This week Pete Evans from the CBC News wrote an interesting (and somewhat frightening) article that describes how high mutual fund fees could cause Canadians to delay their retirement or leave them with less money for their retirement plans.
The key messages in Pete’s article reinforce what we at Invisor have been blogging about recently; namely, the importance of keeping your cost of investing to a minimum, and how portfolios that include exchange-traded funds can lower an investor’s overall cost and allow their savings to grow more quickly.
Some key takeaways from the article:
- The biggest single asset in most Canadians' RRSPs is mutual funds… (the fund) manager is paid a fee measured as a management expense ratio or MER that comes out of the fund's revenues. This limits the amount the fund can invest and is paid regardless of performance.
- Index funds and exchange-traded funds offer lower fees… but "occupy a very small proportion of Canadians' managed fund holdings." We believe this is primarily due to the fact that most financial advisors do not recommend ETFs as they are either not licensed to sell them, or they do not receive sales commissions from the sale of these products.
- Almost a third of households with someone between the age 45 and 64 don't have an RRSP
You can read the entire article on the CBC News website here.
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