Canadian investors are bananas, on the Sunday Reads. - Cut the Crap Investing (2024)

Canadians are not embracing passive low-cost ETFs and that’s just bananas offers Ian McGugan in the Globe & Mail. In the U.S., passive investing has surpassed inferior active investing (by fund managers), but in Canada not so much. The momentum is in the right direction but too many Canadian investors are still slipping up on their investment choice. They choose high-fee actively managed mutual funds that come attached to advisors also charging 1% on average. Too much money is going in the wrong pockets. You can create an ETF portfolio with fees in the 0.10-o.15% range. These superior investments can be life changing, potentially doubling your retirement nest egg (or more). Canadian investors are bananas, plus the Sunday Reads.

Here’s the bananas post (subscription). From Ian McGugan …

The best bet for most investors is simply to buy a fund that passively tracks a broad market index at the lowest possible cost. In short: If the market is so hard to beat, why not just own the market?

The research is extensive and always lands with the same observation. Inexpensive passive beats more expensive (and very expensive in Canada) active investing.

Ian also detailed that from mid-year 2023, more than 70 per cent of actively managed Canadian equity funds failed to keep up with the index over one year. For longer periods, the results were even worse for the active crowd. More than nine out of 10 actively managed Canadian equity funds lagged behind their market benchmark over the preceding five and 10 years. Go out longer, and it gets even worse.

How to build a simple ETF portfolio.

Net, net – don’t pay someone to create a smaller investment portfolio. That’s just bananas.

Canadian investors are moving out of mutual funds

Overall, mutual fund redemptions totalled $57.1 billion in 2023, compared to $43.7 billion in redemptions in 2022, IFIC said — an increase of 30.5%.

On the ETF side, net sales were $3.8 billion in December, compared to $5.1 billion in November and $2.9 billion in October.

Canadian investors are bananas, on the Sunday Reads. - Cut the Crap Investing (1)

Overall, ETF net sales were $37.6 billion in 2023, compared to $36.1 billion in 2022 — an increase of 4.2%.

Buy ETFs for free at Questrade

The inflows are moving in the right direction, but we need to pick up the pace. There’s still $1.9 trillion in mutual funds (mostly active) while ETF assets total $382 billion.

Please share the facts on high fee funds vs ETFs and building sensible stock portfolios. Friends don’t let friends pay high fees.

Soft landing support

And here’s a good thread on U.S. inflation. Looking at the short term trends, it is very much under control.

Headline #PCE remained at +2.6% YoY, the lowest since Feb 2021, while core went down to +2.9% YoY, the lowest since Mar 2021.

Feb and Mar 2021 were months when the #Fed wasn't worried about #inflation at all, well before they didn't even "think about thinking about" raising…

— Marko Bjegovic (@MBjegovic) January 26, 2024
Canadian investors are bananas, on the Sunday Reads. - Cut the Crap Investing (2)

Things are more than lining up for the elusive economic soft landing in the U.S. with inflation under control, with solid economic growth and strong employment.

We can certainly go around in circles on the economic speculating, and by no surprise we end up in the same place –

Get a simple investment plan and stick to it.


Magnificent earnings week

It will be a busy week on the earnings front next week, so be prepared for lots of whipsawing and guesstimates shooting out of every orifice.

Canadian investors are bananas, on the Sunday Reads. - Cut the Crap Investing (3)

We have many of the Magnificent 7 stepping up to the earnings plate as well. Will they be home run kings or rally killers? This should be interesting.

More Sunday Reads

And given that earnings season is in full flight, we’ll first check in with Dividend Hawk.

A few of the companies in our U.S. stock portfolio reported this past week. And it was mostly good news, especially for our defensives such as Johnson & Johnson (JNJ) and Colgate-Palmolive (CL). We have been very patient with CL (as with all of our holdings) and that stock is making a case for getting some new monies over the next several months. I will build up that position

RTX Corporation (RTX) , Texas Instruments (TXN) and Canadian National Railway (CNR) also reported.

Tesla unplugged

Tesla got crushed this week thanks to poor earnings and the refusal to give any guidance (other than it sucks) for 2024. And Musk says, they’re all about to get crushed by the Chinese unless we tax the heck out of them.

