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The traditional Canadian strategy for handling investments is to hand it all off to someone else and then slowly nod as they are inundated with a steady stream of acronyms and fancy terminology that they don’t understand.

If you buy three basic vanilla ETFs using the TSX, you can quickly and easily get a small piece of the more than 200 Canadian companies, over 10,000 of the largest companies from around the world, and dozens of safe Canadian bonds.

The costs of investing are often measured as a percentage of your overall portfolio’s worth, and are usually expressed as an MER or Management Expense Ratio. The simple 3-ETF portfolio that we just built will have an MER in the range of 0.15 to 0.20 percent. That number might not mean much on its own, but when compared to the 2.5 percent range that most Canadian mutual funds charge, you can quickly see that it’s possible to pay less than one-tenth of what most are currently paying for our financial advice!

To give a very rough approximation of what that MER difference means, let’s see how a $100,000 portfolio will look after 35 years of DIY investing with ETFs versus traditional mutual funds. We’ll assume the before-fees-taxes-and-inflation returns for both portfolios is 7 percent (even though most mutual funds fail to return as much as their corresponding index ETF) and that no other money is added during the 25-year stretch. Our ETF portfolio (0.15 percent MER) returns 6.85 percent per year, and compounds yearly to over $1 million! Our mutual fund portfolio (2.5 percent MER) returns 4.5 percent per year, and compounds yearly to only $467,000. To compare apples to apples, one should note that the fees associated with mutual funds generally pay your financial advisor to do more than just figure out your investments. The question then becomes — how much is 2.35 percent of MER worth to you?