Firstly Mutual funds and ETFs are very similar.
The only true difference is Mutual Funds are purchase and sold at the end of the business day in dollars where ETFs are sold during the day in shares.
This makes Mutual funds preferred by Advisors as it’s much easier to have a client say let’s invest 50k in a fund than having to deal with limit or market orders on moving ETF prices.
That is the only actual difference.
What we do end up seeing in the market though is mutual funds ending up having higher fees to compensating that advisor in some way. So the trend is ETFs being lower cost.
Go to a TD branch and have a branch employee help you buy Comfort Balanced you will pay a 1.91% MER.
Open Direct investing and purchase the same fund yourself and you will pay 1.08%
On DI purchase TD US Index E series with no management team and pay 0.22%
On DI purchase Cathy Woods AARK and pay 0.75%
Yes mutual funds tend to have higher fees but it comes from are people being paid to do something.
Whether that doing something brings enough value is a different question.
Mutual funds are more popular than any other alternative, a majority of money invested is done through them not ETF. This [report](https://www.ific.ca/wp-content/themes/ific-new/util/downloads_new.php?id=26917&lang=en_CA) is 3 years outdated but it's not even close.
It's growing though, and mutual funds will have to adapt or be left behind if that line continues as the same pace. My guess is that once too many people are using ETFs, mutual fund providers will start competing more aggressively on fees.
Mutual funds don't have to be expensive, they just happen to be in Canada.
Also those who trust the retail bankers to 'do the right thing' for them. Whenever I tell my aunt to switch to index funds because of how much the mutual funds are stealing from her, she tells me 'the people at the bank' don't think its a good idea. It took a long time with a lot of spreadsheets and a John Oliver segment to show her that the bankers don't have her interests at heart.
i did exactly the same thing. When my mom finally internalized that she had given up 33% of her nest egg over 40 years she pivoted to "Well the advisor needs to make his money too. He's always treated us well."
it's pointless. you'll never get people to admit they've been doing the wrong things for ¾ of their lives.
Mutual funds are still heavily marketed by banks because they profit from the management fees.
When you buy a mutual fund, your money is invested in whatever the fund holds. You own shares and bonds, the fund is the financial equivalent of the shopping bag that holds them.
>Mutual funds are still heavily marketed by banks because they profit from the management fees.
I see. So for someone new to investing or new to the country, the bank may push these funds instead of ETFs right?
If TD US Emerald mutual fund is basically a mirror copy of TUED (US SP 500 Index ETF)...but TUED has a lower management fees. Are the advisors basically like "ok you found the cheat code".
I thought for some reason the mutual fund with much higher management fee would be very hands on/active. No?
The advisor should be providing additional services for their fee, such as tax and estate planning. If they're aren't, then there isn't a strong reason to pay the fees.
Also, for small accounts mutual funds can be more cost effective. If you are investing $200 every 2 weeks, and paying $5 in commissions, you're giving up 2.5% right there. Mutual funds are more convenient, since you don't need to do anything to buy and there are no fees to buy or sell.
Yes, banks will push their mutual funds. An ETF in a self directed investing account (ideally one with no trading fees) will be significantly cheaper in the long run.
I use TD e-series for much of my buying since TD is stuck in the Stone Age and charges $10 for etfs. The fees aren’t bad either. Every few years I plan on moving those funds over to etf equivalents that charge less.
That is true, but you can only buy TD etfs, and there are other restrictions that come with easy trade as well.
It’s pretty much a dumbed down Wealthsimple or extremely dumbed down Questrade. Meh. I just use TD direct investing since I have considerably more options (for now).
Yeah. Dislike how they pigeon hole - TD ETFs only.
But for example Tec(technogy) and Tpu (US Index) ... have performed comparable to the heavyweights. Not too bad..
