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Finally, a clear-cut case for an investor to start dumping high-fee mutual funds to buy something else.

One of the more common inquiries I’ve had from readers in the past two years or so is what to do about mutual fund with high management-expense ratios. My usual answer is to investigate the funds in question to see how well they’ve performed. While high fees are a drag on returns, it’s possible a fund can still deliver decent returns relative to the risks they take on. Advice provided by the adviser selling the funds may also be a mitigating factor.

But recently, a reader presented a case where it makes sense to immediately start phasing out mutual funds and buying guaranteed investment certificates. The reader has a registered education savings plan for a 15-year-old that holds a mutual fund with an MER of 2.23 per cent. “I feel stuck because I know the fee is high,” she wrote. Her question: Should she sell the funds to buy GICs, or move into exchange-traded funds?

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GICs make good sense here, but for a specific reason. A 15-year-old could be three years away from starting college or university, which means it’s time to start reducing risk in his or her RESP investments. Think of this situation like impending retirement. As you get closer to the pivot point where you move from accumulating assets to drawing down on them, you need to make your portfolio more conservative.

There’s no definitive approach to taking the risk out of an RESP, but it’s defensible to have half to two-thirds of a 15-year-old’s plan in GICs. At 16 or 17 at the latest, the portfolio could be 100-per-cent GICs. A lot depends on how big the RESP is right now – is there enough in it to cover all or most educational costs for the beneficiary? If so, then there’s a case for eliminating stock-market risk sooner rather than later.

A GIC ladder is a handy way to generate money a student can use annually to pay postsecondary expenses. With a four-year program, the GIC money could be evenly divided into one- through four-year terms. Maturity dates in early August are convenient for paying tuition costs for the academic year ahead.

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