There are 4x more mutual funds than stocks in Canada

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There are 4x more mutual funds than stocks in Canada

I was meeting with a well-known mutual fund portfolio manager the other day and he stated that there are more mutual funds than there are stocks in Canada. I looked into this and found that in Canada there are 3,985 companies listed on the exchanges, 1,561 on the TSX and 2,424 on the TSXV. I then looked on the FundLibrary.com site and found that there are 413 fund companies with 16,491 distinct funds in Canada. There are 4x more funds in Canada than there are stocks on the two main exchanges.

It is no wonder the investor on the street doesn’t know which funds to purchase. With this many funds I can see why those who don’t understand funds, yet write about them, are able to find a statistic to ‘prove’ their slanted view of investing. I have written about Closet Indexing Mutual Funds before and many will fit this category.  I also know that there are many advisors who have a hard time wading through all these funds to know what to offer to their clients. I am constantly taking on clients who were with other advisors and transfer in a mish/mash of funds that may have been a good idea at the time. They were never changed with the times and more and more are added. Portfolio Managers leave funds, world markets change, interest rates have been driven down; what worked yesterday may not work today. Every time I hear how much money is still in long term Canadian government bond funds I cringe. These are now high risk to the client.

Whittle 16,000 down to 20

I whittle the over 16,000 funds down to 20 that I follow extremely closely at any one time. I also keep a list of those I want to keep close for when things do change. Different funds are meant to serve different purposes. I must then select a fund(s) that are appropriate for each client. It is part of crafting a proper portfolio for each client, choosing from Stocks, Bonds, Mutual Funds, Segregated Funds and GICs to name a few; the whole portfolio must suit my client.

I have written more than once about the clout that our office has in getting Portfolio Managers in to our office. If you follow me on LinkedIn I often take a picture of some of our visiting portfolio managers. We question them very extensively about their investment philosophy, their research, what factors constitute a buy of a security and more importantly, a sell. I want to know that they are investing in the way they tell us they do. Believe me this is not always the case.

Independence Matters

Being a full service advisor and working as an independent at a company that does not try to force us in to their products (a growing practice in the industry) allows me to choose from the full range of offerings. I can then take apart the fund(s) managed by the manager. I want to decide if I want them to manage my client’s money. I can pick the best of the best without having the pool of investment choices constricted. I also keep abreast of other choices with the great pool of independent advisors here sharing our ideas with each other. This is also a rarity in the industry.

Restrictive Choice

This restriction of investment choices was a large factor in why I changed firms over a year ago. You deserve better than having to choose from a restrictive and shrinking pool of choices. The vast majority of fund choices are made by advisors who get their information from the mutual fund’s wholesaler and/or in watered down large group speeches from a portfolio manager. I can tell you that these speeches all sound the same after a while and little about the fund is learned.

If you want to see what a truly independent advisor can do for you, call me at 905-846-9060, ext.3838, email me at Terry.McIntyre@manulifesecurities.ca or visit my website at www.terrymcintyre.ca