The Canadian Investor - Canadian professional services stocks and how fees impact your returns

Episode Date: August 23, 2021

In this episode of the Canadian Investor Podcast we discuss why the majority of mutual funds trail market returns. Braden then talks about Firstservice, Stantec and CGI in a segment about Canadian professional services businesses. Simon explains how covered call ETFs work and then compares the QQQ ETF to its covered call equivalent. We finish the episode with a discussion on transaction fees when buying a stock or ETF. Tickers of stocks discussed: QQQ, STN.TO, GIB-A.TO, SFTC.TO, QYLD https://thecanadianinvestorpodcast.com/ Options episode: https://thecanadianinvestorpodcast.com/episode/converting-cad-to-usd-and-stock-options-basics  Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital See omnystudio.com/listener for privacy information.

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I am Brayden Dennis, joined by my co-host, as always, Simon Belanger from our nation's capital, Ottawa. Today we have a jam-packed episode. We got four large topics to discuss, so we'll both be going on a couple monologues and then comparing notes. Simon is on vacation today, still doing the podcast, and you know it's going to be a good episode because he always has a jump in his step when he is on vacation. So how are you feeling today, Simon? Yeah, I'm feeling good. I'm not sure I would call that a vacation. It's like I'm going to do yard work, but I am excited to record this one. A lot of these were inspired by some of our listeners,

just some questions we got on Twitter. So excited to give our take for those. Yeah. How many bags of sod did you have to deliver to the backyard? We're getting them delivered tomorrow. It's actually three and a half pallets that we're getting delivered. Three and a half pallets. Oh, boy. Yeah. So lots of stretching beforehand and then getting to work on 40 degree Celsius weather

with the humidity tomorrow. Oh, goodness. Okay. So if you're in Ottawa, hit up Simon on Twitter, if you're going to help him with some yard work. All right. First topic of the day. This just came out of pure curiosity because I always hear mutual fund managers underperform the market 80% of the time. That's been the stat that gets thrown around all the time. So I figured, well, is that true still? Does that still happen? And I went to S&P Global,

which is a very legit source. This is the same standard and poor's company that makes the S&P 500 index. And I didn't realize that they do this, which funds are outperforming the market, which ones are underperforming, and just some general stats about the industry, which is really cool to poke around the website. It's cool. That is at S&P TSX composite. Only 1.37% of funds outperformed the S&P TSX. And that's just Canadian companies on the TSX. So that is shocking.

So and then in the US as well over the last five years, large cap fund managers for mutual funds, 75.27% underperformed, meaning less than 25% of fund managers outperformed the market. And I figured like, how is this possible? And not to mention, they're charging maybe one and a half all the way up to two and a half percent on these mutual fund fees. And they're higher in Canada than anywhere else in the world, which is unfortunate. You're seeing that two and a half percent here in Canada still to this day in 2021, which is disappointing. Why is this? How do we peg a reason to why these professional mutual fund managers are underperforming the index? Because it is their job by nature

to probably outperform it. Now, I do want to provide some sort of caveat that some of these fund managers, their goal is not to beat the market. It might be like a dividend strategy, an income strategy, like a capital preservation strategy, and they probably get thrown in here. But still, we're talking about only 1.37% of large cap funds outperforming. So it is apples to apples because they're large cap compared to the TSX composite. All right, so why is this? This is my three very unofficial reasons of why I think this is, just jotting them down. I racked my brain. I believe the three most important things that is happening, especially in Canada, of why they're underperforming. One, I think that these fund managers are underweight technology. Straight up, I think

that they are underweight technology, especially when the index, all the monster returns have come from the TSX technology information technology capped index, which is like Shopify, Constellation Software, CGI, those companies. They've done extremely well. Number two, I think that they trade too much. This isn't a secret. Here, Simon and I, we are sloths when it comes to investing. We don't make a lot of moves. We don't panic. We move very lethargically. We don't trade a lot, and that is our biggest advantage. Number three, these fund managers have incentives around short-term performance. They are measured quarterly, maybe monthly. If you're an individual investor, you are freed from that. If you have a month of underperformance and some stock you own

is getting crushed, but you love it, you like it even more. You liked it at $30, but you love it at $20, you're going to buy some more. That fund manager might cut it loose at $25 before it even got to $20, which was when there was a really good buying opportunity because they're worried of getting crushed in the short term. Now, these incentives matter a lot. They matter so much. I think that might be the most important one. So before I move on to the next section of where I'm going with this, do you have any other reasons of why you think fund managers have like a structural disadvantage? I mean, these are smart people. They are not dumb. I know some of the smartest people are fund managers.

