«

»

Mar 21 2013

avatar

Print this Post

ETF War Offers Opportunity For Canadians





It’s been a few years since we’ve had a good old-fashioned gas-price war at the pumps.

But most of us can still remember the vehicle lineups. Some car owners even filled Jerry cans to squeeze every last ounce of value from the temporarily depressed fuel costs.

A few bucks saved on a couple tanks of gas is one thing; but that’s peanuts compared to what you could save during the price war now raging at an investment brokerage near you.

It’s a marvel what a little competition can do for a marketplace.

Please read the rest of my article at Canadian Business:








About the author

andrew hallam

I'm a freelance finance writer, lucky enough to have been nominated as a finalist for two Canadian National Publishing Awards. I'm also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School, a book explaining how I became a millionaire on a teacher's salary, while still in my 30s. Working to empower people financially, I'm available to motivate and inspire people on basic retirement planning and index investing. I'm happy to comment on your questions, first, please read the Terms of Use.

Permanent link to this article: http://andrewhallam.com/2013/03/etf-war-offers-opportunity-for-canadians/

7 comments

Skip to comment form

  1. avatar
    Value Indexer

    I love seeing falling costs! It looks like Vanguard funds aren’t necessarily the best in Canada in all major categories yet, but hopefully they bring in some more investors and get there soon.

    Vanguard has a great history. It remains to be seen whether the other ETF providers will be able to support investors over several decades. BMO has a few good ETFs but that seems inconsistent with its position as a fee-pumping big bank. (I currently hold BMO and Vanguard ETFs and will be adding iShares soon)

    Another side of this is the price wars at brokerages. Two are now offering commission-free purchases for all ETFs and a few others offer it on a limited list. As we spread the word and get more people on board, the deals will just keep getting better.

    1. avatar
      Andrew Hallam

      I absolutely agree Value Indexer! We are investing during great times.

  2. avatar
    Brunnenburg

    Great article, Andrew, but I wonder if buying just one global ETF might be more efficient than spreading out among several ETFs. I hope Vanguard Canada eventually opens up a global ETF. For simplicity’s sake I’ve been using iShares MSCI World (XWD). Admittedly, the problem here is the relatively high MER (0.46%), but I find it much easier to rebalance my current TFSA portfolio thus:

    XWD: 40%
    CBO: 40% (eventually I’ll probably switch this to VSB)
    ZCN: 20%

    My overall MER for this is roughtly 0.33%. Not bad, but I once Vanguard is more established I’d jump over in a second. My US$ RRSPs are all with Vanguard (BND, VTI, VEA).

    1. avatar
      Andrew Hallam

      You’re right Brunnenburg, a total world index would be great. I think Vanguard’s ETF (VT) has an expense ratio of about 0.35%, but then again, it trades on the New York Exchange.

      As for one on the Toronto exchange, I hope it’s coming. Perhaps we could make noise about it on forums, websites, articles, etc. It’s an idea for a new article, I suppose: a Dear Vanguard piece.

      Hope all is well!

      Cheers,
      Andrew

  3. avatar
    Rahim

    Interesting article, Andrew! I’m a newbie indexer and my portfolio is quite small at the moment so I’m focused on index mutual funds, not ETFs. However, I’m curious to know your thoughts on whether this might have a ripple effect on index fund prices. For example, could I see my index fund portfolio with RBC go down to an average MER of 0.4-0.5% from my current average of 0.7%? (I know the ETF-types reading this must think 0.7% is insane!).

    Mind you, there’s no price war taking place at the current time on the index fund side, but I have the impression that investors are increasingly making the switch from actively managed mutual funds to passively managed index mutual funds. Taking this into consideration, I’m sure the banks that offer index mutual funds (RBC, TD, ING, etc.) will want to grab their fair share of clients through cheaper index fund offerings. (If this happens, hopefully they’ll also expand their index fund line-up too! I’m with RBC and they only offer the 4 main types – Canadian Gov’t Bonds, Canadian Equity, US Equity, and Int’l Equity).

    Thoughts?

    1. avatar
      Vladimir

      Hi Andrew, have read your blog. Really interesting and practical thing considering as i have been approached by Friends salesman recently.
      He still cant make any comments to me about articles re Friends Provident in your blog.
      Can you advise me if Russian residing now in Kuwait can benefit from any of investment approaches described by you for Americans, Canadians, Britons, etc? Thanks in advance Vladimir

    2. avatar
      Andrew Hallam

      Hi Rahim,

      That would certainly be nice if it happened. But I don’t think it would, unless Vanguard started offering indexed mutual funds in Canada. Now that would rock the boat!

      Have you considered switching to TD’s e-Series indexed mutual funds? They cost nearly half of what you are currently being charged, and you could open a TD Waterhouse account, sell your current funds at no cost (and no tax hit if they’re in a RRSP that you would be rolling over into a TD Waterhouse RRSP) and you would give yourself a boost of about 0.4% each year. It doesn’t sound like much, but it would add up to plenty over time.

      Cheers,
      Andrew

Leave a Reply

Switch to mobile version