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Mutual Funds Sales at Record Highs- how do you profit?

Posted by admin on May 15, 2007 in Investment Strategy

I suspect that this must drive Canadian Capitalist crazy; the Investment Funds Institute of Canada reports that mutual funds sales have been increasing for nearly 3 years straight and preliminary sales figures for April indicates that last month was the best month for the mutual fund industry since 1998 with the mutual fund arms of TD Canada Trust and RBC leading sales (RBC had its best April ever). In total, there have been over $20 billion worth of mutual fund sales this year. Here’s the down-side though-most mutual fund investors will, statistically speaking, have a lower return on investment purchasing a mutual fund than simply buying an Exchange Traded Fund tracking a major equity index (using an on-line discount brokerage of course).

There’s been a lot of ink (or bytes consumed) about the downside of purchasing a mutual fund. Rather than add to the volumes already written, I always get a chuckle out of this article. Although its dated now, it elegantly summarizes why buying the stock of a mutual fund company may put you in a better position than buying the funds these companies sell (assuming you like active investing).

The article perfectly summarizes what an investment advisor once told me: invest in a stock underlying the trend and not the trend itself. Rather than blow off steam about mutual funds, I am going to get some more research on some mutual fund companies which I hope to share with you.