plan on living at least for the next 30 years….This is worth paying closer attention to.

Written by:

Todd McLay

Precedence Capital / Gravitas Securities Inc. –

Disclaimer

The views, opinions and positions expressed by the author and those providing comments on these blogs are theirs alone, and do not necessarily reflect the views, opinions or positions of Gravitas Securities Inc.

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