We offer mutual funds, equities, fixed income instruments, and exchange traded funds as well as other investment products (ETFs).
Are the fees at Investors Group excessive?
As a financial advisor, I meet a lot of potential clients who bring their mutual fund portfolios to show me. We’re used to seeing costs of 2.4 percent and higher in Canada since we have some of the highest mutual fund fees in the world.
Investors Group, on the other hand, distinguishes out among Canadian fund companies since its costs are frequently around 2.7 percent. When I evaluate Investors Group portfolios, this is only one of the red signals I notice.
First and first, let me state that Investors Group is a competitor of mine.
However, being one of Canada’s top financial institutions, it has a significant impact on many investors. As a result, I believe it is critical for Canadians who own mutual funds to understand how this may affect their financial situation.
1) The Weak Performance Investors Group manages 15 funds totaling over $1 billion in assets. 6 funds are rated 1 star, 4 funds are rated 2 star, 4 funds are rated 3 star, 0 funds are rated 4 star, and 0 funds are rated 5 star by GlobeFund. One fund isn’t rated at all.
2) Exorbitant fees This has a direct impact on the issue of low performance. Fees are higher than 2.50 percent in 11 of the 15 funds (up to 2.71 per cent). There are three fixed income funds on the ‘low’ end, with fees of 1.95 percent, 1.96 percent, and 1.97 percent. In instance, the RBC Canadian Equity Fund charges 2.05 percent in fees. The cost for the Investors Group Canadian Equity fund is 2.72 percent. The RBC fund has a five-year annualized return of 1.02%, while the Investors Group fund has a five-year annualized return of -3.86%. The RBC Canadian Equity fund isn’t exactly a standout performer. It’s a three-star fund in the center of the pack, but it appears to be pretty solid in comparison.
A 3 star fund, such as the TD Bond fund, has a cost of 1.11 percent and a 5-year return of 5.24 percent in the Canadian Bond category. The Investors Group Bond fund has a 1.96 percent fee and a 5.45 percent 5-year return.
3) Deferred Sales Charges are used in the majority of fund sales. Investors Group does not appear to have slowed down at a time when many advisers and firms have significantly reduced mutual fund sales by applying a deferred sales charge. That means that in many cases, an investor will be unable to sell out of the Investors Group fund family within seven years without incurring a deferred sales charge. Because a large percentage of the products are marketed with a delayed sales charge, some investors will face even greater fees if they sell and withdraw money from Investors Group within seven years of purchase.
The Investors Group Simplified Prospectus – June 30, 2011 contains the following deferred sales fee schedule. This ‘Simplified’ Prospectus is 321 pages long, by the way.
Do ETFs actually own the stocks they invest in?
ETFs do not require you to own any equities. The securities in a mutual fund’s basket are owned by the fund. Stocks entail physical possession of the asset. ETFs diversify risk by monitoring multiple companies in a single area or industry.
What are some of the drawbacks of ETFs?
An ETF can deviate from its target index in a variety of ways. Investors may incur a cost as a result of the tracking inaccuracy. Because indexes do not store cash, while ETFs do, some tracking error is to be expected. Fund managers typically save some cash in their portfolios to cover administrative costs and management fees.
Who invests in ETFs?
ETFs are a sort of investment fund and exchange-traded vehicle, which means they are traded on stock markets. ETFs are comparable to mutual funds in many aspects, except that ETFs are bought and sold from other owners on stock exchanges throughout the day, whereas mutual funds are bought and sold from the issuer at the end of the day. An ETF is a mutual fund that invests in stocks, bonds, currencies, futures contracts, and/or commodities such as gold bars. It uses an arbitrage mechanism to keep its price close to its net asset value, however it can periodically deviate. The majority of ETFs are index funds, which means they hold the same securities in the same quantities as a stock or bond market index. The S&P 500 Index, the overall market index, the NASDAQ-100 index, the price of gold, the “growth” stocks in the Russell 1000 Index, or the index of the greatest technological companies are all replicated by the most popular ETFs in the United States. The list of equities that each ETF owns, as well as their weightings, is provided daily on the issuer’s website, with the exception of non-transparent actively managed ETFs. Although specialist ETFs can have yearly fees considerably in excess of 1% of the amount invested, the largest ETFs have annual costs as low as 0.03 percent of the amount invested. These fees are deducted from dividends received from underlying holdings or from the sale of assets and paid to the ETF issuer.
An ETF divides its ownership into shares, which are held by investors. The specifics of the structure (such as a corporation or trust) will vary by country, and even within a single country, various structures may exist. The fund’s assets are indirectly owned by the shareholders, who will normally get yearly reports. Shareholders are entitled to a portion of the fund’s profits, such as interest and dividends, as well as any residual value if the fund is liquidated.