On $TSLA earnings call Musk admits that only tarriffs can save auto producers from the Chinese EV producers, and I'd include Tesla.

-"Well, our observation is generally that the Chinese car companies are the most competitive car companies in the world. So I think they will have…

— CutTheCrapInvesting (@67Dodge) January 25, 2024

For a year or more I’ve been “suggesting” that Tesla is undergoing the long and painful process of being priced as the car company that it is. Tesla’s stock price has been clipped by 55% from the peak in late 2021. The stock fell about 13% after the poor earnings release.

Your job and your investments

And while we’re on weekly wraps, we’ll next cruise on over to Banker on Wheels where a post asks if your job should affect your investments. I’d say, for sure. The author shares his own concentration risk in financial assets. Of course, the notion might apply to those whose career and compensation creates that concentration. Most of us are not in that camp. And if you hold a very well diversified global portfolio such as the asset allocation ETFs, you might ignore the above.

FiPhysician has a wonderful post looking at the 50/50 (stocks to bonds) portfolio for retirement. You’ll find a chart showing the returns and risk for U.S. portfolios from 0% to 100% stocks.

There’s no set rule for the risk level in retirement. In fact each portfolio should have a unique risk level that matches the overarching cash flow and finanical plan. And that cashflow plan is essential. You can head over to our friends at Cashflows & Portfolios.

Cashflow plans might show that the optimal retirement plan means leaving the TFSA to grow for decades (aggressive allocation), while the RRIF should be drawn down quickly in several years (defensive allocation).

That said, every cash flow plan will be unique and tailored to your money and life situation.

And staying in retirement, Jonathan Chevreau asks if GICs should be the bedrock of retirement portfolios.

Jon wraps up that post with …

So are GICs worth it, despite some of the drawbacks? As I conclude in the fullMoneySensecolumn, “Unless you’re a retiree with a generous employer-sponsored Defined Benefit pension plan (increasingly rare these days), I believe GICs should make up a good chunk of one’s fixed-income assets. So if your asset allocation is roughly 50/50 stocks to fixed income, I’d be comfortable putting at least half of the fixed-income portion in GICs.”

Dividend Daddy is up a quarter mil over the last quarter. That’s “pretty good”. 😉

Over the last 90 days:

My stock portfolio is up $252,120.37 🚀

Dividends paid me $18,067.90 💰

I invested $27,618.32 💵

— Dividend Daddy (@DividendDaddy1) January 27, 2024

And I may have missed Rob’s year-end update at Passive Canadian Income. I wish Rob continued success on his financial freedom journey.

Canadian investors are bananas, on the Sunday Reads. - Cut the Crap Investing (4)

And here’s the year-end post from Bob at Tawcan. And while Bob keeps track of his dividends …

Canadian investors are bananas, on the Sunday Reads. - Cut the Crap Investing (5)

… he has a very good portfolio and often states that it’s “total return for the win”. Of course the portfolio value comes into play for retirement and financial freedom planning.

Here’s more on the financial independence movement in Canada from

Follow the path to greater returns

Thanks a bunch (pun intended) for reading. Be sure to follow this blog, it’s free. Enter your email address in the Subscribe area.

And please follow me on Twitter for daily commentary on investments, retirement, guitar and making music with friends, life and more.

Here’s how you cut the crap

Earn a break on fees by way of many of these partnership links.


Cut the Crap Investing readers can earn a break on fees atQuestradeby way of that partnership link. At Questrade, you can buy ETFs for free.

I have partnerships with several of the leading Canadian Robo Advisors such asJustwealth,BMO Smartfolio,Nest WealthandQuestwealthfrom Questrade.

But, here’sCanada’s top-performing Robo Advisor, Justwealth. You can get advice, planning and l0w-fee ETF portfolios all at one shop.

ConsiderJustwealth for RESPaccounts. That is THE option in Canada with target date funds that adjust the risk level as the student approaches the College or University start date.


The self-directed investor might consider the service provided by Mark Seed from My Own Advisor. He runsCashflows & Portfolioswhere they will provide options for that optimal retirement funding strategy. That service is provided for a very reasonable fee.

If you do head to Cashflow & Portfolios (as do many Cut The Crap Investing readers), be sure to tell them Cut The Crap Investing sent ya.