Yeah, I think there is. You touched on most of them, I think. For the first one, for me, would be also they may have certain mandates, like you mentioned early on. So they may have a health care focus or a dividend kind of mandate. It really depends on the type of the front of the fund and their incentives as well. You're totally right, because if you even take a mutual fund that's targeting retail investors like you and I and all our listeners, well, most people that are retail and going into mutual fund will tend to look at the past performance and specifically the last year and how it did. And if it did not perform well, not even thinking comparing to the index, because most people don't even look at that. But if it hasn't performed well,

a lot of people will withdraw the money from that mutual fund and go somewhere else. So there could be outflows coming from the fund. And obviously, that will affect in a big way the fund manager. Eventually, if there's too many outflows, they could just wrap up the fund, right? So that's probably my two biggest reasons. Yeah, good point. The mandates and the incentives around that can be structurally disadvantageous. So yeah, this is not a section on fund managers are stupid. They don't know what they're doing.

No, they're just some of the smartest people on the street. It's just the 2% management expense ratio and the structural disadvantages of the fund just make it not ideal in 2021 when so many different options are available with technology now. You just really don't need to be in mutual funds anymore. That's just the truth and that's my opinion. Take it as what you want. All right. Where I'm going with this is those reasons why I think that they've underperformed and why I think as individual investors like myself, like Simon, like yourself listening on the podcast, is you have the complete opposite and you have all these advantages to being able to move the money in the way you want.

So I looked and I compared my Canadian portfolio, which is a model portfolio on Stratosphere Investing that's been around since 2016. It is the actual positions that I invest in with my own money. So the model portfolios on Stratosphere, I invest in these names to a T. And then I compared the US one as well. So since 2016, when it started on the Canadian side, I outperformed the market four out of five years, and it represented 23% outperformance over five years. Then the exact same story with the US portfolio, it outperformed the market 22% last year alone. Now, this is not me to just boast here and say like, hey, I can crush the market. There's lots of things that go into that. But where I'm going with this is there are so many different companies inside the index. And my recommendations in terms of how people should

manage their portfolio are the following. Only buy quality businesses. Be opportunistic on market drawdowns. Don't sell winners. Think in years or decades, not quarters. And use a quant model. I use the stratosphere quant model that's available for members. It takes the emotions out of investing. It finds growth at a reasonable price. It looks at things like business quality, network effects, secular trends, management. The takeaway here is the fund managers have all the opposite things going for them that I just mentioned. They sell winners. They're not opportunistic on market drawdowns because they're scared. They don't want to lose clients.

They think in quarters, not years. Those things just don't justify a 2% management fee. You can do so much better than that option, than that and those those these are the reasons why i think that's the case yeah yeah well put um and like i said there's no to me if people want to pick stocks like you just mentioned or owning index funds that's perfectly fine and just to add what you were saying i remember hearing that the fund managers who do beat the index for a five-year period, I think very few of them will beat the index the following five-year period of the ones that did. So you have to keep that in mind as well. So you may have a good fund manager for a shorter period of time. And I know five years for some people is a lot, but in investing world, to me me it's not that long but when you keep looking

further out then it's even less likely that they keep beating that index so something to keep in mind and you add in those fees i was talking with a buddy of mine and he was paying i think 2.85 percent in fees uh for the mutual fund he was in so yeah and and that's like $3,000 on a $100,000 portfolio. Every year. Every year. Or $30,000 on a $1 million portfolio. He said 2.85. So we'll call it $28,500 a year, like 30 grand, like a new car worth of fees for someone to