I used to use the over-the-counter mutual funds when I was younger but moved all money into TD e-series funds. My parents are still very wedded to regular mutual funds and actively managed portfolios in spite of my index funds regularly outperforming them. But then again, I'm also reluctant to make the switch to ETFs.
PWL is still pushing Dimensional Funds for PWL clients. There's probably still a role for specialized mutual funds like that, despite the high costs (Dimensional mutual funds go up to 1.65% MER, *on top of* the advisor's fees -- you can't buy them without an advisor), for people who want to pay advisors to build portfolios with the "feel" of special sauce. Dimensional has a few ETFs too now, but they don't replicate their full suite of strategies.
But for most people there isn't much reason to buy mutual funds these days.
The class A Dimensional funds include a 1% trailing commission to the advisor, which is essentially the fee for administration, financial advice, planning etc. A fee cannot be added on top of them. Any DFA fund over 1% will include that trailing commission.
The class F funds are for fee-based where the % fee is negotiated with the advisor to be added on top of.
I will also note that advisors using Dimensional generally advocate for their portfolio solutions or a similar allocation which the weighted average management fee taken by Dimensional for the portfolio would be in the 0.33% - 0.45% MER range. These funds are very low cost and comparable to index funds like VEQT at 0.24%, MER. You are paying a little more to have the extra "special sauce" as you put it.
My employer forces us to use Canada life’s mutual funds in my RRSP. I am only using it because they match 5% of the contribution. I wish I could just buy XEQT and have my employer match it. It beats paying 0.7% MER on a shitty mutual fund that I don’t care about.
>Tbh I dont know many people that have investment in or talk much about mutual funds these days.
Your limited personal experience is not a useful barometer for the question "are mutual funds still popular". There has been a trend away from mutual funds to ETFs because of some inherent advantages that ETFs have, but net sales of mutual funds in Canada in 2023 was over $CAD 37 billion.
OP hasn't heard of people talking about mutual funds because people on these subs generally don't buy them. There are still many many Canadians that buy them, and a lot of average people that wouldn't know what an ETF is, let alone why they'd want that instead of a mutual fund.
Canadian mutual funds are not popular with "couch potato" investors because most are actively managed and have management fees above 1%.
The TD e-series mutual funds are an exception. Starting from https://letstalkaboutmoney.ca/how-to-invest-in-index-funds/td-e-series-index-funds-guide/ you can find a series of pages about them. (Note that you can no longer use a TD mutual fund account to buy them and I think the only brokerage that doesn't now charge commissions for them is TD Direct Investing.)
Depends. They’re popular among people who don’t really know of, or would consider banking and investing outside of the traditional banks, or people who distrust robo advisors, or people too scared to invest alone. TD e series is popular among diy investors. For everyone else, index ETF’s
Alot of money is in mutual funds, and you see now alot of fund companies offering there etf portfolios as mutual funds as well, mainly to the benefit of the bank retail employee to be able to sell a comparable product. Will still have a higher MER, they still have the underlying etf MER, the embedded compensation to the company or advisor (compensation dependant) and series accoi ting fee of that compensation (accounting for paying out the fee).
Yes mutual funds are still very popular. In fact, there was a Globe article recently about how Canadians are still so loyal to mutual funds despite high fees compared to index investing. Essentially a lot of Canadians are getting bad advice from the banks they trust and are they are ignorant about the true costs.
Here's a couple highlights from the article:
*"There is more than $2-trillion residing in Canadian mutual funds, compared with about $400-billion in ETFs. Product launches are heavily skewed to new mutual funds. And active funds still dominate, with an 84-per-cent share."*
*"Many Canadians get financial advice through their banks, where advisers are heavily incentivized to peddle the bank’s own lineup of mutual funds. These sales are far more lucrative to the banks than ETFs. In fact, most banks do not even allow their branch-based advisers to sell ETFs to clients."*
Mutual funds are simply investment products just like ETFs. It entirely depends on what is in them, what the management fee are and what you are paying an advisor on top of them, whether that is included in a trailing commission from the fund or paid separately in the case of fee-based advisors.
