Investing in Canada

There are several differences between Canada and the US when it comes to investing your money.  Unfortunately, for most making the transition to Canada, they are unaware of these differences and end up making some costly mistakes or paying too much. This is typically the result of an over zealous broker, a smooth talking mutual fund salesman or variable annuity provider.  Following are some of the things you need to consider before investing your hard-earned dollars in Canada:

INVESTMENT EXPENSES - Canada has been ranked as one of the most expensive places in the world to invest, far above the expenses seen in the US.  Competition in the brokerage industry has resulted in lower brokerage fees and commission rates, lower mutual fund expenses and the advent of index funds and exchange-traded funds have reduced investment expenses far more in the US than in Canada .  With some of these discount brokerage firms and mutual fund companies beginning to move into Canada , reduced investing expenses are on their way up there as well.  The most insidious thing about these fees is most investors don't even know they are paying them unless you look at the prospectus sent to you (most don't).  Most mutual funds in Canada typically have a 2 - 3.5% expense ratio compared to an average 0.25% - 1.0% in the US .  In addition, there is a much larger selection of low-cost mutual funds in the US with expense ratios around 0.10%. 

TAX-PREFERENCE INVESTMENTS - There are no tax-preference investment alternatives available in Canada that are normally available in the US.  Your municipal bonds/ money market  funds and US government obligations are fully taxable in Canada. You could make a contribution to an annuity but be careful as they generally have high expenses. You should also note that your Roth IRA is fully taxable in Canada and must be declared on your Canadian income tax return every year.

MONEY MARKET "SWEEP" - Dividends or interest payments, maturing bonds or the sale of an investment results in cash in your account.  In Canada , this cash sits in a savings type account earning "savings" account interest rates unless you choose to invest the cash in a money market mutual fund.  These money market funds in Canada typically have a deferred sales charge and/or a high management expense ratio.  In the US , any cash in your account is typically "swept" on a daily basis into a money market mutual fund automatically.

MUTUAL FUNDS - Some investors in the US have researched and become familiar with the different mutual fund families in the US such as Vanguard, American and PIMCO. Altamira , MacKenzie, AIM, Royal Funds, etc.  In Canada, however, no such funds exist.  The question then becomes "Which mutual fund families should I use?"  Altamira? MacKenzie? AIM/Trimark? There are in excess of 5,000 mutual funds you can select from but "Which mutual fund is right for your unique circumstances?"  We can provide assistance in this area.

Since we are Fee-Only financial advisors, we do not make any money based on the particular mutual fund or investment instrument selected, which allows us to put your interests first. We are proud to be a DFA approved advisor and the support they bring to our clients and us!