Do-It-Yourself Investing

A majority of Canadians with investment assets utilize the services of a fee based investment advisor. The advisor will help the investor develop an appropriate asset mix of stock, bonds and other assets and then recommend a mix of securities such as mutual funds, pooled funds, exchange traded funds and sometimes individual securities. The cost of such services when all fees are totaled is often in excess of 2%. On five hundred thousand portfolio that would be $10,000 in fees per year.

A growing percentage of Canadians are following a do-it-yourself investing approach in order to save fees which over the years can add up to a substantial sum. Today, there are a good number of self directed investment services available from companies such as Questrade and TD Direct Investing. Opening an account is quite easy and accounts can be transferred in from other providers without significant tax implications or costs. Within the self directed account there are many low cost investment options available.

Myself and a lot of sophisticated investors are proponents of index investing. This essentially means accepting the market rate of return and not trying to beat the market. Many Canadian investors are in high cost active funds that try to beat the market. After fees and over a medium or long time horizon the vast majority of active funds underperform the market. My favorite index investment fund family is Vanguard funds. The annual fee on many Vanguard funds is one tenth of a percent i.e. five percent of the cost of active funds.

Do-It-Yourself investing is a good option for many Canadians. It does take some effort to self educate on markets and to monitor and rebalance investments. Using the services of a Fee-Only advisor for an annual check up and to help with other aspects of your personal finances is also a good option.