Another financial advisor has inveighed against do-it-yourself (DIY) investing. First, it was Avner Mandelman; now its David West. What they argue may perhaps be true of DIYers with an active approach, but not so for the growing ranks of DIYers with a passive indexing approach.
Blogger Canadian Capitalist took Mr. Mandelman to task on this point in his July 22 post;what CC said also seems applicable to Mr. Wests thesis. And as the creators of MoneySenses Couch Potato Portfoliohave said all along, buying and holding broadly based index funds and/or exchange-traded funds takes only 15 minutes a year and will beat about 80% of the money managed by professionals.
How so? Markets are efficient. So financial managers and advisors are able to deliver no better than the market average over time. But after deducting their fees, they will underperform the market by 1.5% to 2.5% a year. Simply holding an index fund will yield the market average at a lower cost, between 0.3% and 0.6% a year. Over the long run, keeping fees low adds up big time.
Some of the best index funds in terms of cost, as CC has noted, are the TD eFund family. Blogger wheredoesallmymoneygo.comalso recommends the DFA family of index funds. Providers of exchange-traded funds in Canada include iShares and Claymore Investments.