Cars, clothes, food, flights, computers, cellphone services, back-to-school supplies and toothpaste – with all of these purchases we make our buying decisions based at least in part on price.
Investing products? Not so much.
Wise up, people. By paying less, you put yourself in a position to make more. Also, you influence the industry to sharpen its level of price competition when you put your money in low-cost products.
To help get you started, the Portfolio Strategy column presents seven great investing bargains in mutual funds, exchange-traded funds, brokerage accounts and more.
Alongside, you'll find lists of top bargains selected by three financial bloggers. You're invited to submit your favourite bargains by either e-mailing me or commenting online. Come on, help out your fellow investors and strike a blow for lower costs.
Bargain No. 1: PH&N Bond-D
It's pure negligence if you're a mutual fund investor with at least $5,000 to invest in a Canadian bond fund and you haven't considered this robotically consistent offering from Phillips, Hager & North, a division of Royal Bank of Canada's mutual fund arm. With its ultralow fees and quality management, this fund has outperformed its category average by between 1 and 2 percentage points over almost every measured time frame.
The management expense ratio is 0.59 per cent for the D-version, which is available directly from PH&N itself or through online brokers. The average Canadian bond fund management expense ration (MER) is 1.67 per cent, which is alarmingly high at a time when retail investors are lucky to get a 2.5-per-cent yield from a five-year Government of Canada bond. Investment advisers may like the C version of this fund, but it's less attractive because of its MER of 1.13 per cent.
Bargain No. 2: Mawer Canadian Balanced RSP
This low-profile gem of a fund sticks it to two, yes two, overpriced mutual fund industry offerings. The first is the balanced fund, which blends stocks and bonds, and the second is the wrap product, which bundles a group of funds together into a single product that stands up as a complete portfolio. In fact, Mawer Canadian Balanced RSP is virtually an entire portfolio unto itself.
The fund is technically classified in the global neutral balanced category, which means it holds global stocks and bonds (Canada included) in roughly equal proportions. Global stocks have performed dismally for Canadian investors in recent years, but this fund has somehow managed to achieve a highly respectable compound average annual return of 7.7 per cent over the past 20 years. Credit the tiny 1.03 per cent MER, as well as the skills of the managers at Calgary-based Mawer Investment Management.
Bargain No. 3: Questrade
Big bank-owned online brokers require you to be an active trader or have an account value of $50,000 to $100,000 to qualify for a reduction in your online stock-trading commission to $9.99 or so from $20 to $29. Questrade, an independent, charges one cent per share, with a minimum of $4.95 and a maximum of $9.95, and all you need to qualify is a minimum account of $1,000.
Various electronic network and exchange fees may increase your commission costs at Questrade, but investors with small accounts will still pay well below the regular cost for online trades of up to 1,000 shares. Questrade lacks some of the features and services offered by bigger players, but it's the price leader by far.
Bargain No. 4: The Vanguard Total Stock Market ETF
There's a view that Canadian investors should only buy exchange-traded funds with currency hedging when looking to the U.S. market, and it's based on the risk that a rising loonie will kill returns in unhedged ETFs. The counterargument is that you can get much cheaper exposure to the U.S. market with unhedged ETFs, and that hedging doesn't even matter much if you're a long-term investor.
If you go the unhedged route for a U.S.-market ETF, the Vanguard Total Stock Market ETF is a top candidate. It has a rock-bottom MER of 0.09 per cent and it offers exposure to 95 per cent of the U.S. market in a single package. Many investors choose an S&P 500 ETF for their U.S. exposure, but this covers only big companies and not the smaller stocks that can offer superior long-term returns.
