We have returned from vacation.
Mexico, as always, is a wonderful place to visit. The people are friendly, the culture is warm and welcoming, the sun is shining, and business, mining and foreign investors are welcome.
Mexico is one of our favorite places to visit and to invest. There are enormous reserves of precious metals waiting to be mined, and a business climate that encourages this activity.
More later about the companies of Mexico.
Mutual Fund Managers
On vacation, we tried to catch up on some reading. One of the articles came from the CA Magazine of November 2010. It made several points, including the apparent fact that Canadians care very little about what the managers of their investments charge in the way of fees. Apparently a study found that most people are not concerned about mutual fund fees. I guess that poeple feel that if the fund goes upo in value, the fees don’t matter.
Unfortunately, the fees do matter very much.
Now don’t misunderstand us. We NEVER invest in mutual funds. As can be seen from previous blogs, we think their universe of stocks to invest in is too small and too restricted; we think that mutual funds rarely even match the general stock index for return on investment; we think less than 10% of these funds do better than the stock market index of the market in which they invest; and we think anyone buying mutual funds is too lazy to understand what it is that they are investing in, or has fallen prey to the massive double-speak of the constant barrage of advertisements by this industry.
As an aside, where do you think that all of this advertising money comes from? Dahhhh?
Some Statistics Quoted From That Article – CA Magazine November 2010
Canada ranks #1 (worst) among 18 countries studied when comparing the amount of fees charged by mutual fund managers. A 2007 Harvard University study stated “Canada is the single highest fee country by far.”
Perhaps that is why Canada might have one of the highest mutual fund advertising budgets per capita.
Average management fees charged by Canadian Fund Managers is 2.52%.
On top of this are all the expenses incurred by the fund, including all legal, registration, advertising and trading commissions. Just imagine – if you bought an ETF based solely on the movement of the stock market, right out of the gate, you would be ahead at least 2.52%. If you bought a mutual fund, you would have to do much better than the market invested in – just to break even.
In other words, if the stock market opened and closed at the same level at the start and end of the year, you would have lost at least 2.52% in the year, plus all of the other expenses involved. Considering that the vast majority of mutual funds do not match the average stock market performance, it makes one wonder why people care more about the cost of a restaurant meal, than about how well their investments do.
$10,000,000,000 was paid in 2002 to managers of mutual funds in Canada. That’s right – ten billion dollars. Good job if you can get it.
Ever wonder who paid for those enormous office towers that the banks occupy?
