ETFs, Mutual Funds, and the Rise of Investing Slop
For a long time, investing in Canada came with a fairly simple rule of thumb. Mutual funds were expensive. ETFs were cheaper. If you wanted better odds, you bought ETFs instead.
That advice was broadly right, and for many investors it made a meaningful difference. Moving from a two percent mutual fund into a low cost index ETF is one of the few changes someone can make that immediately improves long term results without requiring better timing, better forecasting, or better luck.
But the investing landscape has changed, and the advice hasn’t quite kept up.
ETFs are no longer a category of investment. They are a structure, a wrapper really, and what’s being placed inside that wrapper today looks very different than it did fifteen years ago.
According to data from the Canadian ETF Association and SIMA, ETFs now account for just over a quarter of all investment fund assets in Canada.
Mutual funds still hold the larger share overall, but year after year the flow of new money continues to favour ETFs, which gives you a pretty good sense of where investor preferences are heading.
The momentum has clearly shifted.
That shift has generally been good for investors. Lower fees, better transparency, and easier access to diversification have all improved outcomes compared with the old mutual fund model, and index ETFs deserve real credit for forcing an industry to clean up its act.
When growth slows, products multiply
But when an industry runs out of easy growth, it doesn’t stop launching products. It just starts getting more creative about what it sells.
Anyone who invested through the 1990s and early 2000s will recognize the pattern.
As mutual funds grew in popularity, choice exploded. Sector funds, technology funds, income funds, market timing funds, each positioned as a smarter and more modern upgrade from boring diversification, even when the underlying ideas weren’t particularly new or well supported.
Most didn’t deliver. Many quietly disappeared. Investors were left with higher costs, more complexity, and portfolios that were harder to understand and harder to stick with when markets inevitably got uncomfortable.
Today’s ETF marketplace shows some eerily familiar parallels.
In 2025 alone, more than 300 new ETFs launched in Canada, the majority of them actively managed and very niche. In the United States, there are now more ETFs than individual stocks, which sounds like something someone made up for effect until you realize it’s actually true.
ETFs themselves didn’t suddenly become the problem – they simply became crowded. No one is launching another plain-vanilla S&P 500 ETF today, because that trade is already saturated and dominated by giants.
Ben Felix has described this wave of product development as ETF slop. I think the idea is broader than ETFs alone, because what we’re really seeing is investing slop, a growing pile of products designed primarily to attract attention and assets rather than improve long term outcomes for the people buying them.
The wrapper may be new. The incentives are not.
An ETF can hold a globally diversified index portfolio at very low cost, but it can just as easily hold leverage, derivatives, options strategies, narrow themes, or single stocks packaged to look simple and approachable even when they’re anything but.
The ticker looks the same either way. The experience for the investor does not.
ETFs no longer automatically mean low cost
One of the more subtle changes in recent years is how wide the fee range inside the ETF universe has become.
Excellent index ETFs still exist with management fees well below 0.20 percent, and those products remain some of the best tools available to self directed investors.
At the same time, many newly launched ETFs now carry fees closer to 0.70 percent, 0.90 percent, or even higher once trading costs and strategy frictions are factored in, which starts to look a lot like mutual fund pricing even if the label on the front has changed.
The danger is that investors continue to associate the word ETF with discipline and efficiency, even when the underlying strategy no longer reflects either.
The ETF wrapper earned investors' trust. Some of what’s being sold inside it doesn't always deserve it.
When choice works against investors
Much of today’s product innovation is built around very human instincts.
Some funds appeal to optimism, the belief that identifying the next big theme will lead to outsized returns. Others appeal to fear, smoothing drawdowns or promising some form of downside protection. Many appeal to income, especially when markets feel uncertain and investors are looking for something that appears more stable.
The common thread isn’t improved outcomes. It’s attention.
More choice often leads to more tinkering, more second guessing, and more opportunities to drift away from a sensible plan, usually at exactly the wrong time. The harder it becomes to separate long term investing from constant product selection, the more likely behaviour starts working against results.
This is how investing slop accumulates, not all at once, but one interesting fund at a time.
The strange reputation of asset allocation ETFs
One of the more ironic side effects of all this is how asset allocation ETFs are often discussed.
