A Tale of Two Funds

You can buy mutual funds through your local bank branch, broker, insurance agent, advisor, etc. Exchange Traded Funds (ETFs) are easily accessible through online discount brokers.

Both mutual funds and ETFs hold stocks or bonds on behalf of investors, but ETFs usually cost a lot less and can leave much more money in your pocket.

The stocks inside some ETFs look a lot like stocks inside some mutual funds. Here are 8 of the top 10 stocks in the Vanguard FTSE Canada Index ETF* which charges annual fees of 0.05% (one twentieth of one percent):

Scotiabank CN Rail
Enbridge Bank of Montreal
TransCanada Corp. Manulife


The identical 8 stocks are also among the top 10 holdings in Canada’s largest stock mutual fund, the $18.8 billion RBC Canadian Dividend Fund*. But the RBC fund charges annual fees of 1.76%, 35 times the fees charged by the Vanguard ETF. (Click here to determine T-Rex Scores for these two funds.)

Now, there are differences between these two funds and you may value the advice you get from your banker or broker, etc. when you buy a mutual fund. But charging 35 times as much for holding a similar portfolio of stocks seems absurd.

What do you think?


*Holdings as at October 31, 2017

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