Author Topic: Convince me to Drop my High MER Mutual Fund (Canadian)  (Read 7889 times)

falcondisruptor

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Convince me to Drop my High MER Mutual Fund (Canadian)
« on: January 17, 2015, 01:17:03 PM »
We don't have many investments, but what we do have are in high MER mutual funds from our bank. 

Last week I got a letter from the bank saying that as of March, registered accounts will have a $75 fee to transfer to a new institution.  New Canadian Couch Potato plans came out this week too.  I've been meaning to switch to a lower cost option for a while now, so I figured that was the push I'd need to finally get our investments updated. 

I'm in the process of signing up for a Questrade account and plan to follow the Canadian Couch Potato Vanguard EFT plan.

Problem: I kind of like my old mutual fund. 

It's the TD Dividend Growth Fund https://www.tdassetmanagement.com/fundDetails.form?fundId=11&prodGroupId=1&lang=en&site=TDCT

I know past performance isn't an indicator for future success, but even with a MER of 2.02% it has a 10 year return of 7.64% vs the couch potato plan that only had 6.56%.  The couch potato plan has been doing better in recent years, but I don't want to start chasing short term results... 

Honestly I wasn't expecting my fund to have been competitive.  Can anyone give me the kick in the pants I need to keep moving towards lower fee investments?

falcondisruptor

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #1 on: January 17, 2015, 01:29:12 PM »
Please avoid Questrade. It's really awful. It seems okay until you want to get our your money, but then you'll start having tons of problems. They also screw everything up massively if you have any dealings with the United States. I haven't been a client in almost a year but I'm still having to deal with problems their incompetence created for me.

Interactive Brokers is the best broker available to Canadians. There is no reason to use anything else.

Wow, I'd only ever heard good things!  Thanks for the heads up Cathy, I'll look into Interactive Brokers.

skyrefuge

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #2 on: January 17, 2015, 02:53:45 PM »
I know past performance isn't an indicator for future success, but even with a MER of 2.02% it has a 10 year return of 7.64% vs the couch potato plan that only had 6.56%.  The couch potato plan has been doing better in recent years, but I don't want to start chasing short term results... 

You're comparing apples and oranges. Your TD fund is entirely made up of Canadian stocks. The Couch Potato portfolio (you're presumably looking at the "aggressive" mix?) is 10% Canadian bonds, 30% Canadian stocks, and 60% non-Canadian stocks. Due the the bond component of CCP, the long-term expected return is lower than the TD fund, but so is the risk. And since the portfolios are quite different, you should expect very different return profiles between them.

A better comparison would be between your actively-managed TD fund and similar, passively managed funds. Here are 3 Canadian dividend index funds, all with MERs lower than 0.66%:

http://www.blackrock.com/ca/individual/en/products/239496/ishares-canadian-select-dividend-index-etf
http://www.blackrock.com/ca/individual/en/products/239834/ishares-sptsx-canadian-dividend-aristocrats-index-fund
http://www.etfs.bmo.com/bmo-etfs/performance?fundId=86809
 
Unfortunately none of them have been around for 10 years, but the two that have been around for 5 years both beat the TD fund's 5-year return.

This is just an illustration of how to correctly compare active-vs.-passive. I'm not saying that you should move your money from an active Canadian dividend fund to a passive Canadian dividend fund; you should first decide what you want in your portfolio, and then decide what funds best cover that allocation.

Honestly I wasn't expecting my fund to have been competitive.  Can anyone give me the kick in the pants I need to keep moving towards lower fee investments?

While I think passive funds are awesome and they make up almost all of my portfolio, there will still be plenty of high-expense funds that will beat them, even over fairly long timeframes, so it shouldn't be too surprising when you see it happen.

Just count yourself lucky for stumbling into such a "winner" this time, take your winnings, and move it to a lower-expense portfolio.

falcondisruptor

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #3 on: January 17, 2015, 07:09:57 PM »
Thanks Skyrefuge,

I definitely am comparing apples to oranges here.  I was hoping that the couch potato plan would be a one size fits all type of plan and would beat my current setup.  I guess I'll need to take some time to better plan out my next moves. 

Thank you for the more comparable options, they've gotten me thinking. 

KMMK

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #4 on: January 17, 2015, 08:00:01 PM »

Last week I got a letter from the bank saying that as of March, registered accounts will have a $75 fee to transfer to a new institution. 

Problem: I kind of like my old mutual fund. 

It's the TD Dividend Growth Fund https://www.tdassetmanagement.com/fundDetails.form?fundId=11&prodGroupId=1&lang=en&site=TDCT


If you're already with TD I'd think they wouldn't charge you the fee to change to TD self-directed? Or maybe they'd consider that different.

I'm very happy with my TD e-series funds, as also mentioned on Couch Potato. I'd consider the index fund portfolio with TD.

csr

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #5 on: January 17, 2015, 10:22:56 PM »

Heckler

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #6 on: January 18, 2015, 12:10:08 AM »
Id definitely look at TD self directed if youre with TD. No fees to sell and move my BMO mutual funds to BMO InvestorLine.


