Blogs & Comment

What some DIYers seem to overlook

As some of you may know, I co-write the Me and My Moneycolumn in the Globe and Mail. Its fun but the occasional piece does attractcaustic feedback in the online comments section– as was the case earlier this month!
The article profiled Nora Dunns investing style and portfolio. My thinking was that she would be interesting to feature because of her unique career and lifestyle. But as I discovered during the interview, she keeps her money in In vestor Groupmutual funds.
That was like putting up a bulls eye for all the passive index and dividend investors! The majority of the comments went on about how dumb it was to own mutual funds with MERs around 2.4%. Several were downright ornery about it.
What the DIYers overlook
Sure,MERs are high on mutual funds. But heres what some DIYers seem to overlook: to sell mutual funds, advisors and planners usually pass on a lot of advice free of charge on how to reduce taxes, set up an estate, prepare financially for retirement, etc. Then there are specialized niches such as business-succession planning and cross-border financial planning.
As one commenter, a client of Investors Group, said: My portfolio is doing fine but thats not even the important part. Thanks to my advisor, I paid off my home in 10 years instead of 25. He also showed me how to save for my kids education and I am on track to retire at 55. I am also paying closer to $10,000 less in taxes every year thanks to his advice.
But dont go to an advisor or planner with $25,000 or less and expect a lavish financial plan. You would be better off with index funds or ETFs. Mutual funds also dont make sense for higher net-worth individuals if they have the time and inclination to research their own investments and do their own financial planning on taxes, etc.
Being representative
I myself am a committed DIY investor who uses only stocks and ETFs. But when I found out Nora owned mutual funds, I was happy to feature her because Me and My Moneyshould be representative of the broad cross section of investors. Consider the following breakout of vehicles used by investors (borrowed from John Heinzls column).
Canadian Value of:
mutual fund assets: $720-billion segregated fund assets: $83.3-billion hedge fund assets: $45.7-billion exchange-traded funds: $36.2-billion closed-end funds: $24.1-billion (Source: Investor Economics)