Weekend Reading – The tyranny of compounding costs

Weekend Reading – The tyranny of compounding costs

Hey Folks,

Welcome to new fresh Weekend Reading, all about the tyranny of compounding costs.

A few thoughts on that in a bit…

Some reminders and highlights of late:

I shared some of our tips and tricks to manage food inflation.

I updated this post about the pros (and cons) of transferring stocks to your Tax Free Savings Account (TFSA).

Based on a reader question a few weeks back, they wondered if I still own TD Bank stock. I do. This is my post about owning TD Bank, Then and Now.

Weekend Reading – The tyranny of compounding costs

Where to begin…

Maybe here:

“Investors need to understand not only the magic of compounding long-term returns, but the tyranny of compounding costs; costs that ultimately overwhelm that magic.” ― John C. Bogle, Founder of The Vanguard Group

More and more, Canadians are waking up and taking financial matters into their own hands. They are recognizing costly products or people may be robbing themselves of some retirement dreams. 

All investments carry costs.

There are opportunity costs (with any investor decision choosing to forego one asset or financial decision over another) and there are also significant financial costs incurred when it comes to owning expensive financial products. Many years ago, after being fed-up with the support I was personally getting from my financial advisor, I learned that high-priced financial products in particular were doing major damage to my semi-retirement plans. There are two big problems with high-priced products or people:

  1. A higher portion of your money is going to something or someone else other than you. You are paying for their yacht.
  2. The more you pay in fees, the more challenging it becomes for the money manager you hire to beat any benchmark index.

Weekend Reading - Top travel tips edition

From my trip to Florida last year, maybe a money manager owns it? I don’t know?!

The tyranny is: any modestly- to high-priced fund, ETF, or any other financial product is very likely to be a drag on your wealth-building journey. Invest in costly products at your financial peril. 

If you want to check out the damage done to your porfolio from owning any high-cost mutual funds, check out one of my favourite free tools here from GetSmarterAboutMoney.

For those who remain invested in any high-fee funds, the sticker shock to you might be overwhelming…

You can also compare some of the small differences that fees can do that limit your wealth-building power in the next link. Use this free calculator to see how different fees could impact your investment strategy!

Most of my ETFs (including low-cost tech USD fund QQQ) charge 0.20% or much less. 

In Canada, I feel there are only a handful of low-cost Canadian ETFs worth owning that charge about the same, or less. 

I included some of those picks in the MoneySense The Best ETFs in Canada for 2023.

I also have a similar list of favourites below related to all-in-one funds. 

The Best All-in-One Exchange Traded Funds

Again, even if you never wanted to own any individual stocks (which is A-OK by me) you could own just two ETFs, keep some cash for emergencies, and fire your money manager by owning a world of stocks for some wealth-building power. 




5-Year Return

10-Year Return

Since Inception



·       Exposure to large, established Canadian companies

·       Distributions eligible for the Canadian Dividend Tax Credit in taxable account






Global diversification ex-Canada, in one fund for TFSA, RRSP/RRIF, for long-term growth.




Information and returns current to the time of this post. *XIU started trading in 1990, making it the first ETF in the world. (XIU has a 30+ year track record of 7% annualized, pretty good!)

Here are some gems on this subject from John Bogle based on a former U.S. Senate testimony address on this subject:

“My data showed (assuming a 7% nominal annual return on equities) that a 30-year-old investor,
earning a $30,000 annual salary that grows at 3% per year, investing 10% of annual compensation in a
tax-deferred retirement plan, and retiring at age 70 would have built the following retirement fund
—Actively Managed Fund – $561,000.
—Index Fund – $927,000.”

Another example:

“A person saving for retirement who chooses low-cost investments could have a standard of living throughout retirement more than 65% higher than that of a comparable investor in high-cost investments.”

Something to ponder….giving up possibly 65% of your standard of living based higher priced products…as your May long weekend approaches…

Fees kill portfolios - My Own Advisor

More Weekend Reading…

I enjoyed Ben Carlson’s post about concentration in the stock market. 

“Going all-in on a couple of stocks sounds wonderful until you are forced to live with the volatility inherent in concentration.”

I take Ben’s advice to heart since I tend to invest in low-cost ETFs beyond Canadian borders however I do confess to own many individual Canadian stocks here at home. I tend to keep a “5% rule” in place that you can read about on my FAQs page to avoid concentration risk. I’ve always believed owning too much of a good thing/good stock could also harm your portfolio too… Investing winds can change. 

Congrats to my friend Tawcan who is absolutely killing it with his income portfolio.

Impressive stuff from Cheesy Finance from the Netherlands. Look at those skyscrapers in the chart!

Cheesy Finance April 2023

While dividends and distributions are fun, believe me, I posted our April 2023 dividend income update below….

April 2023 Dividend Income Update

…the desire to live off dividends and distributions in perpetuity really doesn’t make much sense.

Read why in this Cashflows & Portfolios post!

Finally, in case you need more evidence to invest for growth…

“After reviewing the market data for nine different equity markets over the last 30 years, I can confidently say a few things:

  • Real equity returns typically range from 3%-7% per year.
  • The best equity markets in one period may not be the best in another period. This is why we must diversify our holdings (if possible) to hedge any single-country exposure.
  • When markets crash, they tend to crash everywhere at once. The DotCom bubble, the Great Financial Crisis, and the COVID-19 crash all impacted different equity markets in remarkably similar ways.
  • By continually purchasing a broad basket of global equities, you are very likely to maintain and grow your purchasing power over time.”

The above with thanks from Of Dollars and Data.

Have a great weekend!


My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.

6 Responses to "Weekend Reading – The tyranny of compounding costs"

  1. Hi Mark,
    I always thought that XIC was a better choice over XIU if I want to own only 1 Canadian ETF because of the lower MER. My 3 main ETF’s are XIC, XEI (for higher dividends) and XGRO (in RRSP only). Curious what your thoughts are.

    1. XIC is a great fund but I feel for taxable investing, or registered investing (RRSP, TFSA, LIRA, etc.) XIU is very hard to beat. If you compare XIU vs. XIC and vs. XEI for 10-year returns you’ll find XIU comes out on top.

      That said, XIC, XIU and others are very good funds for long-term ownership.

      Happy to hear your thoughts!

  2. Thanks for the calculator from GSAM …its eye watering when you compare funds !!
    Fees at 2% really enhance the hair cut on your overall return.
    Keep the investing education coming ! :o)


    Hi Mark: you are right on when it comes to brokers. I do have a bone to pick with you if living off dividends is a mistake. As mentioned I have been out of the workforce for 31 years and started investing 54 years ago. If not for the fact that my father got into investing and learning from him I wouldn’t have been able to live a normal life. My portfolio has ballooned since then and so have the dividends. The more dividends I get the more financially secure I am and I see no sense in stopping now. Give me a stock with medium dividend that is growing over a low dividend high growth stock any day. BN has split 5 times and CU has split 4 times so with these stocks you can still get growth.

    1. All good with me, as long as you enjoy it – do it! 🙂

      “My portfolio has ballooned since then and so have the dividends. The more dividends I get the more financially secure I am and I see no sense in stopping now.”

      Have a great weekend,


Post Comment