Heckler

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #7 on: January 18, 2015, 12:22:18 AM »
VCN, the Canadian index fund that would be most comparable to your TD fund that's mostly Canadian equity, theoretically returned 7.59-0.04 fees = 7.55 over ten years, as it follows its TSX benchmark.

https://www.vanguardcanada.ca/individual/etfs-detail-performance.htm?portId=9561

daverobev

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #8 on: January 18, 2015, 08:56:35 AM »
Questrade are absolutely fine, anecdotes are just anecdotes.

IB are also fine, though honestly QT tend to get back to me a damn site quicker than IB do (two weeks for a reply to one ticket, for instance, with IB).

IB: Cheap margin, cheap foreign exchange, flexibility. IF you have > $100k, absolutely, go with IB.

If you have a smaller stash and want to regularly buy ETFs? Go Questrade. Fee free purchases means you can (and I do) buy 1 or 2 units of ETFs (why would I do that? RESP).

I don't "love" Questrade, but from Cathy's writeup they are "the worst thing ever". People have issues with RBC, Scotia, IB, TD, QT, every brokerage or bank out there have *some* dissatisfied customers.

*Edit* but God OP ditch that fund. You are paying them 2+% to hold 40% big 5 Canadian banks!!
« Last Edit: January 18, 2015, 08:58:38 AM by daverobev »

Stasher

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #9 on: January 21, 2015, 11:16:59 AM »
I'm going the simple route for an answer...do some reading that will open your eyes.
I use Scotia I-trade and is simple and beyond happy with their online tools and connectivity to online banking.
(If you hold over $50k in account the trades are 9.99 and no commission)
I read and follow the Canadian Couch Potato regularly and actually just rebalanced my ETFs into the newest portfolia.

http://www.scotiabank.com/itrade/en/0,,3527,00.html
http://canadiancouchpotato.com/2015/01/15/couch-potato-model-portfolios-for-2015/

Some of the Vanguard funds I use regularily

VAB - mer 0.12%
VXC - mer 0.25%
VCN - mer 0.05%
VUN - mer 0.15%
« Last Edit: January 21, 2015, 11:22:01 AM by Stasher »

falcondisruptor

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #10 on: January 21, 2015, 12:47:24 PM »
Thanks to everyone who's commented so far!  We don't have a big portfolio right now, we're focusing on paying off our mortgage first.  I've definitely thought of the TD e-series funds, but I've heard they can be a bit of a pain and I'm not very attached to my current bank, which is why I was looking at the Vanguard EFTs.  I'll look into them even more.  My Questrade signup hit a snag when e-signature didn't pass for some reason, so I haven't fully committed to that route either.

Thanks for suggesting the comparable index Heckler, it's even more confusing now that I see this fund has out performed it. 

"*Edit* but God OP ditch that fund. You are paying them 2+% to hold 40% big 5 Canadian banks!!"  Thank you, this is the kind of berating that I need!!!!

Heckler

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #11 on: January 21, 2015, 01:27:24 PM »
Yup, I just compared my parents mutual fund with my recently purchased Vanguard, and the mutual fund outperformed over ten years.  I didn't try to get them on self directed indexing.

Spudd

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #12 on: January 21, 2015, 02:21:41 PM »
The pain with e-series is the initial setup phase but once you get over that hump it's super easy. I assume you already have a TD mutual funds account where you hold this monster of a fund. Fill out this form and send it to them. Bob's your uncle.

http://www.tdcanadatrust.com/document/PDF/mutualfunds/tdeseriesfunds/tdct-mutualfunds-tdeseriesfunds-convertaccount.pdf

scottish

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #13 on: January 21, 2015, 05:35:30 PM »
Whenever I see a mutual fund that has beat the index, I like to try and understand what happened.

It looks like TD Canadian dividend growth fund beat the TSX 60 total return index in 2012.   The other years, it was very close to the index.

This is great for tormenting anyone trying to get you to buy the supposedly outperforming fund.   "You just had 1 lucky year.   I'm paying you 2% because you got lucky one year?  What happens when you're not lucky?"

I think this is the big secret of  many funds that claim to outperform.   Not always, but often the fund manager had a good year or two - maybe early on when the fund was small.   They time their reporting period to include those 2 good years and suddenly they beat the index.   But if you started after those two years, it's a different story.

Stasher

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #14 on: January 21, 2015, 06:59:06 PM »
With the big drop of the BOC rate today watch for mortgages to go on a bike rate sale
I bet you could find a ridiculous refinance that even with remortgage penalty will allow you to get into a new mortgage that would allow you to slightly increase monthly payment with an even greater % going straight to principal. Take advantage of the banks charity and use it to your frugal debt repayment plan.

The other thought is to take advantage of the seriously low mtg rates (2.7 as an example) at rates like that why pay down MTG when the cash savings could be put to indexes where years like this past VUN averaged a 22% return or ridiculous amount, that cash you wanted to put on the mortgage that is almost free money could actually be put to work for you making crazy returns.