Make your cash work a lot harder atEQ Bank. RRSP and TFSA account savings rates are at 2.5% and 3.5%. You’ll find some higher rates on GICs up to 5.2%. They also offer U.S. dollar accounts. We use EQ Bank, they have been awesome.


We make between $40 to $70 every month! And that’s on everyday spending. There are no fees with …

The Tangerine Cash Back Credit Card

For December we received $55 in cash.

While I do not accept monies for feature blog posts please clickhere on the missionand ‘how I might get paid’ disclosures. Affiliate partnerships help me (try to) pay the bills for this site. But they don’t, ha. That will allow me to keep this site free of ads and easy to read.

As an expert in personal finance and investment, it's evident that the article you provided is addressing the investment landscape in Canada, particularly the preference for actively managed mutual funds over passive low-cost ETFs. The author, Ian McGugan, argues that this choice is detrimental to Canadian investors due to the associated high fees and underperformance of actively managed funds.

Let's break down the key concepts mentioned in the article:

  1. Passive Investing vs. Active Investing:

    • Passive investing involves buying and holding a diversified portfolio that mirrors a market index, aiming to match its performance.
    • Active investing, on the other hand, involves fund managers making strategic decisions to outperform the market.
  2. ETFs (Exchange-Traded Funds):

    • ETFs are investment funds that are traded on stock exchanges, mirroring the performance of a specific index or asset class.
    • They are known for lower fees compared to actively managed mutual funds.
  3. High-Fee Actively Managed Mutual Funds:

    • Actively managed mutual funds typically have higher fees due to the active management and advisory services associated with them.
  4. Canadian Investment Landscape:

    • The article suggests that Canadian investors are still inclined towards actively managed mutual funds, despite the global trend favoring passive ETFs.
  5. Performance of Canadian Equity Funds:

    • Ian McGugan mentions that over 70% of actively managed Canadian equity funds failed to keep up with the index in mid-year 2023. Over longer periods, the underperformance is even more pronounced.
  6. Shift Towards ETFs:

    • The article notes a positive trend where Canadian investors are gradually moving away from mutual funds, with redemptions increasing and ETF net sales on the rise.
  7. Benefits of Low-Cost ETFs:

    • Low-cost ETFs are highlighted as superior investments that can be life-changing, potentially doubling retirement nest eggs due to their lower fees.
  8. Earnings Season and Stock Portfolios:

    • The article briefly touches on the upcoming earnings season, emphasizing the importance of having a simple investment plan and sticking to it.
  9. Tesla's Performance:

    • There's a mention of Tesla's poor performance in the stock market due to disappointing earnings, raising questions about its valuation as a car company.
  10. Job Influence on Investments:

    • A brief mention is made about whether one's job should affect their investment decisions, acknowledging the relevance of concentration risk.
  11. Retirement Planning and GICs:

    • The article briefly discusses the role of GICs (Guaranteed Investment Certificates) in retirement portfolios, suggesting they could be a significant component of fixed-income assets.
  12. Financial Independence Movement in Canada:

    • The article concludes with references to various financial bloggers and their insights into investment strategies, including the financial independence movement in Canada.

In summary, the article emphasizes the importance of Canadian investors reconsidering their preference for high-fee actively managed mutual funds and shifting towards low-cost ETFs for better long-term returns. The data presented, particularly the underperformance of actively managed funds, serves as evidence supporting the benefits of passive investing in the Canadian context.

Canadian investors are bananas, on the Sunday Reads. - Cut the Crap Investing (2024)
Top Articles
Latest Posts
Article information

Author: Laurine Ryan

Last Updated:

Views: 5887

Rating: 4.7 / 5 (77 voted)

Reviews: 92% of readers found this page helpful

Author information

Name: Laurine Ryan

Birthday: 1994-12-23

Address: Suite 751 871 Lissette Throughway, West Kittie, NH 41603

Phone: +2366831109631

Job: Sales Producer

Hobby: Creative writing, Motor sports, Do it yourself, Skateboarding, Coffee roasting, Calligraphy, Stand-up comedy

Introduction: My name is Laurine Ryan, I am a adorable, fair, graceful, spotless, gorgeous, homely, cooperative person who loves writing and wants to share my knowledge and understanding with you.