A reader wants to know: Are ETFs a good option?

Q - My children have set up an educational fund (RESP) at a bank for their two-year-old son. They have the proceeds in a mutual fund with risk geared to a student (higher risk in early years). They find the fees high. Their risk tolerance is average. They are looking to switch to ETFs. Would you have any thoughts and recommendations? – Bernie S.

A – It sounds like they have invested in a target date mutual fund, which automatically adjusts the asset mix to a more conservative balance as the child approaches college age. I did some extensive research and I could not find a comparable ETF that is available to the general public. There are many such ETFs that are offered to institutional investors (pension plans, group RRSPs, etc.), including 10 recently launched by Vanguard. But none that I could find that your children could buy directly.
I'm sure some will be available soon to the public but for now if they move from a mutual fund they are going to have to take responsibility for adjusting the asset mix of any combination of ETFs they select as their son grows older. Most people are not very good at doing that so my advice would be to stick with the target date mutual fund until an ETF becomes available to retail investors. – G.P.

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