probably underperform the market. And I think, you know, I'm out here beating the market, but if you had me sitting in the chair in some shiny corner office and told me that I need to please clients on a monthly or quarterly basis, oh God, I would be so set up for failure and probably not beat the market. Anyways. Yeah. And I think the way that some of these funds get away with it is they, I think they're called segregated fund. It's a type of mutual fund. I may have to turn them off a little bit, but what they do is when someone invests with them they'll say okay this portion of your investment is like guaranteed capital so you can always get that back if the markets go completely down but in exchange

they usually charge very high fees and when you do the math the calculation over long periods of time i mean it doesn't really make sense. That original, you know, guaranteed capital three, four, five, six years out, I mean, the market could go down 50% and you'd still have more than that initial capital investment, right? So I think a lot of them get away with that and that fear of people that they have that backstop as a guaranteed amount. I've seen those type of funds more than once. And when you crunched a number over long periods of time, it just doesn't make sense. I mean, if you need a safety net, just put that in an emergency fund and the rest just invested in something low fee. It's not worth

it. As do it yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I

need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with

Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at Airbnb.ca forward slash host. That is Airbnb.ca forward slash host. To our next subject, this was inspired by one of a question I got on Twitter and I'm totally sorry. I don't have the name in front of me but I'm sure you'll recognize yourself so it's about covered call ETFs so you wanted to know what they were you wasn't understanding them

and I'll break it down for you guys so these type of funds by companies then they sell call options therefore they generate premiums and more yield so before i go into detail i'll just do a bit of a refresher on what a call option is so we had an earlier episode on that so you can always go back i can't remember which episode it was but i'll add it to the show notes if you want a refresher on what the options are. So call option gives the buyer of the call option the right, but not the obligation, to buy a certain stock at a predetermined price, which is called the strike price. The call option will expire after a certain amount of time.

So there is always a time component and a limit to the to the call option contract in exchange for that the buyer of the call option will pay a premium to the seller of the call option for that right if the buyer exercises the option before its expiry date the seller has no choice but to sell him the shares at that predetermined price and usually while they will be done in lots of a hundred so one contract means if it's exercise it equals a hundred shares so people I will so you understand this with a concrete example say Microsoft and I know the prices are not really what they're trading at right now so bear with me say Microsoft is trading at 190 a share Braden has a hundred shares and wants to sell me a

call option because he's not sure about Microsoft and wouldn't mind selling his shares if they got up to $200 a share so he sells me a covered call option because he owns the share and I decide to take him up on it because I'm bullish on Microsoft. We decide that the strike price is $200 a share and is good for a period of six months. In exchange for that, I give him a premium of $3 per share for a total of $300. This means that I can a hundred shares of Microsoft at any time in the next six months for $200 each from Braden so obviously there are several outcomes here for both parties I won't go into detail because like I said

we did previous episode on that but to go back to our covered call ETF the premium they receive so in that same example, the premium Braden would have received, will end up boosting the distribution of the fund and therefore increasing the yield it will generate. That's why you see a lot of these type of funds focusing on dividend stocks, but it's not specific to just dividend stocks. And I'll give an example later on. to just dividend stocks. And I'll give an example later on. So the pros of a covered called ETF. They'll tend to be lower volatility than a comparable ETF. That is not a covered call. This is because the premium collected ends up lowering the downside if there's a market downturn.

