Searching for an index fund

Question: Investor advisory columns in the U.S. have promoted “index funds”. They are inexpensive to administer and will move with market as a whole. There is no need to ‘out-predict’ the market by choosing one stock over another. I could buy an S&P Index fund in the US. Is there anything similar in Canada? I have looked (without the help of a financial planner, because I have found them expensive and no better than I at picking winners), but have not found such an index stock fund. – T.S.


Index funds certainly have lower costs attached to them than funds that are actively managed. And many people feel that, over the long haul, they perform better, although that was not true during the bear market if you compare index funds to those that use a value approach to stock selection. The reason: there is nowhere to hide when the markets go down. These funds will track its movements, and there is no flexibility to convert some assets to cash, buy lower-risk stocks, etc.

There are several index funds sold in Canada that are based on U.S. indexes, including the S&P 500, the Dow, and the Wilshire 5000. I don’t have space to list them a here, but several of the banks offer such funds so check out their line-ups.

One that gets consistently good ratings in my annual Buyer’s Guide to Mutual Funds is the TD U.S. Index Fund, which is based on the S&P 500 Total Returns Index. It comes very close to matching that index’s performance. Since you don’t use a financial advisor, you may be interested in the “e” units of this fund which can be purchased only on-line and which have a very low management expense ratio (MER) of 0.33%. – G.P. (July 2003)

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