Today I went running with a couple of new friends, Joey and Marilyn. 

Entering Victoria, B.C.’s Elk Lake trails, we started a conversation about investing as we pattered along the wet leaves.  As it turns out, they use the same financial advisor that I started my investment journey with, two decades ago.  But they’re starting to feel the seven year itch, wondering if they should ditch their advisor.  How are their investments performing?  Let’s have a look.

Joey and Marilyn are paying roughly 2.5 percent a year in hidden annual fees…just as I used to, with a company called Investors Group.

During our run, I expounded on the merits of indexed investing, and how investors stand the greatest statistical chance of success when investing with indexes, rather than expensive financial products (like those sold by Investors Group).

But what if Joey and Marilyn had only listened to one part of my discussion?  At some point, they may have drifted off to something more mentally scintillating—like where the ducks go in the winter.

What if they didn’t hear what I said about “low cost indexes” and they bought expensive indexes instead?

That would be a shame.  There are plenty of banks in Canada that are selling index funds that they should be ashamed of.  Many of them cost nearly 1 percent a year.  You can find indexes that cost 1/5th of 1 percent, if you know where to look.

Let’s assume that Joey opened an account of expensive index funds eight years ago, and Marilyn opened an account of actively managed funds with Investors Group on the same day.  Marilyn’s investment funds had fund managers who arrived at work each day to trade stocks (and/or) bonds—trying to find great businesses, ride economic trends, and make money for Marilyn.

Joey, on the other hand, bought a group of indexes from Toronto Dominion Bank.  And he paid high fees for them.  He still paid half of what Marilyn was paying, but Joey was still getting fleeced.

Whose account would have done better over the past eight years, Joey’s or Marilyn’s?

Presume that Joey and Marilyn each diversified their money equally between the Canadian stock market, the U.S. stock market, the International Stock Market and the Canadian bond market, putting $10,000 into each sector, back in November 2003.

Here are the following funds that they would have likely bought, given the above scenario of global diversification:

Marilyn’s Investment Group Funds

Joey’s TD Index Funds

Investors Group, Canadian Equity A

TD Canadian Index

Investors Group, U.S. Equity Fund A

TD U.S. Index

Investors Group, Templeton International

TD International Index

Investors Group, Canadian Bond Fund

TD Bond Index

 With $10,000 invested in each of the funds below, in November 2003, this is what they would each be worth on November 22, 2011 

Investment Category

Marilyn’s Actively Managed Funds

Joey’s Index Funds

Canadian stock market



U.S. stock market



International stock market



Canadian bond market



Total Account Sizes




Over just eight years, Joey’s indexed account would have beaten Marilyn’s Investor’s Group account of actively managed funds by $8,513.

A couple of things to keep in mind:

  1. If Joey bought cheap, e-Series index funds, the difference would be even more significant.
  2. If this money were held in a taxable account, Marilyn’s actively managed funds would have generated heavier relative tax liabilities, relative to Joey’s funds (indexes are much more tax efficient)

If you’re looking for further information on index fund investing, you could order a copy of my book, Millionaire Teacher.  It’s currently Canada’s #1 stock market investment book, according to Amazon.

 And it ranks among Amazon’s top 3 investment books in the United States.  You won’t be disappointed.