Because of their low expenses, tax efficiency, and tradability, ETFs may be appealing as investments.
Globally, $9 trillion was invested in ETFs as of August 2021, with $6.6 trillion invested in the United States.
BlackRock iShares has a 35 percent market share in the United States, The Vanguard Group has a 28 percent market share, State Street Global Advisors has a 14 percent market share, Invesco has a 5% market share, and Charles Schwab Corporation has a 4% market share.
Even though they are funds and are traded on an exchange, closed-end funds are not considered ETFs. Debt instruments that are not exchange-traded funds are known as exchange-traded notes.
When did Investors Group decide to discontinue DSC?
The DSC buy option of Investors Group’s funds will be closed to all new lump sum investments on January 1, 2017. (Note that if a client redeems their investments within a specified number of years, they will be charged a declining redemption cost.)
- For pre-authorized contribution plans established before January 1, 2017, the DSC purchase option will be available until June 30, 2017. After December 31, 2016, DSC fees will not apply to purchases made under pre-authorized contribution arrangements.
For reinvested distributions, switches from current assets bought through the DSC buy option, and Management fee and cost reductions reinvested into shares of the classes, the DSC purchase option will remain accessible. Series A, A-RDSP, TDSC, JDSC, and TJDSC, as well as the DSC buy options available for Series C, Tc, Investors Canadian Money Market Fund, or any single series Investors Group Fund, are affected by the DSC purchase option adjustments.
Consumers will be able to buy no-load funds at a reduced yearly charge of 4 to 10 basis points on the majority of Investors Group Funds starting in 2017. On the $11.4 billion in assets under management now living inside the affected no load series, this will result in an annualized weighted average yearly fee reduction of about 8 basis points.
- This modification reduces service fees on balanced and equities products by 4 to 10 basis points, and administration expenses on fixed income products by 5 basis points.
- The management charge for Series U equity and balanced products is reduced by 4–10 basis points.
- Series B, B-RDSP, TNL, JNL, TJNL, U, and TU are all affected by the no-load buy option adjustments.
- The Investors Real Property Fund’s Series U units will remain open, but purchases made after December 31, 2016 will no longer be subject to DSC fees, unless the investment was moved to Series U from a DSC-eligible investment.
- Service fee reimbursement eligibility for Series C and TC’s no-load purchase option will be linked with the DSC purchasing option of those series.
Are exchange-traded funds (ETFs) safer than stocks?
Although this is a frequent misperception, this is not the case. Although ETFs are baskets of equities or assets, they are normally adequately diversified. However, some ETFs invest in high-risk sectors or use higher-risk tactics, such as leverage. A leveraged ETF tracking commodity prices, for example, may be more volatile and thus riskier than a stable blue chip.
Are ETFs suitable for novice investors?
Because of their many advantages, such as low expense ratios, ample liquidity, a wide range of investment options, diversification, and a low investment threshold, exchange traded funds (ETFs) are perfect for new investors. ETFs are also ideal vehicles for a variety of trading and investment strategies employed by beginner traders and investors because of these characteristics. The seven finest ETF trading methods for novices, in no particular order, are listed below.
Are dividends paid on ETFs?
Dividends on exchange-traded funds (ETFs). Qualified and non-qualified dividends are the two types of dividends paid to ETF participants. If you own shares of an exchange-traded fund (ETF), you may get dividends as a payout. Depending on the ETF, these may be paid monthly or at a different interval.
Can I sell ETF whenever I want?
ETFs are popular among financial advisors, but they are not suitable for all situations.
ETFs, like mutual funds, aggregate investor assets and acquire stocks or bonds based on a fundamental strategy defined at the time the ETF is established. ETFs, on the other hand, trade like stocks and can be bought or sold at any moment during the trading day. Mutual funds are bought and sold at the end of the day at the price, or net asset value (NAV), determined by the closing prices of the fund’s stocks and bonds.
ETFs can be sold short since they trade like stocks, allowing investors to benefit if the price of the ETF falls rather than rises. Many ETFs also contain linked options contracts, which allow investors to control a large number of shares for a lower cost than if they held them outright. Mutual funds do not allow short selling or option trading.
Because of this distinction, ETFs are preferable for day traders who wager on short-term price fluctuations in entire market sectors. These characteristics are unimportant to long-term investors.
The majority of ETFs, like index mutual funds, are index-style investments. That is, the ETF merely buys and holds stocks or bonds in a market index such as the S&P 500 stock index or the Dow Jones Industrial Average. As a result, investors know exactly which securities their fund owns, and they get returns that are comparable to the underlying index. If the S&P 500 rises 10%, your SPDR S&P 500 Index ETF (SPY) will rise 10%, less a modest fee. Many investors like index funds because they are not reliant on the skills of a fund manager who may lose his or her touch, retire, or quit at any time.
