Should You Ever Buy a Mutual Fund?

The argument for buying ETFs is a pretty easy one. Because of lower fees and products that track the index instead of trying to beat it, ETFs as a whole do better than mutual funds.

Sure, the argument goes, a fund manager could beat the index–at least in theory. But over the long haul, any skill the manager might have gets eaten away in fees and something called window dressing. Basically, a fund manager doesn’t want investors to know they own dud stocks. So those stocks get punted out and replaced with sexier names trading at higher prices.

Buying high and selling low isn’t really a good recipe to investing success.

However, after saying all that, I won’t completely write off the mutual fund industry. There are a select group of funds have been terrific investments over the years and should continue to outperform the market going forward. Yes. Really.

These funds aren’t easy to find, but they do exist.

Becoming a good mutual fund investor

There are certain types of investments that benefit more from active management than others.

Take the world of small-cap stocks as an example. Many people follow Suncor or Imperial Oil, Canada’s two largest oil producers. Very few follow drilling company Akita Drilling, a company 99% of you think I just made up. Yet there are compelling reasons to buy the latter over the two former companies.

This is an area of the market where a smart manager can really make a huge difference. They can pick up cheap stocks, hold until other investors figure out the opportunity, and then sell when things get higher.

Take the Mawer Global Small Cap Fund for instance. It has been around since 2007, and has pretty much trounced the market since inception by following such a strategy. If you would have invested $10,000 in the fund when it opened, you’d have nearly $30,000 today. That’s compared to an investment in the TSX Composite Index, which would be worth about $11,500 today.

That’s a difference of…carry the one…a lot. This Mawer fund has killed just about every index fund during its existence.

The fund’s top holdings are littered with names unfamiliar to the average investor. Bank of Hawaii Corp. DCC PLC. PayPoint PLC. Amsterdam Commodities NV. I swear, these companies really exist.

Even though this fund charges investors a 1.74% annual fee–multiples higher than Vanguard or iShares charge for even their most expensive ETFs–it’s cash that has been worth every penny for investors.

The only disadvantage to this fund? You’ll need a minimum investment of $5,000 to get a piece of the action.

The Mawer fund isn’t the only terrific mutual fund out there in Canada.

Back in 2000, small-time asset manager Norrep launched the Norrep Fund. If you would have put $10,000 in this fund on inception date, your investment would be worth nearly $86,000. That compares to the TSX Composite Index, which would have turned $10,000 into approximately $26,000.

The Norrep Fund charges a rich management fee of 2.36%. And like the Mawer fund, its portfolio is stuffed with companies the average layperson has never heard of. But you can’t argue with the results.

Should you try this strategy?

Naysayers will point out that it’s always possible to find mutual funds that do well over a period of time. A fund manager can always get lucky. After all, a broken clock is right twice a day.

These people have a point. There’s no guarantee the Mawer or Norrep funds profiled above will continue to outperform. In fact, they may even underperform going forward as returns regress to the mean.

But at the same time, I don’t think it’s something that should be dismissed completely. There’s a very clear reason for their outperformance. They continue to have the same people in charge. And luck doesn’t tend to last a whole decade.

Picking winning mutual funds is tough, there’s no doubt about it. Many people will choose not to bother, and I don’t blame them one bit. If ETFs are a fine solution, then why even try to mess around in the world of mutual funds?

But the fact is that among the many duds are some great funds that can make a lot of money. If you can find one of these funds, it might make a big difference in your net worth.


How to Save With Home Services

How long does it take you to scrub the floors? How much energy do you expend trying to fix the lawnmower? How much space are you losing by trying to store all your belongings in your garage?

Though sustainability and healthy personal finance often require a bit of DIY, you might actually be putting yourself in the red by attempting complex and arduous tasks on your own. Sometimes, paying a professional to complete the more tedious tasks around your home is actually a financially savvy option. Here’s how you can save by hiring for home services.

How DIY Is Costing You

Once you stop to think about it, you will realize just how much you are losing by attempting to do everything around your home by yourself. Not only do you have to pay for the tools ? the chemical solvents, the scrubbers and dusters, the powerful machinery ? but you also lose the potential money you could earn if you devoted that time to more profitable pursuits. The time you spend on your hands and knees weeding your lawn is time utterly wasted in a financial sense, unless you enjoy joint pain and grass stains.

Worse, your undone chores are likely adding an unnecessary weight of stress to your already-stressful life. Home-related responsibilities are often a source of tension between spouses as well as between parents and kids; inevitably, one member of a family will demand more orderliness than the others, and everyone will suffer. If hiring professionals do clean up the house and yard will lower your cortisol levels, it is well-worth the price.

Essential Services Worth Paying for

Of course, not every chore requires professional effort. Particular labors that are either incredibly frequent, like doing the dishes, or especially personal, like sorting your desk, are best left to you and your family. However, there are certain services that can and should be paid for, such as:

Cleaning. This means deep, difficult cleaning. There are places in your home you simply don’t know how to clean property; maybe your parents never taught you, maybe you don’t have the tools, or maybe you just don’t ever think about where grime actually gets. A cleaning service will scrub your floors to their original color, make your bathroom fixtures shine, and suck the stubborn pet hair from every corner of your house.

Lawn care. Lawns require way more attention than you probably expect, which means yours might be on the verge of death. Before the brown spots cover your entire yard, you should acquire lawn care services. Lawn professionals know the healthiest grass height, the best season to fertilize, and the most effective chemicals for killing weeds and pests, so you don’t have to worry about a dry and ugly lawn.

Pool care. Like lawns, pools are especially beloved features of yards. Also like lawns, pools can go really bad really fast. Without the perfect mix of chemicals, your pool can turn into a swamp in a matter of hours. Pool professionals have the testing equipment to diagnose pool problems and perform expert pool maintenance, even when it isn’t pool season.

How to Save on Services

If you are still concerned that home services are too expensive to consider, there are a few tricks to save money without going full-DIY, such as:

  • Using apps. Technology has brought home services into your hands. Apps like Handy and TaskRabbit connect cheap labor with busy homeowners to complete chores faster and easier.
  • Trying a-la-carte. When you book a services provider, most will ask precisely what you need. You can ask for particular services without committing long-term to an expensive full-service agreement. For example, you might ask cleaners to address common areas like the kitchen and living room and leave bedrooms to be cleaned by their inhabitants.
  • Opting for low frequency. Unless you are an utter slob, you probably don’t need a cleaner to come every day. You might not even need services every week. As long as you can keep your home under relative control, infrequent services will cost less.

It is easy to become bogged down by money in and money out, but good personal finance should consider more than cash. Relying on a few home services can dramatically improve your quality of life without emptying your checking account. Professionals are more efficient, more economical, and generally better at their trade than you could ever be, so relying on them might save you big in the long run.