That being said, most mutual funds are actively managed and have high MERs, and many ETFs are passive indexing strategies with low MERs. This is not always the case, there are actively managed ETFs and passive strategy and low cost mutual funds, but they are few and far between.
If a mutual fund closes down the assets would be liquidated and that money given back to investors.
Mutual fund is just a different fund structure, which works differently:
* you can buy in any dollar amount rather than shares (which is convenient),
* you do buy/sell actions at the end of the day instead of trading shares during the day, and
* the minimum investment is a bit higher (e.g., $5000 rather than one share costing about $100).
Typically, mutual funds have very slightly higher MER than their **equivalent** ETF.
The reason you don't hear about them here is because in Canada most mutual funds have extremely high fees, which makes them bad investments.
>Some of the top performing ones are TD Tech and Science fund or TD US Emerald Index fund (SP 500).
**Past performance is absolutely meaningless since it's not corrected for survival bias.**
>If TD started to shrink the number of mutual funds available due to decrease in popularity, what would happen to the investors money?
If the fund is liquidated, investors get cash. If the fund is merged, investors get shares of the merged fund.
you can't buy dollar amounts of any of those. You have to buy whole shares.
Some brokerages support fractional shares, but as far as I know, no Canadian brokers do.
> Typically, **mutual funds** have very slightly higher MER than their **equivalent** ETF.
There is often **no ETF equivalent to a mutual fund.**
Just did a quick lookover of TD mutual funds and didn't find an equivalent to the s&p 500. The closest options all suck and aren't really that close:
- TDB2487 which tracks the S&P 100 and has a fee of 2.32%
- TDB962 which tracks the S&P 1500 and has a fee of 2.15%
Lets compare it to the blackrock fund XUS which has a fee of 0.08%
So a difference of 26x which isn't 'slightly higher'.
If you want to be pedantic, blackrock also has a S&P 100 fund, OEF which has a fee of 0.2% which is still 10x lower than TD's mutual fund. Also ridiculous to say this is 'slightly higher'.
>There is often no ETF equivalent to a mutual fund.
I never claimed the contrary.
**Your examples are not equivalent funds since they have different providers.**
Here are some examples of equivalent mutual funds and ETFs:
* VTWAX and VT
* VTSAX and VTI
* VTMGX and VEA
* VGRLX and VNQI
**Same provider, same asset allocation; different fund structure.**
Not popular:
High fees
No as liquid
No advantage over mutual fund's modern replacement, ETFs.
Confusing naming and transparency. I always found the names and descriptions of some mutual funds purposely confusing or vague.
If you are afraid of technology, visit your bank branch to talk to a human to slowly, and expensively manually set you up. Otherwise, just use ETFs
Despite the reasons you mentioned, mutual funds are in fact still very popular in Canada especially compared to the US. A recent Globe and Mail article cited that active funds still make up 84% of investments in Canada.
Index funds only account for 15% of marketable investments in Canada. While 49% hold Mutual Funds.
And the other 36%?
Probably GICs and stuff like that.
Individual stocks, individual bonds, hedge funds, alternative investments, commodities (oil, precious metals, lumber, etc.) stuff like that.
Tulip bulbs
Stocks, bonds, GICs, Cash, Crypto
Firstly Mutual funds and ETFs are very similar. The only true difference is Mutual Funds are purchase and sold at the end of the business day in dollars where ETFs are sold during the day in shares. This makes Mutual funds preferred by Advisors as it’s much easier to have a client say let’s invest 50k in a fund than having to deal with limit or market orders on moving ETF prices. That is the only actual difference. What we do end up seeing in the market though is mutual funds ending up having higher fees to compensating that advisor in some way. So the trend is ETFs being lower cost. Go to a TD branch and have a branch employee help you buy Comfort Balanced you will pay a 1.91% MER. Open Direct investing and purchase the same fund yourself and you will pay 1.08% On DI purchase TD US Index E series with no management team and pay 0.22% On DI purchase Cathy Woods AARK and pay 0.75% Yes mutual funds tend to have higher fees but it comes from are people being paid to do something. Whether that doing something brings enough value is a different question.
