WHAT WE'RE LOOKING AT
Bargains in index mutual funds.
With all the fuss being made over exchange-traded funds these days, you may have forgotten that the mutual fund world offers its own take on index investing. Index funds are sold mainly by the big banks, and they offer exposure to all kinds of stock and bond indexes. The key distinguishing feature is fees, which is the point of today's screen. You'll find index funds of all types ranked here from lowest management expense ratio on up.
WHAT WE FOUND
The TD e-series of index funds rule. You can only buy these online through TD or through the online broker TD Waterhouse, but these funds are a true indexing bargain. Consider them to be a totally legitimate substitute for ETFs. Note that TD offers a more widely available series of its index products, but the fees are in the area of two times higher.
Another reasonably priced family of index funds comes from Altamira, once a fund industry sparkplug and now just a brand name kept up by National Bank of Canada (which bought Altamira in 2002). RBC's family of index funds are also reasonably priced.
Part of the reason why index funds don't get the attention that exchange-traded funds do is that ETFs are generally much cheaper to own. Remember: with indexing, cheaper is always better. You have to pay brokerage commissions to trade ETFs, while index funds typically cost nothing to buy or sell. But even so, ETFs are a lower-cost option in many cases.
And yet, today's screen suggests that index funds are still worth considering if you can't or won't invest in ETFs. Check out the five-year quartile rankings for today's funds. Each of the 30 lowest-price index funds ranks in the first or second quartile for the five years to March 31 (quartiles divide funds in a category into four groups by their returns - first is best and fourth is worst). The message here is that indexing is a valid strategy for investors even with the higher fees of index funds over ETFs.
|Index Funds with low MERs|
|TD Canadian Index-e||Canadian Equity||*||0.31||2||1||1|
|TD Dow Jones Average Index-e||U.S. Equity||*||0.31||3||1||1|
|TD Canadian Bond Index-e||Canadian Fixed Income||*||0.48||3||1||1|
|TD European Index-e||European Equity||*||0.48||1||2||2|
|TD International Index-e||International Equity||*||0.48||3||2||2|
|TD Japanese Index-e||Japanese Equity||*||0.48||3||1||1|
|TD NASDAQ Index-e||U.S. Equity||*||0.48||1||1||1|
|TD U.S. Index Currency Neutral-e||U.S. Equity||*||0.48||1||1||1|
|TD International Index Curr Neut-e||International Equity||*||0.50||1||2||1|
|Altamira Canadian Index||Canadian Equity||246.4||0.52||3||1||1|
|Altamira Intl Currency Neutral Idx||International Equity||84.1||0.52||1||1||1|
|Altamira US Currency Neutral Index||U.S. Equity||114.8||0.52||1||2||1|
|TD U.S. Index||U.S. Equity||325.9||0.53||3||2||2|
|RBC Canadian Bond Index||Canadian Fixed Income||322.5||0.63||4||1||1|
|RBC Intl Index Currency Neutral||International Equity||266.1||0.67||1||1||1|
|RBC Canadian Index||Canadian Equity||580.0||0.68||2||1||1|
|RBC U.S. Index Currency Neutral||U.S. Equity||241.5||0.69||1||2||1|
|RBC U.S. Index||U.S. Equity||59.4||0.70||3||2||2|
|TD Canadian Bond Index||Canadian Fixed Income||366.3||0.79||4||2||2|
|TD Balanced Index||Canadian Neutral Balanced||48.1||0.83||3||2||2|
|TD Canadian Index||Canadian Equity||852.6||0.84||2||1||1|
|TD Dow Jones Average Index||U.S. Equity||48.2||0.84||3||1||2|
|TD U.S. Index Currency Neutral-I||U.S. Equity||103.5||0.84||1||1||1|
|Altamira US Index||U.S. Equity||11.8||0.86||3||1||2|
|Scotia Canadian Bond Index||Canadian Fixed Income||262.3||0.86||4||2||2|
|Quebec Professionals American Index||U.S. Equity||15.2||0.88||3||3||2|
|Altamira International Index||International Equity||14.2||0.92||2||2||2|
|* Assets are included in totals for other versions of the same funds|
|Source: Globe Investor|
© 2007 The Globe and Mail. All rights reserved.
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