They will perform better in a bear market than a similar ETF because of the premiums that are collected. And they can generate pretty good yield with the premiums collected. And we're talking here like 8%, 9%, 10%, 11%, 12% in terms of yield. There are some cons. So the cons of a covered called ETF, they tend to have higher fees because of the increased trading. to have higher fees because of the increased trading, those call options, there obviously there's a cost to trade those, which also requires more active management from the fund managers. It caps the fund upside because the fund is forced to sell equities when they perform well. So if I go back to that example with Braden, the $200 a share for Microsoft. So if Microsoft within that six month period goes up to $250 a share, well, I'll probably call up Braden and say, hey, buddy, I want to buy those shares

of Microsoft at $200 a share. Obviously, if it goes down to $150, I'll never exercise my option and just collects a premium and he's very happy about it. But it definitely caps your upside because of that specific situation. And like I mentioned, they do not perform well in a bull market, just like they will perform a bit better in a bear market. So an example of this is the Global X Nasdaq 100 covered call etf it's ticker qyld and we'll compare it to the qqq which is the investco qqq both follow the nasdaq 100 so it's the same index that they actually follow but the qyld is a covered call variety so i did a little table here that I'll go through. So the QILD over the past five and one years, so the past year QILD is up 17% and 72% over the past five years,

compared to the QQQ, which is up 36% in the past year and five years 227% and that's because we've been in an overall bull market and you're seeing that cap upside right there. The dividend amount is 0.22 for QILD. It's paid monthly and it generates a yield of 11.6% whereas QQQ is 0.39 per share for a dividend amount that's paid quarterly and it's a yield of roughly 0.40% because the shares are way higher for the QQQ. In terms of fees the QYLD so the covered call ETF 0.60% and QQQ 0.20%. So you're seeing exactly the pros and cons right there. I thought this was a really good example just to show the difference because they track the same index. They're just one's a covered call and one isn't. So in a nutshell, that's what a

covered call is. Any comments on that, Brayden? Well, I have a couple comments. My first takeaway here is that there is a juicy dividend yield that you might be very attracted to of over 10% from this covered calls and you go, this is an absolute no-brainer and you still got absolutely smoked by the index. The NASDAQ 100 over the last five years has been incredible at a 227% increase. That's not normal in five years, but look at the difference. Even after you collected your yield, you just lost straight up to the index. And doing nothing is just owning the index, right? And it goes back to the mutual fund conversation is why do that when instruments like just owning the index for 0.05% exists? Why do anything else other than own great companies if you want to own individual

stocks? It's a good overview and thanks for pointing out that these ETFs performance, I think that just says it all because I've been investing for 10 years now and I've never traded an option. I've never owned one of these special ETFs. I know all about them. I know how all these things work and I'd rather just own good companies for the long term. So thanks for pointing this out. Yeah, I mean, I learned something. I thought they were pretty much only dividend companies that they would do covered calls with. So I was kind of surprised when I saw the NASDAQ 100. I mean, I guess they're the only saving grace and you can take it with a grain of salt. I guess if you're retired and you're really looking for that income.

There's income. Yeah, there's definitely income. You can't say you have to agree with that. There is definitely a lot of income related to these covered called ETFs. So if that's really something you're looking at, but if you're really far out from needing the money or from retirement, I mean, the performance is it got shattered by the non-covered called ETF. I mean, that's the only way to put it. Yeah, it did. But you, I mean, yeah, you're buying this for the income. So you got your income. So if you're seeking income, then that's a pretty good strategy actually. It's kind of cool. All right, let's move

on because we got lots to talk about. I'm going to go through a few Canadian professional services businesses and ones that I think are good. I like these companies. So I'm going to go through them here. We got one, two, three, four. Yeah, we got four companies. So I'll try to rifle through these. First one, First Service, ticker FSV. And by the way, these all trade on the TSX. Some of them are dual listed. Like FirstService is also FSV on a US exchange. But so FirstService splits their business into two. FirstService Residential is North America's largest manager of residential communities.

It manages 8,500 properties, which equates to 1.7 million units, which is very impressive. Then first service brands is them rolling up property services, which are primarily franchise-type businesses. They have over 1, franchisees uh so some of those brands people might recognize are paul davis first on site california closets serta pro painters uh floor coverings i think they have college college uh what is it college pro painters that's it right is it really oh yeah okay i've seen those around yeah yeah yeah i haven't seen it in a while but like i remember they always just try to recruit pandemic i've seen them yeah yeah the name has escaped me it's also part of the brand

so they're a roll-up company right they buy these home services businesses uh and when i say home services this is commercial contracts for the most part, but also some direct-to-consumer contracts. It's been a hell of a stock. Let's not get ourselves. They have been compounding free cash flow at about 12% over the last 10 years and earnings per share compounded at over 30% compounded annual growth rate over the last 10 years. at over 30% compound annual growth rate over the last 10 years. I know some really smart people that love this name. I think it's a little expensive here, but it is a good company and they're doing all the right things to deliver shareholder returns. So it's been a good story so far here in Canada and I like the business moving forward.

