For the most part, there is a reason as to why a Bank or Brokerage firm puts a mutual fund in your account – FEES. Whether it’s through being paid directly by offering up a propriety product or through revenue sharing by allowing another fund family to participate on their platform, Brokerage firms have found a way to legally double dip on your account. The adviser makes his commission or asset management fee for managing the account, and then the institution makes its fee from the mutual fund. This is a very lucrative, but far from objective practice endeavored upon by most large brokerage firms. Most clients have no idea what is going on. This is because the conflict of interest is only revealed to them in tiny print on the back page of a prospectus, which is rarely read. If the firm does have proprietary funds, many hide the affiliation by naming the fund family something that is hard to trace back to the parent company.
Author Archives: Noah Greenbaum
A Comment on the Government Shutdown
“No Man’s life, liberty, or property are safe while the legislature is in session” -Mark Twain
Over the past week, Neil and I have received many questions about the government shutdown and impending debt ceiling and how they might affect the markets. So we thought we would share with you a quick summary of what we believe is happening and how we are positioning our portfolios as a result.
Not All ETFs are Created Equal
We at Canal Capital Management are big believers in ETFs, otherwise known as Exchange Traded Funds, because of their salient characteristics: cheap, tax efficient, intra-day trading, index replicating, etc., But just like with any investment product, they are not all created equal. Due diligence is required when investing in any ETF. At our firm, we follow a disciplined process when vetting any investment, and ETFs are no exception. We apply the following test: Efficiency, Tradability & Fit. Efficiency looks at a fund’s costs, while Tradability assesses average daily trading volume, and Fit examines the securities the fund owns. Though it may sound corny, this mnemonic device describes a process by which we narrow down some 1,500 ETFs to a more manageable security universe of choices that will best fit our investment objectives.