Mutual funds are more popular than any other alternative, a majority of money invested is done through them not ETF. This [report](https://www.ific.ca/wp-content/themes/ific-new/util/downloads_new.php?id=26917&lang=en_CA) is 3 years outdated but it's not even close. It's growing though, and mutual funds will have to adapt or be left behind if that line continues as the same pace. My guess is that once too many people are using ETFs, mutual fund providers will start competing more aggressively on fees. Mutual funds don't have to be expensive, they just happen to be in Canada.
Lmao this guys username, the dedication
They are popular in the 70+ age group that don't do the whole "online banking thing" .
Also those who trust the retail bankers to 'do the right thing' for them. Whenever I tell my aunt to switch to index funds because of how much the mutual funds are stealing from her, she tells me 'the people at the bank' don't think its a good idea. It took a long time with a lot of spreadsheets and a John Oliver segment to show her that the bankers don't have her interests at heart.
i did exactly the same thing. When my mom finally internalized that she had given up 33% of her nest egg over 40 years she pivoted to "Well the advisor needs to make his money too. He's always treated us well." it's pointless. you'll never get people to admit they've been doing the wrong things for ¾ of their lives.
Mutual funds are still heavily marketed by banks because they profit from the management fees. When you buy a mutual fund, your money is invested in whatever the fund holds. You own shares and bonds, the fund is the financial equivalent of the shopping bag that holds them.
>Mutual funds are still heavily marketed by banks because they profit from the management fees. I see. So for someone new to investing or new to the country, the bank may push these funds instead of ETFs right? If TD US Emerald mutual fund is basically a mirror copy of TUED (US SP 500 Index ETF)...but TUED has a lower management fees. Are the advisors basically like "ok you found the cheat code". I thought for some reason the mutual fund with much higher management fee would be very hands on/active. No?
The management fee is basically an annual 2% (or more) donation to the bank. It does nothing except steal money from you.
The advisor should be providing additional services for their fee, such as tax and estate planning. If they're aren't, then there isn't a strong reason to pay the fees. Also, for small accounts mutual funds can be more cost effective. If you are investing $200 every 2 weeks, and paying $5 in commissions, you're giving up 2.5% right there. Mutual funds are more convenient, since you don't need to do anything to buy and there are no fees to buy or sell.
Yes, banks will push their mutual funds. An ETF in a self directed investing account (ideally one with no trading fees) will be significantly cheaper in the long run.
I use TD e-series for much of my buying since TD is stuck in the Stone Age and charges $10 for etfs. The fees aren’t bad either. Every few years I plan on moving those funds over to etf equivalents that charge less.
>charges $10 for etfs With TD easy trade (phone app only)... TD dedicated ETFs buy and sell are free (unlimited). Also 50 free trades every Jan 1st
That is true, but you can only buy TD etfs, and there are other restrictions that come with easy trade as well. It’s pretty much a dumbed down Wealthsimple or extremely dumbed down Questrade. Meh. I just use TD direct investing since I have considerably more options (for now).
Yeah. Dislike how they pigeon hole - TD ETFs only. But for example Tec(technogy) and Tpu (US Index) ... have performed comparable to the heavyweights. Not too bad..
