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A question I have never once received from a reader: How do I switch my exchange-traded funds into mutual funds?

This occurred to me the other day as I read yet another in a long series of queries from readers about moving money in the opposite direction. “How do I switch my mutual funds to ETFs?” an Alberta-based reader asked. “I hold my mutual fund in an RRSP account with my bank.”

I expect to get more questions like this in the months and years ahead. With their comparatively high fees, mutual funds are struggling to compete with the returns available from low-cost ETFs. A balanced mutual fund with a management expense ratio of 2 per cent is up against it when government bonds with maturities of two through 10 years yield well less than 1 per cent and stock markets are contending with uncertain prospects for the economy to resume its pre-pandemic growth track.

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You can get balanced ETFs with MERs of 0.2 to 0.25 per cent. Yes, you might have to pay as much as $10 in commissions to buy these funds, but the long-term benefit of paying a low MER is a far more important factor.

Switching mutual funds into ETFs is simple, especially in this reader’s case because he has a registered account – a registered retirement savings plan – and thus doesn’t have to worry about the potential for taxable capital gains when he sells the mutual funds. Here’s a four-step process:

  • Open an RRSP account at an online brokerage: Use the broker at the bank where the mutual funds are held, or another one.
  • Complete an account-transfer form: Request the mutual funds be transferred to your new brokerage account “in kind,” which means they will appear in the new brokerage account; in doing so, you have control over when you sell the mutual funds.
  • Identify the ETFs you want: The quick, smart move is to find a balanced ETF that suits your investing profile and use it as your one and only holding; you can move to individual ETFs later if you feel the need.
  • Sell the mutual funds, buy your ETF(s): Welcome to low-fee city.

-- Rob Carrick, personal finance columnist

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.

Stocks to ponder

Score Media and Gaming Inc. (SCR-T) Shares of the Toronto-based digital media and sports betting company fell this week after an earnings miss for its fourth quarter. The stock is up nearly 30 per cent over the past year and the company is in the emerging sports-betting industry that’s getting a lot of attention. Some followers of the company say investors should be cautious. Brenda Bouw reports (for subscribers)

The Rundown

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Dividend investors in Canada need to face an inconvenient truth that could hinder returns for years to come

Many Canadians regard dividend investing as gospel. If so, they might want to start investigating alternative faiths, writes Ian McGugan. Over the past three years, investors who selected Canadian stocks on the basis of their dividend yields have received little in return for their trouble. Perhaps this represents a temporary aberration. But anyone who wants to practise dividend investing in Canada today has to face an inconvenient truth: The two sectors that produce the bulk of Canadian dividends are confronting challenges. (for subscribers)

Funds favour bonds over stocks in run-up to U.S. election

Global fund managers recommended the lowest exposure to equities and the highest share of bonds in portfolios in over a decade this month, citing risks posed by the U.S. election and economic fears stoked by resurgent coronavirus pandemic, a Reuters poll found. (for subscribers)

S&P financials index may be bruised but not without bright spots

Financial stocks have lagged the broader equity market since the start of the year and since the late March crisis-low. But not all stocks are created equal in the S&P index that tracks the industry, which is down 23% year-to-date. In fact, so far in 2020, the lead performers of the S&P 500 Financial sector have even outperformed the high-flying Nasdaq, which is up almost 23% year-to-date. Sinead Carew of Reuters tells us about them. (for subscribers)

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Others (for subscribers)

The week’s most oversold and overbought stocks on the TSX

Friday’s analyst upgrades and downgrades

Thursday’s analyst upgrades and downgrades

Number Cruncher: Safeguarding animal health – and keeping dividends flowing with these five stocks

Number Cruncher: How 11 TSX oil and gas stocks stack up in the wake of the Cenovus takeover

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Others (for everyone)

Tim Cestnick: CRA takes offence with leveraged insurance products

Globe Advisor

Six investment opportunities for a greener future

Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis, and access to ProStation - a powerful tool to help you manage your clients’’ portfolios.

What’s up in the days ahead

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How will markets react to next week’s U.S. election? Ian McGugan this weekend shares his thoughts. Plus, John Heinzl explains why he’s no fan of covered-call ETFs.

Click here to see the Globe Investor earnings and economic news calendar.

More Globe Investor coverage

For more Globe Investor stories, follow us on Twitter @globeinvestor

You may also be interested in our Market Update or Carrick on Money newsletters. Explore them on our newsletter signup page.

Compiled by Globe Investor Staff

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