It’s the first time in a long time (just north of 30 years) since the Blue Jays won the title, and while it’s too early in the ballgame as of writing to tell if another title will be in the books, especially with the Los Angeles Dodgers tying up the series last week, I think that long-term investors who were in markets way back in 1993 may wish to put things into perspective. Indeed, many of today’s investors weren’t invested in stocks way back in 1993. In fact, some market newcomers may not have been born yet.
Either way, there’s been some serious appreciation over the past three decades. And while the Jays have been chasing another shot at the World Series, investors have been rewarded with some pretty substantial rewards, not only in the form of capital gains but also some serious dividend growth. Indeed, if you went heavy on the dividend growth plays back in 1993, you’ve probably found that dividends have grown enough to finance a fairly comfortable retirement lifestyle. In any case, the dividends to be had from long-term investing through the decades really do make a difference.
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The ETF scene has changed a lot in the past few decades!
In the past few decades, investing has grown more accessible to everyday investors, with the rise of ETFs (exchange-traded funds) that offer exposure to broad markets, fixed-income securities, physical bullion, digital assets, and even derivatives-focused strategies. With the wave of ETFs continuing to land on public markets, the price of admission into the markets has gone down fast!
In due time, I suspect that management expense ratios (MERs) will have a very similar fate as brokerage fees (or commissions) as the surge in competition paves the way for a race to the bottom. Nowadays, you can bet on the broad markets with MERs south of 0.1%. Such absurdly low fees have allowed today’s investors to keep more of their gains as they invest in the future of Canada, America, or other global markets.
While mutual funds, especially those with hefty fees in the 2-3% MER range, still exist, the ball seems to be moving towards low-cost ETFs. And it’s not just about the cheapest index funds that mirror the S&P 500 or TSX Index, either.
Various active funds have popped up with fairly low expense ratios (think in the 0.2-0.5% ballpark), which are still highly competitive with their mutual fund counterparts. As the rate of growth in ETFs continues to soar ahead of mutual funds, the new generation of investors will be able to keep more of their money and perhaps retire several years sooner than expected.
Stick with the VUN and hold for decades
Indeed, if you’re betting on an index fund, like Vanguard U.S. Total Market Index ETF (TSX:VUN), with an MER below 0.1% instead of a 3%-MER mutual fund that was more popular more than a decade ago (it was the only game in town for many, way back in 1993), you’ll have an easier time keeping up or even putting the broad TSX Index to shame.
These days, the feat isn’t all too difficult, especially if you’ve got significant exposure to the U.S. indices, which might be able to outpace the TSX Index as the tables turn in favour of AI and growth stocks and against the gold miners and energy firms. In any case, the passive investment landscape has changed for the better in the past 30 years. And the price of admission, as well as the selection of products, will likely get even better the next time the Jays head to the finals.