They’re frequently described as beginner products or starter portfolios, as though investors are expected to graduate from them once they become more sophisticated and move on to something more complex.
That framing has never sat well with me.
A single, risk appropriate asset allocation ETF already provides global diversification, automatic rebalancing, low costs, and built in behavioural guardrails, all of which are things investors tend to struggle with when left to their own devices, especially during volatile markets.
Adding more moving parts doesn’t make a portfolio smarter. It mostly just creates more opportunities to interfere with it.
Where this leaves me
None of this is an argument against ETFs. It’s really an argument for being more selective about what we expect them to do.
The ETF structure remains one of the most important financial innovations of the past few decades. It improved access, lowered costs, and gave investors far better tools than they had before.
But ETFs are no longer automatically the good guys.
Some remain excellent long term building blocks. Others are simply distractions dressed in familiar clothing.
For most investors, the fundamentals still matter far more than product design. Broad diversification, appropriate risk, low costs, and the discipline to stay invested when markets inevitably test your patience will always matter more than whatever flashy product happens to be launching this quarter.
You don’t need to keep upgrading your portfolio to prove you know what you’re doing. A sensible plan usually does its best work when you leave it alone.
Robb, If it wasn’t for the all in one ETF I probably would not have moved my Mutual Funds over to my current ETF XBAL and XEQT. All I do is add money and let the ETF to it’s thing. All I need to do now is work on my withdrawal strategy which you have already assisted me with.
Thanks Tom, agreed – those funds are complete game changers for investors. All the best!
Excellent article and 100% spot on. Thank you
Thanks Colette!
A nice reminder, Robb.
And you say Asset allocation ETFs are not beginner products or starter portfolios. It’s refreshing that you actually walk the walk here with your own money, even with a larger value portfolio.
Thanks Mark! I get questions about this all the time – breaking apart VEQT to get a slightly cheaper portfolio, or using US-listed funds in an RRSP to save withholding tax.
Listen, if you understand how to do that and are comfortable with the additional steps and complexity – go for it! I’m just saying that an asset allocation ETF gets you 97% of the way there. If you want to try and squeeze out the extra 3%, knock yourself out.
I think the idea is to “Keep it simple”.
My sister has fallen in the ETF mind frame and I cannot talk her out of it. ETF this and ETF that.
I gave her my strategy – simple- BNS Nasdaq Index Fund- made me a lot of money over the last 20 years. Now I am making money on Mackenzie Precious Metals Fund- I invested $250,000.00 in September 2025 at $48.00 per unit – now it is $58.00 per unit. Plus I received $25.000.00 in December 2025 for its distributions.
Simple Investing- I understand this simplicity. When people look at ETF’s they read the prospectus that is like a DREAM.
Excellent article Robb, as most of them are. You illustrate one of the most basic principles of the financial industry, namely that they will always develop new products to make themselves money, and rarely in the best interests of their clients. Private equity, mortgage income funds, and even conventional recommendations for bond allocations fall into this category in my view.
Until now, I have been part of the silent masses who you have helped educate and reinforce the important principles of achieving financial security. Keep up the good work.
I look forward to an article on charitable giving, donation of securities, and use of donor advised funds to dispose of my “legacy “ mutual funds that have too large capital gains to sell!
Hi Neil, thanks for the kind words. I wish more investors could understand that simple doesn’t mean settling for mediocrity. In fact, it’s the opposite. Markets works, and market returns are really good over long enough periods of time. The key is to stick with them long enough to reap the rewards.
As for the charitable giving article, thanks for the nudge – it’s coming this year, I promise!
Just to show you my simple strategy- I follow my Funds Value every day.
One week value change from Monday January 19/26 to Friday January 23- my wealth increase by $16,651.00 in one week.
Hi Rob, another great article.
What are your thoughts on the XEQT index ETF, also mentioned by Tom above. I like the global diversification it provides, that it’s in CAD and the low fees (0.20%). I was looking for an alternative to the VTI which had a slightly higher fee (0.24%) when I last looked and was in USD. I also compared it with the VOO which had the best fee (0.03%) but not feeling like putting all my money in the USA with all that’s going on with our not so friendly neighbour.
