In an inflationary era, these investments keeping falling in cost
Exchange-traded funds rule, and one reason is that they keep getting cheaper
We’ve had a couple of reminders lately of how unique exchange-traded funds are in the investing universe.
This is not a conversation about ETF returns, which in many cases mirror the fantastic results provided by stock indexes around the world. Everyone’s made money in financial markets in recent years - you just needed a pulse.
Where the ETF sector stands out is its clear understanding that fees are a drag on returns. ETF companies are fee-cutters like nobody else in the investing world, and that’s worth noting in today’s inflationary world.
A fresh example: Vanguard has lowered the management fee on a dozen of its exchange-traded funds, including its popular asset allocation funds. In case you’re new to asset allocation ETFs, they’re a fully diversified portfolio of stocks and bonds offered in a single, well-priced fund. I consider them to be one of the best investing products today, period.
The management fee for each of the five Vanguard asset allocation funds falls to 0.17 per cent from 0.22 per cent, which means the management expense ratio should come in around 0.19 per cent. MERs are a definitive measure of what it costs to own a fund - management fees represent most of the MER, but not all of it.
Vanguard’s cuts are significant because of the popularity of its asset allocation lineup. But they don’t rank the company’s asset allocation funds as the sector’s cheapest. Earlier this year, BMO Asset Management lowered the management fee for its asset allocation funds to 0.15 per cent from 0.18 per cent. This should reduce the MER for these products to about 0.17 per cent, in line TD and a bit lower than the 0.18 to 0.4 per cent for most competing funds.
Another recent fee cut in ETF-land comes from Global X Investments, which will reduce the management fee for the Global X S&P/TSX 60 Index ETF (CNDX-T) to 0.09 per cent from 0.13 per cent as of Jan. 1, 2026. Expect the MER to come in around 0.11 per cent once after the reduction. Note that Global X has rebated the management fee for this fund down to zero until year’s end.
Another cost cut from the same company: The management fee for the Global X Nasdaq-100 Index ETF (QQQX-T) dropped to 0.15 per cent from 0.25 per cent as of last month.
When I was putting together the annual Globe and Mail ETF Buyer’s Guides, my criteria for selecting funds included the underlying index or investment strategy, the liquidity of the fund, asset size, returns and, most importantly, fees.
Index-trackers are the best ETFs because they tick all the boxes - cheap fees, recognizable underlying indexes with strong historic returns, big assets and liquidity that lets you trade in all kinds of market conditions at competitive prices.
The investment industry has come a long way in cutting fees over the years. A new report from Morningstar says fund fees have fallen by 0.22 of a percentage point on average over the last 10 years. Trading commissions at online brokers have fallen to between zero and $10 from close to $30 in recent decades, and the cost of advice in fee-based accounts can be had for a nice, round 1 per cent in many cases.
But ETFs are where fee competition is healthiest. Nowhere else in the investing industry do they more consistently demonstrate an understanding that fees degrade returns, and that investors are better off when they pay less.
Trash on sale - just $4.99
I was in a thrift store not too long ago, minding my own business. I recall my wife was looking for something - a vase was it? Anyway, I came across this item in my wandering and had to document the moment. We had a hot water bottle just like it around our home when I was a kid, let’s say 50-plus years ago. I remember that our water bottle had a gross rubbery smell and, even back then, felt like an archeological find. Now, one just like it can be yours for just $4.99. Also, I remember that you needed a cap to keep the water from pouring out. There was no cap with this water bottle, which is to say it’s trash on sale for $4.99.
Storylines
The fake affordability fix: CNN looks at the U.S. government proposal for 50-year mortgages, which would be a way to address high home buying costs. A longer amortization period means lower payments, but also much more interest paid over the decades until this loan is paid off. Apt comparisons are drawn to long-term vehicle loans and buy now, pay later (BNPL) options for buying goods and services. Ownership at the cost of debt servitude.
Cutting back on booze: Booze is a profit centre for restaurants and bars - might you save some money if you cut back on alcohol? Uh, no. Zero-alcohol beer and mocktails aren’t cheap to make — they just taste that way.
Emergency funds: A fascinating Reddit thread on whether it’s worthwhile to have money parked in a savings accounts to cover emergency expenses. Of course it it, but there are people who see a savings accounts as a waste when it’s possible to make so much more in stocks. You can also lose big in stocks, though. Savings are bullet-proof thanks to deposit insurance. Also, it’s still possible to earn a return on your savings that matches inflation, or comes close.
Cologne-crazy teens: A Maclean’s story about a Tik Tok influencer who “caters to cologne-crazy kids online.” I share this article with you because it tells a story about the consumption habits of young people today. Following a trend called smellmaxing, teen boys in the U.S. increased their spending on perfume by 26 per cent between 2023 and 2024. “Gone is the era of teenage boys drenching themselves with Axe. Now they’re hunting down niche designer fragrances that can cost hundreds of dollars per bottle.” Sure, great. As a dad, I recall that teenage boys can smell pretty rank at times. But, um, where are they getting the money for this and all the other spending trends on Tik Tok and other social media? Parental credit cards?
What I’m listening to
Eighty musicians pick their favourite song by Neil Young, who recently celebrated his 80th birthday. My fave Young song changes over time - right now, I’ll go with an acoustic number called Thrasher about his break with Crosby, Stills and Nash. Bonus content: The 10 best Neil Young covers. Extra double-plus bonus: A fine Radiohead cover of On The Beach. Thom Yorke’s Young affinity is easy to figure - just listen to them both.
Check this out
I was recently a guest on the new Canadian Advisor.cast. Host Kevin Press and I had a great convo about the state of financial advice and more.