All right, Stantec. Stantec is a global engineering firm. It is ticker STN on the TSX. Their services are engineering, architecture, interior design, landscaping, surveying, environmental sciences, project management, and project economics. This is a multidisciplinary engineering firm, but they do mostly do civil eng. It's been a great compounder. It's tripled over the last three years. It doesn't grow crazy fast, but it does grow nicely over time. Pays a nice dividend,

spins off tons of free cash. With these services businesses, they produce gobs of cash because the business is so capital light in a way. I do like WSP more, but I'd be happy to own Stantec in my portfolio. So WSP is the larger engineering firm, which trades on the TSX. They deploy more capital in terms of acquisitions. I just like their vision a little bit better, but Stantec, I'd be happy to own as well. These companies that just provide services in things like engineering and construction, which is very capital-intensive work, they just provide services. They're in that capital light, free cash flowing side of the value equation. I like that a lot. All right, CGI, which is tickered GIB. CGI is a global IT consulting, outsourcing,

and system integration firm. They have over 400 offices, which seems nuts. When I saw that, 400 offices, it seems like a lot. But again, it's a service, professional service businesses. And, you know, their business is their employee base. We have 77,000 employees. So they have long-term contracts, strong brand, a partnership ecosystem, a lot of IP, and they deliver in-house value to clients through consulting and outsourcing engagements. What I just read was from the Stratosphere Investment Thesis on it. You can see it. It's been part of the model for quite some time, CGI. You can read that. They grow the top line, they grow the dividend, they grow earnings, and they buy back a lot of stock. I graphed out

on the report how much they've been buying back stock. It's pretty impressive. The top line growth is nothing to write home about, but free cash flow per share and earnings per share grows really fast. Growth on the top line is lumpy because they make acquisitions. So it's a classic roll-up story. They acquire service companies, spin off, repeat. And there's going to be a theme here.

All these companies, they're just consolidating a very fragmented market. All right. Last one. Softchoice. Ticker F. No, sorry. Ticker S-F-T-C. Softchoice is an IT services company.

They are known for their world-class sales force out of Toronto. I know a bunch of people that work there. They sell IT hardware and software services. They do everything. They can do everything from, you know, Simon comes over and says, hey, we need 500 laptops. They'll say the 500 laptops and the Microsoft Enterprise solution to set you up on their Microsoft cloud. But then they'll also do a cloud migration from old to new tech through their services segment. low single digits on revenue for how much they were doing the professional services. This is climbing up and up and up as they shift the business to a services business because the margins are way better. So on the services side, it means moving clients to the

cloud, helping them build the workplace of tomorrow and enabling them to make smart decisions about their tech portfolio. It is a new IPO. I know people that work there that were buying stock options for like a buck. And the stock IPO-ed at $20 in May. And it's up 60%. It even hit $40, but it's pulled back over the last week. So this has been a great IPO on the TSX so far. It's an interesting business as they shift the model to a IT consulting and professional

service business with their specialty being in the cloud. I think they're set up for success. Yeah. I mean, in terms of IPO, I feel like you really have to be pretty bad this year to not have a successful IPO. Fair enough. Fair enough. But you can find some exceptions to the rule. Oh, yeah. They're executing on this new strategy, right? And I'd be honestly happy to own all four of them.

