More and more investors are managing their own investments or considering doing this. A J.D. Power survey found a rise of more than 50-per-cent in do-it-yourself investors from 2012 to 2013 in Canada.
The first step to a DIY portfolio is knowing the benefits. About three-quarters of Canadian investment industry assets have been in mutual funds, based on the Canadian Securities Administrators (CSA), and average annual mutual fund fees (management expense ratios or MERs) in this country are 2.42 percent for equity funds, based on Morningstar.
Canadian mutual funds fees have always been identified as the highest in the world, but the theory behind paying such fees is that the mutual fund manager and the or her team have the ability to outsmart the markets.
The trouble with this assumption is that the stock market is really a zero sum game. That\’s, there are as numerous winners and losers and something person\’s gain are only able to come in the expense of another\’s loss.
In other words, it\’s impossible for each mutual fund to outperform. Like a group, they tend to trend towards the average return from the market. When you back out 2.42 percent in fees, you have a good chance of underperforming the marketplace by 2.42 per cent and may be better off just purchasing the market to begin with.