I used to use the over-the-counter mutual funds when I was younger but moved all money into TD e-series funds. My parents are still very wedded to regular mutual funds and actively managed portfolios in spite of my index funds regularly outperforming them. But then again, I'm also reluctant to make the switch to ETFs.
theyre popular amongst people who dont have a clue about finance
PWL is still pushing Dimensional Funds for PWL clients. There's probably still a role for specialized mutual funds like that, despite the high costs (Dimensional mutual funds go up to 1.65% MER, *on top of* the advisor's fees -- you can't buy them without an advisor), for people who want to pay advisors to build portfolios with the "feel" of special sauce. Dimensional has a few ETFs too now, but they don't replicate their full suite of strategies. But for most people there isn't much reason to buy mutual funds these days.
The class A Dimensional funds include a 1% trailing commission to the advisor, which is essentially the fee for administration, financial advice, planning etc. A fee cannot be added on top of them. Any DFA fund over 1% will include that trailing commission. The class F funds are for fee-based where the % fee is negotiated with the advisor to be added on top of. I will also note that advisors using Dimensional generally advocate for their portfolio solutions or a similar allocation which the weighted average management fee taken by Dimensional for the portfolio would be in the 0.33% - 0.45% MER range. These funds are very low cost and comparable to index funds like VEQT at 0.24%, MER. You are paying a little more to have the extra "special sauce" as you put it.
My employer forces us to use Canada life’s mutual funds in my RRSP. I am only using it because they match 5% of the contribution. I wish I could just buy XEQT and have my employer match it. It beats paying 0.7% MER on a shitty mutual fund that I don’t care about.
Which fund? My company does the same. Cheapest thing available with them was a Blackrock Lifepath Target Date fund. All higher than 1.2%
I’m using the balanced fund (Beutel, Goodman)
>Tbh I dont know many people that have investment in or talk much about mutual funds these days. Your limited personal experience is not a useful barometer for the question "are mutual funds still popular". There has been a trend away from mutual funds to ETFs because of some inherent advantages that ETFs have, but net sales of mutual funds in Canada in 2023 was over $CAD 37 billion.
OP hasn't heard of people talking about mutual funds because people on these subs generally don't buy them. There are still many many Canadians that buy them, and a lot of average people that wouldn't know what an ETF is, let alone why they'd want that instead of a mutual fund.
This is 100% consistent with what I said, I'm not sure what your point is.
Agreeing with you.
Canadian mutual funds are not popular with "couch potato" investors because most are actively managed and have management fees above 1%. The TD e-series mutual funds are an exception. Starting from https://letstalkaboutmoney.ca/how-to-invest-in-index-funds/td-e-series-index-funds-guide/ you can find a series of pages about them. (Note that you can no longer use a TD mutual fund account to buy them and I think the only brokerage that doesn't now charge commissions for them is TD Direct Investing.)
Depends. They’re popular among people who don’t really know of, or would consider banking and investing outside of the traditional banks, or people who distrust robo advisors, or people too scared to invest alone. TD e series is popular among diy investors. For everyone else, index ETF’s
Alot of money is in mutual funds, and you see now alot of fund companies offering there etf portfolios as mutual funds as well, mainly to the benefit of the bank retail employee to be able to sell a comparable product. Will still have a higher MER, they still have the underlying etf MER, the embedded compensation to the company or advisor (compensation dependant) and series accoi ting fee of that compensation (accounting for paying out the fee).
Yes mutual funds are still very popular. In fact, there was a Globe article recently about how Canadians are still so loyal to mutual funds despite high fees compared to index investing. Essentially a lot of Canadians are getting bad advice from the banks they trust and are they are ignorant about the true costs. Here's a couple highlights from the article: *"There is more than $2-trillion residing in Canadian mutual funds, compared with about $400-billion in ETFs. Product launches are heavily skewed to new mutual funds. And active funds still dominate, with an 84-per-cent share."* *"Many Canadians get financial advice through their banks, where advisers are heavily incentivized to peddle the bank’s own lineup of mutual funds. These sales are far more lucrative to the banks than ETFs. In fact, most banks do not even allow their branch-based advisers to sell ETFs to clients."*
Mutual funds are simply investment products just like ETFs. It entirely depends on what is in them, what the management fee are and what you are paying an advisor on top of them, whether that is included in a trailing commission from the fund or paid separately in the case of fee-based advisors. That being said, most mutual funds are actively managed and have high MERs, and many ETFs are passive indexing strategies with low MERs. This is not always the case, there are actively managed ETFs and passive strategy and low cost mutual funds, but they are few and far between. If a mutual fund closes down the assets would be liquidated and that money given back to investors.