While the vast majority of ETFs are index investments, mutual funds, both indexed and actively managed, employ analysts and managers to look for stocks or bonds that will yield alpha—returns that are higher than the market average.
So investors must decide between two options: actively managed funds or indexed funds. Are ETFs better than mutual funds if they prefer indexed ones?
Many studies have demonstrated that most active managers fail to outperform their comparable index funds and ETFs over time, owing to the difficulty of selecting market-beating stocks. In order to pay for all of the work, managed funds must charge higher fees, or “expense ratios.” Annual charges on many managed funds range from 1.3 percent to 1.5 percent of the fund’s assets. The Vanguard 500 Index Fund (VFINX), on the other hand, costs only 0.17 percent. The SPDR S&P 500 Index ETF, on the other hand, has a yield of just 0.09 percent.
“Taking costs and taxes into account, active management does not beat indexed products over the long term,” said Russell D. Francis, an advisor with Portland Fixed Income Specialists in Beaverton, Ore.
Only if the returns (after costs) outperform comparable index products is active management worth paying for. And the investor must believe the active management won due to competence rather than luck.
“Looking at the track record of the managers is an easy method to address this question,” said Matthew Reiner, a financial advisor at Capital Investment Advisors of Atlanta. “Have they been able to consistently exceed the index? Not only for a year, but for three, five, or ten?”
When looking at that track record, make sure the long-term average isn’t distorted by just one or two exceptional years, as surges are frequently attributable to pure chance, said Stephen Craffen, a partner at Stonegate Wealth Management in Fair Lawn, NJ.
In fringe markets, where there is little trade and a scarcity of experts and investors, some financial advisors feel that active management can outperform indexing.
“I believe that active management may be useful in some sections of the market,” Reiner added, citing international bonds as an example. For high-yield bonds, overseas stocks, and small-company stocks, others prefer active management.
Active management can be especially beneficial with bond funds, according to Christopher J. Cordaro, an advisor at RegentAtlantic in Morristown, N.J.
“Active bond managers can avoid overheated sectors of the bond market,” he said. “They can lessen interest rate risk by shortening maturities.” This is the risk that older bonds with low yields will lose value if newer bonds offer higher returns, which is a common concern nowadays.
Because so much is known about stocks and bonds that are heavily scrutinized, such as those in the S&P 500 or Dow, active managers have a considerably harder time finding bargains.
Because the foundation of a small investor’s portfolio is often invested in frequently traded, well-known securities, many experts recommend index investments as the core.
Because indexed products are buy-and-hold, they don’t sell many of their money-making holdings, they’re especially good in taxable accounts. This keeps annual “capital gains distributions,” which are payments made to investors at the end of the year, to a bare minimum. Actively managed funds can have substantial payments, which generate annual capital gains taxes, because they sell a lot in order to find the “latest, greatest” stock holdings.
ETFs have gone into some extremely narrowly defined markets in recent years, such as very small equities, international stocks, and foreign bonds. While proponents believe that bargains can be found in obscure markets, ETFs in thinly traded markets can suffer from “tracking error,” which occurs when the ETF price does not accurately reflect the value of the assets it owns, according to George Kiraly of LodeStar Advisory Group in Short Hills, N.J.
“Tracking major, liquid indices like the S&P 500 is relatively easy, and tracking error for those ETFs is basically negligible,” he noted.
As a result, if you see significant differences in an ETF’s net asset value and price, you might want to consider a comparable index mutual fund. This information is available on Morningstar’s ETF pages.)
The broker’s commission you pay with every purchase and sale is the major problem in the ETF vs. traditional mutual fund debate. Loads, or upfront sales commissions, are common in actively managed mutual funds, and can range from 3% to 5% of the investment. With a 5% load, the fund would have to make a considerable profit before the investor could break even.
When employed with specific investing techniques, ETFs, on the other hand, can build up costs. Even if the costs were only $8 or $10 each at a deep-discount online brokerage, if you were using a dollar-cost averaging approach to lessen the risk of investing during a huge market swing—say, investing $200 a month—those commissions would mount up. When you withdraw money in retirement, you’ll also have to pay commissions, though you can reduce this by withdrawing more money on fewer times.
“ETFs don’t function well for a dollar-cost averaging scheme because of transaction fees,” Kiraly added.
ETF costs are generally lower. Moreover, whereas index mutual funds pay small yearly distributions and have low taxes, equivalent ETFs pay even smaller payouts.
As a result, if you want to invest a substantial sum of money in one go, an ETF may be the better option. The index mutual fund may be a better option for monthly investing in small amounts.