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Investment Ideas How to decide whether to ditch your mutual funds, a REIT vulnerable to a selloff, and the ‘double-edged sword’ of incessantly checking your portfolio

One of the side effects of investors becoming more savvy about fees is a condition we’ll call mutual fund angst.

It works like this: An investor learns more about fees and realizes that mutual funds are a comparatively expensive way to invest. This often produces an impulse to get out of those mutual funds and sever the relationship with the adviser who sold them. Here’s a sample of this kind of thinking from a query sent recently by a reader: “How does one extricate oneself from long-standing mutual funds if they are no longer a good idea or a long-standing relationship with a particular banking adviser?”

The extrication process couldn’t be easier. Just find a new adviser, ask to have your old account transferred over and then decide which of your exiting mutual funds to sell. It’s quite possible to set this in motion without ever confronting your old adviser.

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But is extrication the right move? You need facts to answer this question, not just an uneasy feeling you own mutual funds that aren’t worth the fees.

A lot of funds are not worth the fees you pay to own them. I delved into this last year in an analysis of the largest 100 Canadian mutual funds. But you don’t sell funds just because they’re funds. There are plenty of good to excellent funds that can help you realize any financial goal you can think of and entirely justify their fees.

If you’re feeling mutual fund angst, you need facts to decide what to do next. Using a resource such as or, take a look at:

  • How the short-, medium- and long-term returns of your funds compare with peer averages and the appropriate stock or bond indexes: Mutual fund returns are shown after fees, which generally include a portion that goes to advisers and their firms for services provided to clients. Chop 1 per cent off index returns to get a fair point of comparison with your mutual funds. Also, put much more emphasis on returns for five years and longer. One-year results don’t mean a lot.
  • Down-market performance: One way for fund managers to add value for investors is to blunt the worst of a bear market. Did your Canadian equity funds lose less than the S&P/TSX Composite Index last year? If not, have you been compensated by extra strong returns in up markets?
  • Holdings: Does your fund have different weightings and holdings than its benchmark stock or bond index? If not, you might as well hold a cheap index-tracking exchange-traded fund.

Next, consider the value of the services provided by your adviser. If you have a financial plan and are confident you’re on track to meet your goals for retirement and more, then you’re getting something for the fees you pay.

Paying hefty fees for weak funds and getting no advice? Now that’s good reason for mutual fund angst.

-- Rob Carrick, Globe and Mail 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.

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Stocks to ponder

Granite REIT (GRT-UN-T). This stock is the most overbought, technically vulnerable member of the S&P/TSX Composite Index this week. The unit price has been reasonably sensitive to sell signals over the past 24 months. An RSI sell signal in February 2017 successfully predicted a price correction to early March 2017, but the downward move was a mere 2.1 per cent. The unit price ignored a sell signal in April 2017, continuing higher, and a May sell signal was followed by one brief, sharp downdraft before rising again. More recently, a June 2018 sell signal was followed by a marginal drop in price and a period of stagnant price action. More ominously, a September RSI sell signal predicted a more serious 7.7-per-cent decline. Scott Barlow takes a look at the overbought and oversold charts (for subscribers).

SIR Royalty Income Fund (SRV.UN-T). For investors seeking income, this fund has an attractive yield of over 8 per cent and a history of providing stable monthly distributions with two distribution increases announced in 2018. Jennifer Dowty reports (for subscribers).

The Rundown

Check in, freak out: The ‘double-edged sword’ of real-time portfolio tracking

Modern portfolio management tools give today’s investors control over their own savings, insight into fees and performance, and the luxury of watching their money vanish in real time when markets plunge. With immediate access to their holdings through online investment platforms and mobile apps, retail investors have the ability to continuously track fluctuations in their personal wealth. That’s a temptation many long-term investors seem unable to resist. Staying disciplined appears to be more difficult for investors who check in on their accounts most frequently. Research shows that higher login rates are associated with reduced risk appetite, higher levels of trading and lower long-term returns. Tim Shufelt reports.

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Haywood stands by Aphria report after probing claims by short-seller

Investment bank Haywood Securities Inc. is defending its work on a recent Aphria Inc. deal after two short-sellers took aim at the cannabis grower last month, sparking a dramatic selloff in the company’s shares. In September, Aphria issued almost $300-million in stock to buy marijuana assets in Colombia, Argentina and Jamaica from a company now known as Sol Global Investments Corp. Last month, New York-based short-sellers Gabriel Grego and Nate Anderson criticized the transaction, alleging that the assets had almost no value and that the deal enriched people with ties to Aphria. Christina Pellegrini reports (for subscribers).

Investors were spooked about profits. Now come the facts

It’s time to see the numbers. Investors are about to get a read on the health of corporate America as businesses begin releasing quarterly profit reports and laying out expectations for the coming year. The results may resolve a roaring debate on Wall Street that has pitted economists, who have argued that the economy remains healthy, against investors, who pushed stocks to the brink of a bear market over concerns that growth is waning. Matt Phillips from The New York Times News Service reports (for subscribers).

Slashed U.S. profit expectations may set stage for share gains

There could well be a silver lining in all the caution around the stock market as the earnings season approaches: Shares do way better when profit expectations have fallen, and lately, they’ve been falling like a rock. By at least one measure, this is the most negative analysts have been ahead of a reporting period in nearly four years. Fourth-quarter reports get rolling next week with results from JPMorgan Chase and other big banks. Reuters reports (for subscribers).

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Others (for subscribers)

‘Growth prospects for internal combustion engines are over in China’

These dividend-paying tech leaders stand to benefit from Huawei’s lost 5G markets

Third time may be a charm as Jeff Vinik relaunches hedge fund

Friday’s Insider Report: COO sells over $2.3-million worth of this large-cap stock

Friday’s analyst upgrades and downgrades

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Ask Globe Investor

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What’s up in the days ahead

Why are so many stocks suspending their dividend reinvestment plans? John Heinzl will share his thoughts.

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

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Compiled by Gillian Livingston

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