I own none of them. I'm laying out the list. I own none of them. I'm like, I own none of them. But they are good companies. I like the services business. It's sticky. The margins are good. And it's capital light. That's a good, very interesting companies. I'll be honest, most of them I wasn't too familiar with, but something to add to my watch list. familiar with, but something to add to my watch list. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free,

so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit Questrade.com for details. That is Questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about

hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. That is Airbnb.ca forward slash host. So our last segment here, again, this was something that came from a question on Twitter from Hugo, which he asked me that he was missing out on some opportunities because he's waiting until he has $2,500 to invest because he pays a $6.95 fee with his online broker for each transaction. So he's using CIBC Investor's Edge?

No, he's using a Quebec, I think it's the Caisse Populaire. Oh, true. Yeah. I thought Investor's Edge was the only one at $6.95. But go on, I'm hijacking your story here. Yeah, it's all good. Nice try though. But go on, I'm hijacking your story here.

Yeah, it's all good. Nice try though. And because this broker charges that, he wants to minimize the trading fee for each transaction. So he added that he finds it hard to DCA because he has to wait until that amount, which equals to about 0.28% of the total transaction cost. And I mean, I love that you go is thinking about fees because obviously we harp on fees all the time but I'll break down the the problem over here just with

some examples and some numbers and what I personally do and it's really important to to keep in mind that when you buy a stock it's a one- fee. It's not a reoccurring fee like we just talked about mutual fund, which they'll charge you 1%, 2%, or 3%. That happens every year. So that really can have a really devastated compounding effect over the long term. So keeping in mind that Brayden and I tend to buy and hold, so that transaction fee is essentially, like I said, a one-time fee. Obviously, you'll get a fee when you sell.

But again, it's different from that mutual fund that's charging you that 2% or whatever. For me personally, I have a 1% rule for transaction costs. It's a little bit arbitrary, but that's the rule I kind of gave myself. That's the minimum amount I'll use for my DCA. To illustrate that, I used an example of paying 1% versus 0.5% of the transaction cost and the difference I can do over a 20-year period. So I used a $5 fee because I do pay that with Questrade,

but you could do the same kind of calculation to determine what makes sense for you. And I know some people may not have a lot of money to invest at once. So as long as you do the calculation and you understand the impacts long term, I think that's what counts here. So in the first scenario, I'm investing twice at $500 with each transaction. So each $500, it cost me five dollars so the total i pay for that two five hundred dollar transaction is a thousand dollars and ten

dollars and my total invested is a thousand dollars because the thousand and ten that ten is the two time fee that i pay so over 20 20 years at 8% compounded growth rate annually, it gives me $4,660 and change. In the scenario two, I do one transaction, one transaction at $1,005. And that costs me a $5 fee. The reason I put $1,005 is because I only have that one $5 fee. I want to kind of show that $1,000 and $10. So the total paid is, like I said, $1,000 and $10 and the total invested is $1,005. So I have $5 invested more because I only incurred that fee once. Over 20 years at 8%, it's $4,684. And that's compared, I'll say it again, to $4,660 with the previous approach. So we see there's only a difference of $24 over a 20-year period. So it's not a huge difference. And you really have to

determine what makes sense for you in the end. You can just do that same exercise, use a compound income calculator and calculate the different outcomes of a smaller amount invested and paying a higher overall one-time transaction cost versus a bigger amount with a smaller transaction cost. Because of course you you'll have if you invest $100 at a time and you pay $5 each time then obviously when you invest a thousand you'll have paid $100 worth of $50 worth of fees so you have to keep that in mind it's always it's not an easy decision to take but at the end of the day the impact should not be too big because it is a one-time cost and that's the the most important thing to remember here um brayden do

you have a rule for you in terms of the the percentage for transaction costs for you i have a rule where i don't do anything less than 500 bucks yeah just because i don't want it to be more than 1%. So yeah, $5 on Questrade. So yeah, $500 is my hard minimum. Yeah, yeah, exactly. And I think 1.52% of transaction cost, depending how much you can invest. Because for me and you, I think it doesn't take us too long to have $500 to invest. So you have to keep that in mind. You want to balance it with not having too high cost, but also being able to dollar cost average on a pretty regular basis. I would say anything above 2% starts being pretty

high, but under that, I think that's pretty reasonable. So if you pay $5 each time, you could go as low as $250. I think that would be fine. Obviously, it'll impact your returns a little bit over a long period of time, but it shouldn't be too big. And is that impact going to outweigh the fact that you're waiting a longer period of time? So it's always creating that balance. You're waiting a longer period of time. So it's always creating that balance. Yeah, look, my stance here is don't sweat the small stuff. And this is – it's great that you're thinking about fees and it's important to think about fees.

