As the summer draws to an end, many of us are thinking about back-to-school time. Whether you have kids, teach kids or once were a kid, September represents a new year of learning. With that in mind, Jason Heath offers up a little financial refresher course on four key personal finance topics.
Investments
Did you know that most actively managed mutual funds do not beat the market over the long run? According to S&P Dow Jones Indices’ SPIVA Canada Report Card, as of Dec. 31, 2014, only “20 per cent of actively managed funds in the Canadian Equity category outperformed the S&P/TSX Composite” for the previous five years. That means four out of five mutual funds underperformed.
There are two reasons for this, in my opinion. First, most mutual funds are not truly active: That is, many of them are reluctant to take risks, so they more or less buy the index, making them destined to underperform the index by about the amount of their fees. Just check out the long-term performance on your mutual funds on Morningstar.com – many of them end up lagging the index by just about the management expense ratio (MER).
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