I dressed up today because what I'm
about to teach you is the single most
important thing I'm ever gonna teach you
about investing. What I'm about to teach
you is actually going to save you tens
to hundreds of thousands of dollars over
the rest of your life and that is not a
hyperbole. And if you if you do like this
video, please share it, because it's very
important information for every Canadian
to understand. Now before I did this
video I taught you about stocks and
bonds and mutual funds and the market, so
that you can understand what I'm about
to tell you. Now when I was doing my
four-day course that was going to allow me
to sell mutual funds to everybody I
started learning things I didn't know
and I would talk to my friend a lot,
who has the following credentials, so he
basically knows more about money than
anybody I've ever met. He could actually
manage a mutual fund if he really wanted
to, but instead he runs a really
successful practice downtown dealing
with wealthy people. And I said to him I
said, "how come people don't just invest
in the index why don't they just track
the index?" and all he said to me was,
"Exactly!" That's exactly the only thing
that you need to know and what you need
to know about the mutual fund that
you're buying is that the manager that's
managing it, probably doesn't even own it
himself. Do you understand that? He's not
investing his own money into that fund,
unless maybe he has to. So what you
really need to understand about every
single mutual fund, is that every single
one is trying to beat a specific index or
group of indexes. So I thought to myself
what's the easiest comparison i can make?
I can just take six big mutual funds
from companies that everybody knows that
are Canadian Equity Funds and compare
them to the Toronto Stock Exchange
the tsx and just see what happens.
Because we can all understand that every
single one of those funds is trying to
beat that index, so let's just look and
see what happened. And and the other
thing you need to know before I really
get started is the only time you're ever
going to find any evidence contrary to
what I'm about to show you is when the
financial institution is the one that
actually put the study together. This
isn't me just making stuff up and I
didn't do things multiple times to like
make this look fancy.
I just thought, what's the easiest way
for you guys to understand this? And so,
let's look at some numbers now: So as you
can see here the Toronto Stock Exchange
had a 10-year return of 4.67%
Now we've got the RBC fund and
it has a Fee of 2.06%, had a 10-year
return of 3.1%, which
is a difference of negative 1.57%, so
that's down a bit now we've got TD, 2.18%
Fee, your return of 3.07%, down by
1.60%. Now we've got
Investors Group has a fee of 2.58%
A poor 10-year return of 0.59%,
which is down by a little
over 4.0%. Now we've got the BMO
fund has a fee of 2.39%, and a
10-year return of 3.91% so that
was up pretty good. Not too bad a return.
Still a difference of minus 0.76%
You get what i'm getting at.
Now let's just look at the average. Let's
go to the average and say the average
fee of all these six funds was
2.30% and
their average return was 2.45%,
which means that they lost to
the index by 2.22%, which is
almost exactly the same as the average
fee. Which is not a coincidence. That's
just kind of what happens. People can't
generally beat the index because of that
embedded fee. So now let's go to the
bottom and let's look at a robo advisor
who's using a very inexpensive
ETF, the iShares Capped Composite TSX Index
ETF and then include their fee on top
of that. So you would have a 10-year
return of 4.02% which is down by
0.65%, now if you
invested in this ETF yourself, then you
would have done much better, but it is my
opinion that you should have a money
manager of some sort,
unless your are a true do-it-yourselfer,
because you shouldn't just invest in the
Canadian index. Now let's look and see
what would have happened? What's the
difference over those ten years and
actual monetary value? So for this i'm
not going to go into every number, but
you can just look where you're sort of
net worth or investments would lie and
I'm going to talk about people with a
hundred thousand dollars. You can see
their average bank or financial
institution Fee over 10 years was just
over $26,000 dollars. Now if
you take my fee, plus the robo advisor
fee over 10 years that total Fee would
have been just over $10,000 dollars,
which is a savings of almost $16,000
dollars. Now you have an average
portfolio increase of just over
$20,000 dollars by doing this, minus our fee,
which would have been $4,100 dollars over
ten years. And you have an increased net
worth of $16,200
dollars, or a 12.66%
net worth increase. Now that means what
I'm saying is that I've given this part
of my strategy away to you guys. So I
need to earn that fee from you by
providing you with advice outside of
this. Otherwise you can stop paying me
and your net worth will increase more than
more than I just showed you. And I
believe that people do NEED financial
planners to help them along the way. I
want you to think about this really
quick.
On average, index tracking funds beat
other investors 80% percent of the
time, so if i showed you a roulette wheel
that had the same pay out, with 80%
black numbers and 20%
red numbers, could somebody sell you on
the idea of investing in red? Or betting
your money on red?
Why would you do that? And I don't want
you to blame your advisor for this at
all. Had I've been able to do this at the
old institution I was at, or had been
able to go to any other institution and
give my clients this advice. I would have,
but that just isn't available, so i had
to create it on my own. So that's what I
did.
Now I hope you understand this because
it will save you money. It will improve
your investment returns most likely, and
investing is not difficult.
All you have to do is avoid the noise.
And be patient. And diversify your
portfolio at a low-cost and you will beat
almost every single person you know. And
that's it, thank you