That's why I'm saying like don't buy one share of something and your fee costs like 20% of the transaction. Now, that's the extreme case, but anything over 500 bucks, don't sweat the small stuff because we were just talking about fees when going through a mutual fund fee on $100,000 portfolio will cost you $2,500 with a 2.5% mutual fund fee. We're talking about $2,500 in fees for someone who's probably going to underperform the market. Don't sweat the $5 or the $10 if you're using one of the big banks. Don't sweat the small stuff. one of the big banks. Don't sweat the small stuff. Hey, maybe there's a silver lining here, and I think about this sometimes as the brokers keep fighting for lower and lower fees in the US. They're like $0 now. If there's just that little bit of fee, that little bit of stop, wait, and think, should I make this move? Should I panic sell this stock that's down 5% today? Just having that little bit of fee might actually be a good thing to make you

stop and think. Anytime you're on your brokerage account and you're thinking about making a trade and you're just not sure, should I do it? Should I panic sell this company? It's almost always a good idea to take a couple deep breaths, close down your brokerage account, check it in the morrow. And that'll keep you from doing some knee-jerk reactions with buying and selling stocks. Because if you trade too much, you'll just have a bad time. Trading too much is not a good investment strategy. Like Simon and I, I said I would describe myself as a sloth if I was an animal as an investor. Yeah, so that's my take on that.

Now look, we talked a lot about fees today. If you hit your million-dollar goal, if you hit that million-dollar investment portfolio and you're paying for active management, let's say it's only 1.5% mutual fund. Now, that's pretty standard. Say 1.5%. By the way, they'll tack on some performance as well. By the way, they'll tack on some performance as well. They'll tack on some backloaded performance fees if they do beat the market. But let's say they don't do some performance fees.

You're looking at $15,000 at 1.5%. Every year? Every year in fees. Now, that's why I say don't sweat the small stuff. It's a five bucks, 10 bucks a year trading. As long as you're not trading too much, you are doing so good. You're doing so great. I can't express how much, if you even just listen to this podcast, managing your own portfolio, seriously, as cliche as it sounds, pat yourself on the back.

You're doing so good. Most people aren't doing this. Most people truly aren't doing this. I think that's a good way to end it other than the fact that a Stratosphere membership costs $180 per year. Compare that to $15,000. That seems like a pretty good deal, Simon, wouldn't you say? Yeah, it's a pretty good deal. It's a pretty good deal. All right, guys.

Or if you co-host a podcast, you get it for free. Yeah, you got the free membership. I don't know. Simon's doing pretty well on the house he just bought. What do you guys think? I should start charging him. Yeah. Charge me double. I'm going to charge you double. I'm going to charge you 15,000. All right, guys. Thank you so much for listening. Hope you are enjoying the two episodes per week that we're pumping out.

We're having a good time doing it. Now's a good time also to shout out that we have a new website. having a good time doing it. Now's a good time also to shout out that we have a new website. We have a new website. I did it as a little side project. It did launch. It's live today. The URL is thecanadianinvestorpodcast.com. That is thecanadianinvestorpodcast.com. You'll see links to all the episodes, all the show notes, all of links to Stratosphere, for instance, so I don't have to keep pumping getstockmarket.com. Maybe I'll redirect that to thecanadianinvestorpodcast.com now. There's also a link there to buy Simon and I coffee if you really feel like it. And it is not expected, by the way, guys.

It's really just for the most people who have been listening for a long time who want to support us, support our work. But if you are just listening to this show, you are doing more than enough to support it. Thank you so much. See you next week.