VTI expense ratio = 0.03%. Not 0.24%.
XEQT covers the whole world, VTI just the US market. The C$ version of VTI is VUN. For comparing MERs, global ETFs will be more expensive by their nature than ETFs that cover a single market.
I was merely correcting the factual error.
Beyond that there are advantages and disadvantages to each vehicle. Like the benefit of simplicity’s but loss of withholding taxes on top of higher fees if you use XEQT.
Mordko – yep, I’m with you on all that. My response above was to Pete’s original post, not to your first comment.
Hi Pete, XEQT and VEQT are both great options for all-in-one global diversification for about 20 basis points.
Hello Rob
I suggest putting a 100% into the USA.
The USA is growing- new companies are opening factories- as the write offs are 100% in year one.
Canada is falling behind – and at an alarming rate. There is no NEW INVESTMENTS in CANADA,
Some Canadian Companies like GFL are moving their head quarters to Florida,
Canada is dependant on the USA as they are our major source of growth. This major source of growth is being challenged and Canada only solution is words from Carney.
Canada does not attract foreign investment. Our Strick environmental and social rules are a threat to foreign investment.
If you want to invest in Canada- I suggest you buy Canadian Gold Stocks/ Oil and Gas Stocks.
As our MANUFACTING is in deep decline and soon to make us poorer.
Don’t worry about fees – and do not diversify – stay focused on growth. Diversification to me is a GARBABE Pail of Investments that institutions have to unload.
Pay the fees- and get GREAT Returns
There is a lot of truth in your comments. Unfortunately there is a lot of manufactured noise trying to hide the truth and people are making poor investment and other choices due to politics vs. facts and independent thought. Europe is just as, if not more restrictive than Canada and creating new bureaucracies constantly that hurt investments. The S&P is the way to go 100%. Many of those top companies have world wide reach anyway, and cover all asset groups. If you insist on have world exposure, allocate some of your pie to an all world excluding USA etf as well..
Are ETF’s the new cash cow ?
Great premise Robb – the fees being charged for the new ETF’s for “diversification” seems to be another way to make money for these companies.
Glad we have companies like Vanguard and their low fees to lead the way.
VEQT and chill, thank you!
PS: you mentioned in your last net worth report peaking spending far earlier in your life – and attach it with lots of giving and gifts for kids – keen to hear more as very interested in that strategy too.
We have gifted money to our adult kids, depending on their situations in life and how far up the ladder they are.
But, more importantly I feel, we’ve shared lifelong memories for them, our grandkids, and us.
Many years ago my wife and I took Self-Funded Leaves and then took our young family to the south of France where we lived for a year. This was costly-we each lost a year’s salary- and we returned to our jobs both poorer and yet much, much richer.
In the summer of ’24, for our 50th Anniversary, we took our family-now eleven of us in all, including grandkids-back again to the same town where we’d lived-for a two week stay!
In 2019 we took our then 14 year old grandson to the World Junior Hockey Tournament in the Czech Republic (complete with many tours of such places as Prague, Krakow, Auschwitz etc) and other accompanying excursions.)
In 2022, we took our then 14 year old granddaughter for a week in Paris (including such tours of Monet’s Giverny and to Juno Beach, in Normandy) and a week in London (four stage plays, including Shakespeare’s The Tempest at the Globe Theatre, and tours of The Tower of London, etc..)
This summer we’ll take our nine year old grandson for a few days to the Fern Resort.
So, as my wife are soon to be octogenarians, we’ve both gotten and given money, experiences, and memories.
Yes, we have DBPensions, a luxury these days, I well know. Even more importantly, we have enjoyed reasonably good health.
Our three kids all had debt free university educations and yes modest inheritances helped us pay off our mortgage. (Now that was a huge gift. My father in law lived with us for seventeen months after his wife had died. I recall him asking how much I still owed on our mortgage. “$65,000.” Well, before he died in ’03 he told me to take the money he had and to pay it off.
Now, this is just about our journey Ravi, a winding road we’ve travelled by investing bit by bit but in the despised and dreaded Mutual Funds! Somehow, in spite of our mistakes, we’ve made it this far so we must have done a few things right.
