Over 30 years ago, after previously working with professional institutional investors as an order taker in practice, I moved over and began working with individual retail investors such as yourself as an advisor, and I was not very impressed with the average stockbroker or investment advisor.\u00a0 <\/span>It seemed like the \u201cwild west\u201d to me, not unlike the movie \u201cThe Wolf of Wall Street.\u201d Clients were being sold stocks based upon very little research, often based on commission rates or new issue commissions. And clients had very little information on the rate of return they were achieving, and almost zero information on how much risk they were taking through their broker.<\/span><\/p>\n I was looking for a new way forward, a more structured and professional process to manage my clients\u2019 portfolios. This eventually led me back to my institutional roots, and we began employing a very sophisticated Nobel Prize-winning mathematical process, used by virtually all significant institutional investors, and based upon modern portfolio theory \u2013 to build and manage client portfolios. <\/span>We still use this process today, and the long-term track of performance <\/span>success of our model portfolios<\/span><\/a> is self-evident.<\/span><\/p>\n One of the basic building blocks of those portfolios was created in the 1990s, when the first exchange-traded fund in North America<\/a>\u00a0called <\/span>TIPs was created<\/span>, which stood for Toronto 35 Index Participation Units. It was one stock which was available to buy on the equity market like any other stock, and it tracked the Toronto Stock Exchange’s top 35 stocks. Surprisingly, the first successful passive investment vehicle was created in Canada, a relatively small fish compared to larger equity markets such as America and Asia.\u00a0<\/span><\/p>\n TIPs was met with huge resistance from the investment industry on both Bay Street in Canada and Wall Street in the U.S. because it threatened many parts of the industry, particularly their revenue streams. At the time, Mutual funds were the preferred commercially available portfolios.\u00a0<\/span>I, however, loved it.\u00a0<\/span>TIPs was soon followed by a similar exchange-traded fund in the U.S. for the S&P 500 called SPDR, which I also loved. And so began the very first truly passive index investment vehicles.<\/span><\/p>\n ETFs are called passive because, with one security, you can gain exposure to an entire market with a very low to no management fee. And on the issue of cost, keep in mind that truly passive investment vehicles like these have no manager, and there are no investment decisions made. That is what mutual funds are for. <\/span>Exchange-traded funds, simply via computer, own the entirety of the market in the correct percentage based upon the market capitalization of each underlying stock. So, the cost is as close to zero as you are going to get. Owning these core ETFs is also called \u201cIndex Investing.\u201d<\/span><\/p>\n As ETFs became more popular, more funds emerged to track smaller indices such as growth or value indexes. Then they further stratified into industry types, such as technology, energy, housing etc. As they did this, ETFs began to “eat the lunch” or take away the market share of Mutual Fund companies \u2013 and with good reason; <\/span>studies have shown<\/span><\/a> that mutual funds, on average, underperform the index funds over 80% of the time, after fees. Who wants to pay heavy fees, only to underperform the broad market index 80% of the time?<\/span><\/p>\n![\"bull](\"https:\/\/www.mcivercapital.com\/wp-content\/uploads\/2023\/02\/daniel-lloyd-blunk-fernandez-vrSKrUEZsDY-unsplash-min-1024x683.jpg\")
<\/p>\nThe History of Passive Income Investing in Canada<\/strong><\/h2>\n
What is Passive Income Investing<\/h2>\n