Comments on: New PowerShares Mutual Funds

By: dj

dj — Sat, 21 Nov 2009 18:28:38 +0000

1)Preet would have to pay to talk to me 2)just pay by the hour for your “Advise”

By: Canadian Personal Finance Blog » Blog Archive » Random Thoughts: For a Parasitic Website

Fri, 20 Nov 2009 07:51:57 +0000

[...] the Canadian Capitalist also commented about the same topic in New Powershares Mutual Funds. The topic of a Mutual Fund that is made up of an ETF, makes me think of a TurDuckEn (with American [...]

By: Finance Matters

Finance Matters — Tue, 17 Nov 2009 19:11:31 +0000

You could try the broad index funds from Pro Financial. They are FTSE RAFI so they are Fundemental Index funds. Available to all of us mutual fund licensed advisors. Bonus is you get to chat with Preet!

By: Big Cajun Man

Big Cajun Man — Tue, 17 Nov 2009 18:24:44 +0000

Wait a minute, you buy a Mutual Fund that holds a Single ETF? WTF?!?!?

OK, I am a little simple in the more intricate areas of Investing, but that seems somewhat redundant if not dumb, or am I being too simple?

By: Canadian Capitalist

Canadian Capitalist — Tue, 17 Nov 2009 18:21:03 +0000

@CFPME: I’m curious since you mentioned you are an advisor. Do you think advisors will utilize these narrow, sector ETFs in client portfolios? My concern is that advisors will end up using products that may not be suitable for the vast majority of investors. I’m thinking of products like the Clean Energy or Agriculture ETF.

By: CFPME

CFPME — Tue, 17 Nov 2009 17:19:15 +0000

As a financial advisor i think what we are missing here is that there is an F-Series version available without the 1% fee for advise. What we see as a result is a U.S. ETF with an MER of 0.60% adding Cdn GST and operating cost to get to the MER of 1.90%.

I have seen their literature it appeals to me as a financial advisor not licensed to sell securities having cleints always coming in and asking for these products. Plus the product is tax efficient as they have wraped it in their corproate structure.

This will never appeal to a DIY because they can buy the security – unless the tax efficiency is worth the mark up – for me and my clients it makes sense

By: Canadian Capitalist

Canadian Capitalist — Tue, 17 Nov 2009 16:51:34 +0000

@Michael: I don’t disagree that 2% is a very high cost and is likely to be a significant drag on returns. But, you are comparing DIY investors like us with investors who will not (for whatever reason) invest on their own. So, the right comparison is tacking 1% for “advice” on top of 0.5% for a total of 1.5% against PowerShares costs of around 2%.

It is an entirely different question if that “advice” is worth 1%. If an investor is in the hands of a competent advisor, it might well be. If the advisor is clueless, the fees are wasted. Personally, advice that costs 1% isn’t worth it for me, whatever its quality. Many investors think otherwise. I don’t say I like it, but that’s the way it is.

By: Four Pillars

Four Pillars — Tue, 17 Nov 2009 16:35:07 +0000

Don’t forget that half of the 2% mer is going to the advisor (more than half for the cheaper funds). People who don’t want to do it themselves have to pay someone to do it for them.

That’s the way life is.

By: Michael James

Michael James — Tue, 17 Nov 2009 16:32:33 +0000

CC: I agree that lowering costs from 2.5% to 2% is a move in the right direction. Viewed in terms of change like this, it is a positive development. However, just looking at a 2% MER in absolute terms, it is terrible. Compared to a 0.5% MER, over a 40-year investing lifetime, the 2% MER leaves the investor with just over half as much money. Feeding your kids at McDonald’s twice a day may be better than doing it 3 times a day, but it’s still bad.

By: Canadian Capitalist

Canadian Capitalist — Tue, 17 Nov 2009 16:12:59 +0000

@Michael: I should clarify why I’m only “somewhat negative”:

(1) Invesco Trimark is saying that it is planning to launch more funds and I’m hoping that broad market funds will be among them. If advisors build portfolios around these funds, it will be an improvement on the current state of affairs.

(2) The average fund costs investors 2.5%. When Invesco Trimark gets around to launching more broad market funds, these hybrid funds will cost around 2%. That’s a move in the right direction.