Thanks Robb for this great article, and also for your past articles emphasizing the importance of diversification. I do feel sorry for those ignoring this advice.
Heck, even those invested in just the S&P back in 2000 had to wait 7+ years to get back to even only to get hammered again in 2008, and finally recovering in 2013. That is a lonnnng time to wait for some positive returns if one narrows their investments to a single geography. Past history seems to be forgotten at times. Your thoughts are very prudent and well-reasoned. Thank-you.
If the USA geography is weak- I bet you other countries are weak. In the past – 20 years ago I was diversified – holdings in INDIA etc. Then some fancy BNS funds run by a guru- that would constantly change portfolio’s when that fund went into decline.
All this diversification lost me big money. Then I had a meeting with a new BNS advisor who took over my account- she was from Russia.
She told me point blank – where big money is invested- ie: Doctor’s and professionals all invested in the USA- especially the Nasdaq. She also told me she invests in that sector personally.
So “NO BULL” – not even one mention of the deadly “Diversification word. JUST STRAIGHT HONEST TALK- As every Financial Advisor I delt with always lead me to “DIVERSIFICATION”
I made a lot of money from her advice- I could not believe the returns I was now getting- I got used to “LOW RETURNs'” and “LOSING MONEY”-
It is hard to find an ADVISOR like her- she sang a completely different song than all the rest.
You have to remember financial advisors are SALESMEN- with Phrases like “I HAVE A SOLUTION FOR YOU” – NO NO- the Solution is only in their best interest. And as salesmen can persuade you to make bad discissions.
Nearly 60% of stocks that have existed since 1926 have delivered lifetime buy-and-hold returns less than one-month treasuries. Only 4% of those companies are responsible for the net gains of the entire US stock market over that time.
You might take that to mean you should simply avoid those poor performing stocks and focus on the winners, but that’s not the right takeaway because the winners are only knowable in hindsight.
The results help to explain why poorly-diversified active strategies most often underperform market averages – because a concentrated portfolio that misses the big winners will almost certainly underperform the index fund that just owns everything.
Indeed, market returns as a whole are excellent, even though most stocks are losers and very few are winners. Owning the entire haystack beats looking for needles over the long term.
Are you saying that you put everything into the US 20 years ago? How did 2008/2009 treat you?
Hi Robb,
Absolutely bang on with this column today. Thank you.
Doug
Hello Mordko
Yes 100% into The USA market- Nasdaq Index Fund and S&P Funds- both mutual funds. The Index Funds have low MER’s.
I made expectational returns over time and more than doubling my net worth. As I said earlier when I had “Balanced Funds” – i got used to low returns and losses.
When the market flattened in 2008/2009 I lost money from Nasdaq Index and S&P. But I had made a lot of money earlier- so the loss was not bad. IF you put money to work in growth- you get the rewards more than any balanced (bonds) fund. Example I made lets say $400.00 – when 2008/2009 – I lost $150.00. So I am still ahead $250.00.
You will loose money sometime as you are basically gambling if you play the market. To reduce the gambling effect you stick with the USA- a WINNER Country that is BUSNESS Orientated.
Now I have put 50% of my holdings into GOLD Mutual Fund- Mackenzie Precious Metals Fund.
So far I look at my balances every day and see $3000.00 to $6000.00 increases per day.
..
&P
Well, congrats but these numbers don’t stun me. Pretty much anyone consistently invested in the market more than doubled (or tripled?) their money in the last 10 years.
Your maths is a little surprising though. If you invested in Nasdaq and S&P 20 years ago, you would have been well underwater in 2008/2009. Something isn’t quite right.
I think looking at balances every day isn’t a good practice in any way shape of form but I do record annual and monthly changes and over 12 months the “balance” went up by 0.7M. That’s not too far of $3000 a day and is slightly more meaningful than daily fluctuations. But whats important is that its not based on a bet. Its a bog standard diversified 70/30 portfolio. Bets are awesome. Unless they lose.
Now in Gold- Barrick Mining- Wheaton Precious Metals and Mackenzie Precious Metals fund MFC8535) series D.
Cannot believe my daily increase in net worth.
This looks like its going to be a great ride.
I am happy your investments are doing well, JerryT, but I think Outcome Bias is factoring heavily into play.