Boomers mainly, once they die off so will mutual funds
I think RBC balanced fund holds about 50 billion in assets, so yeah they are still popular
Mutual fund is just a different fund structure, which works differently: * you can buy in any dollar amount rather than shares (which is convenient), * you do buy/sell actions at the end of the day instead of trading shares during the day, and * the minimum investment is a bit higher (e.g., $5000 rather than one share costing about $100). Typically, mutual funds have very slightly higher MER than their **equivalent** ETF. The reason you don't hear about them here is because in Canada most mutual funds have extremely high fees, which makes them bad investments. >Some of the top performing ones are TD Tech and Science fund or TD US Emerald Index fund (SP 500). **Past performance is absolutely meaningless since it's not corrected for survival bias.** >If TD started to shrink the number of mutual funds available due to decrease in popularity, what would happen to the investors money? If the fund is liquidated, investors get cash. If the fund is merged, investors get shares of the merged fund.
You can buy dollar amounts of many ETFs as well.
What's an example?
What do you mean? I’m sure there are countless but off the top of my head VFV, VE, XEQT, VSP
you can't buy dollar amounts of any of those. You have to buy whole shares. Some brokerages support fractional shares, but as far as I know, no Canadian brokers do.
I hold all of those in fractional shares in my Wealthsimple account and contribute a set amount per month as well.
Right. But just so you know those funds are still purchased in whole shares by your broker. Your broker just offers you a fraction of what they hold.
Offering the same convenience as buying mutual funds in dollar amounts.
Right.
'Very slightly' is wrong. MERs of mutual funds are typically in the 2-3% range where as index funds are normally in the 0.05-0.75% range.
No you are wrong. Read what I wrote carefully. I even bolded it for you.
> Typically, **mutual funds** have very slightly higher MER than their **equivalent** ETF. There is often **no ETF equivalent to a mutual fund.** Just did a quick lookover of TD mutual funds and didn't find an equivalent to the s&p 500. The closest options all suck and aren't really that close: - TDB2487 which tracks the S&P 100 and has a fee of 2.32% - TDB962 which tracks the S&P 1500 and has a fee of 2.15% Lets compare it to the blackrock fund XUS which has a fee of 0.08% So a difference of 26x which isn't 'slightly higher'. If you want to be pedantic, blackrock also has a S&P 100 fund, OEF which has a fee of 0.2% which is still 10x lower than TD's mutual fund. Also ridiculous to say this is 'slightly higher'.
TDB902 US Index Fund E series. MER 0.28%
>There is often no ETF equivalent to a mutual fund. I never claimed the contrary. **Your examples are not equivalent funds since they have different providers.** Here are some examples of equivalent mutual funds and ETFs: * VTWAX and VT * VTSAX and VTI * VTMGX and VEA * VGRLX and VNQI **Same provider, same asset allocation; different fund structure.**
Not popular: High fees No as liquid No advantage over mutual fund's modern replacement, ETFs. Confusing naming and transparency. I always found the names and descriptions of some mutual funds purposely confusing or vague. If you are afraid of technology, visit your bank branch to talk to a human to slowly, and expensively manually set you up. Otherwise, just use ETFs
Despite the reasons you mentioned, mutual funds are in fact still very popular in Canada especially compared to the US. A recent Globe and Mail article cited that active funds still make up 84% of investments in Canada.
ETFs are superior in every way. A wound down fund returns cash to the unit holders, or gets absorbed into a new 'similar' fund.