Buy the company, not the product
Buying the products of financial companies rather than the financial company itself is a common occurrence in today’s market. Below I have listed two real examples of this so you can further understand this point and apply it to your financial lives.
Firstly, we have a well-known mutual fund company that has recently had its stock return over 125% in a 1-year period and over 30% per year over a 5 year period. It has also had a healthy 5-7% dividend yield on top of the yearly price gains. Their lineup featured close to 200 funds, but only 6 of them were over 10% ROI during the same period. Considering these numbers, I would feel more confident buying the stock of the company directly instead of just putting my money in their mutual fund products.
My second example features a typical bank. Often people tell me about their bank GIC paying them 3%. They say that they trust their bank and that they like their products. But I like to point out that if trust is the issue then they should consider buying the bank’s stock which has often produced a 10-15% return, instead of just using the GIC product. This way you are still going with a company you trust, but you will very likely be getting a higher return in the process.