The best time to start saving was yesterday

cjottawa

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #15 on: January 22, 2015, 07:35:22 AM »
Walk into a TD branch and fill out the conversion form to make your accounts e-Series. It's that easy. They'll even help you fill it out and send it via inter-branch mail pouch, saving you the stamp.

The difference in average MER between e-Series (averaging what? 0.4%?) and ETF (maybe 0.2%?) portfolios is mitigated in large part by: bid/ask spread on ETFs, the ability to buy partial shares of the e-Series funds so you don't have a "cash drag", and finally no commissions to buy or sell.

Look at the performance difference between portfolios here:
http://canadiancouchpotato.com/2015/01/09/couch-potato-portfolio-returns-for-2014/

...and details of CCPs recommended portfolios here:
http://canadiancouchpotato.com/2015/01/15/couch-potato-model-portfolios-for-2015/

Cookie78

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #16 on: January 22, 2015, 08:18:18 AM »
My Questrade signup hit a snag when e-signature didn't pass for some reason, so I haven't fully committed to that route either.

My e-sig did the same thing, apparently that's common. I just had to print, sign, scan, and upload the documents instead.

scottish

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #17 on: January 22, 2015, 08:44:25 PM »
This:

Quote
The difference in average MER between e-Series (averaging what? 0.4%?) and ETF (maybe 0.2%?)  portfolios is mitigated in large part by: bid/ask spread on ETFs,

Just look at the spread on EPP for example: 

http://finance.yahoo.com/q?s=epp&ql=1

woe to anyone who places a market order.

Kstar

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #18 on: January 23, 2015, 04:42:03 PM »
My Questrade signup hit a snag when e-signature didn't pass for some reason, so I haven't fully committed to that route either.

My e-sig did the same thing, apparently that's common. I just had to print, sign, scan, and upload the documents instead.

Mine as well, even when I got a fresh equifax report and tried again.  Not sure what is going on there.

Kstar

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #19 on: January 23, 2015, 04:52:04 PM »
Since we're on the topic... does anyone have an opinion about Tangerine (formerly ING Direct) investment funds? 

The MER is 1.07% with an 0.4% trailing commission.   I'm not sure how this compares to other arrangements. 

Stasher

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #20 on: January 23, 2015, 05:00:38 PM »
Since we're on the topic... does anyone have an opinion about Tangerine (formerly ING Direct) investment funds? 

The MER is 1.07% with an 0.4% trailing commission.   I'm not sure how this compares to other arrangements.

As mentioned earlier
I use all Vanguard Index ETF  funds within my Scotia Itrade account
$9.99 per trade  and then my MER are as follows;
VAB - mer 0.12%
VXC - mer 0.25%
VCN - mer 0.05%
VUN - mer 0.15%

daverobev

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #21 on: February 26, 2015, 02:07:54 PM »
Since we're on the topic... does anyone have an opinion about Tangerine (formerly ING Direct) investment funds? 

The MER is 1.07% with an 0.4% trailing commission.   I'm not sure how this compares to other arrangements.

Tangerine is AWESOME for indecisive people, people who don't care about the markets at all, and people who want convenience.

Not going to invest til you know everything about investing? Just buy Tangerine. Want something to auto rebalance, auto take money from your chequing account? Tangerine.

Balanced Growth.

No, it's not the cheapest, but it is 100% the easiest thing going - a one-fund solution.

cjottawa

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #22 on: February 27, 2015, 06:30:38 AM »
Since we're on the topic... does anyone have an opinion about Tangerine (formerly ING Direct) investment funds? 

The MER is 1.07% with an 0.4% trailing commission.   I'm not sure how this compares to other arrangements.

Tangerine is AWESOME for indecisive people, people who don't care about the markets at all, and people who want convenience.

Not going to invest til you know everything about investing? Just buy Tangerine. Want something to auto rebalance, auto take money from your chequing account? Tangerine.

Balanced Growth.

No, it's not the cheapest, but it is 100% the easiest thing going - a one-fund solution.

Yup. I'd argue it's a better choice than paying someone 1.0% to manage your funds for you or screwing up while trying to self manage; both of those will cost you.

I have friends using Tangerine funds who would otherwise not know where to start.
« Last Edit: February 28, 2015, 12:30:02 PM by cjottawa »

beee

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Re: Convince me to Drop my High MER Mutual Fund (Canadian)
« Reply #23 on: February 28, 2015, 04:32:50 PM »
I've started with Tangerine, now I'm switching to Questrade (free ETF buys).
Tangerine was great: plain and easy. I was on Balanced Growth portfolio (25% canadian equities, 25% us equities, 25% intl equities, 25% canadian bonds). I do like to manage investments myself, that's the reason I'm switching. Another one is that I want less bonds in my portfolio, as I am 26yo (10% cad bonds, 30% for canadian, us, intl equities each).
« Last Edit: February 28, 2015, 04:34:32 PM by ildar »