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  • Identify the many Myths in the financial system, including the dream of “beating the market” through individual stock selection.
  • Identify the key factors to becoming better do-it-yourself investors AND identify those which are under your control, such as an optimum allocation of your investments across appropriate asset categories.
  • Accompany you each step of the way in the saving and investment process- see our User Guide.
  • Help self-investors to better control their costs, what Warren Buffett calls the financial system’s friction costs.
  • Help you better use your tax-exempt (RRSP) account.
  • Show you how to minimize your tax-related investment costs.
  • Give you access to information to help you better manage a portfolio intended to constitute an important source of retirement income.
  • Identify areas where the financial system does not adequately take into account the interests of independent investors.
  • Encourage reforms to the regulatory system.


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Welcome to our site for the independent investor which was officially launched March 18, 2008. Become a member (it’s free) and enjoy full access to the site + receive on a preferred basis our newsletters. Our first newsletter commenting on TFSA's was emailed to members March 25. MEMBERS-PLEASE NOTE: Depending on your software and internet provider, it may be necessary for you to add This e-mail address is being protected from spam bots, you need JavaScript enabled to view it  to your list of safe contacts in your spam filters. Otherwise, you may not receive our newsletters. Our newsletters notify our members in priority of our commentaries on current events and other topics of interest. If you miss a newsletter, it will eventually be filed on the site at a later date under Information on the home page.

Do You Know Who Really Manages Your Mutual Fund?

An independent investor (sometimes called a do it yourself or self investor) who chooses to invest in mutual funds has two basic choices: actively managed funds and indexed funds. There is only one reason to invest in an actively managed fund: You believe you have found the exception to the rule – a manager who is able to regularly beat the market (or, to be more precise, to beat the indexe reference that he has fixed as his objective); see Equities – Beat the Market? Faced with the difficulty of identifying in advance such a manager, as well as the higher management fees charged by actively managed funds (see Equities – Actively Managed Funds), our site recommends the purchase of index funds (which can be exchanged traded funds or index mutual funds) having the objective of tracking the market in general) rather than the purchase of actively managed funds.

If you prefer the approach of actively managed funds, that supposes, at a minimum, that you are able to identify the name of the individual (often called a portfolio manager) who is managing on a daily basis the fund which you have chosen (or, more typically, the fund which a broker has recommended to you), and not only the name of the corporate entity which has the management contract to manage the fund. Otherwise, you will not be able to evaluate in a meaningful fashion the chances of your fund beating the market (remember: It is the only reason to purchase an actively managed fund). In addition, you will not be able to re-evaluate if it is still appropriate to maintain your investment if there is a subsequent change in the portfolio manager who is looking after your fund. But, do mutual funds give you this information?

Here is a recent case which is not encouraging …

The firm Sceptre investment counsel (Sceptre) is a manager of mutual fund and other assets. One of its best known mutual funds is the Sceptre equity Growth Mutual Fund; see description doc. 805. The peculiarity of Sceptre is that it is listed on a stock exchange, contrary to most managers who are either private firms or 100% subsidiaries of large financial complexes like those comprising the Top Ten. On June 22, 2007, the firm Sceptre announced the resignation of its veteran portfolio manager, Allan Jacobs. This news was so important that the price of the shares of Sceptre fell 16.2%. Jacobs was the portfolio manager responsible for Sceptre Equity Growth. As a result of the loss of this key employee, the ratings firm, Morningstar, announced doc. 804 that it was withdrawing its five-star evaluation (the highest evaluation in the Morningstar system) for Sceptre Equity Growth. These two bits of information demonstrate the huge importance that the loss of Jacobs represented for Sceptre Equity Growth. What information concerning Jacobs and his departure was disclosed to unit holders of the fund? Answer: Very little.

Firstly, a reading of the key documents filed with regulatory agencies (see doc. 806, doc. 806A, doc. 806B, and doc. 806C) would not have enabled the reader to assess the exceptional importance of Jacobs for the Sceptre Equity Growth Fund. Instead, the documentation spoke of a team of portfolio managers, of which Jacobs was only one member without identifying him as the key person in the management team.

Secondly, as of the date this text was written, July 16, 2007, according to the files of the relevant regulatory bodies (see, Sceptre had still not advised unit holders of Sceptre Equity Growth of the loss of Jacobs.

Why? On this type of issue, the interests of the parties are opposed. It is in the interest of the manager of a mutual fund not to identify in documents filed with a regulatory agency the individual who is responsible for the return (good or bad) of the fund. Why? Because, in the event of a loss of the individual, the fund would be obliged to amend the documents to inform unit holders of the change, and thereby risk the loss of investors who might wish to follow the individual to his new employer. Conversely, it is in the interest of unit holders to know who is the individual responsible for the management of the fund, in order to be able to assess his personal expertise (education, experience, past results, etc.) and decide whether to invest (or to maintain their investment) in the fund.

The disclosure by Sceptre with regulatory agencies was undoubtedly consistent with applicable law, but what lessons should we draw as investors? There is at least one: when an advisor recommends that you invest in an actively managed fund and refers to wonderful past fund results, ask yourself the following questions:

  • Do you know who was the individual responsible for those past results?
  • Is he still in place? and
  • Will you be advised of his eventual departure?

Remember: if you invest in index funds (whether ETFs or indexed mutual funds), you are investing in a fund whose return does not depend on the expertise of an individual whose name you do not know, whose experience you do not know, and you often do not even know whether he is still with the organization managing the fund.
Last Updated ( Wednesday, 05 March 2008 )
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  • Help you become a better independent self investor.
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  • Build on our past to earn the trust of Canadian and non-Canadian do-it-yourself investors. Our founder has several years experience with a securities regulatory agency and over a quarter century of experience with two blue chip Canadian securities issuers.
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  • Perhaps you see self investing as a retirement project, or are merely curious about the world of investing.
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