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There's a mathematical formula that much of the investment industry wants to keep secret: Market gains minus fees equals returns to investors.

The formula is so simple, and yet so subversive because it could cause you to question some of your investments and the dealers through which you buy them. Cost is not the only consideration in choosing what to invest in and where to buy it, but savvy investors know it's a big factor.

Let's get you started thinking about costs by looking at some of the top investing bargains. You'll find these suggestions useful if you're making investment decisions for your registered retirement savings plan, and all year long.

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Bargain No. 1: Low-cost mutual funds

A very small number of fund firms now offer a D-series of their lineup that is specifically targeted at do-it-yourself investors who neither receive nor want advice. The benefit of D-series funds is that their fees are not weighed down by trailing commissions, which are used by fund companies to pay advisers who sell their products.

Companies offering D funds include blue-chippers such as Phillips, Hager & North, Beutel Goodman and McLean Budden, all of which have some very competitive funds in their lineups. Royal Bank of Canada's huge mutual fund arm has a D series that strips out most but not all trailing commissions. D-series funds are also suitable for use in fee-based advisory accounts. Note: Mawer and Leith Wheeler are two other firms that sell funds ideal for DIY investors.

Bargain No. 2: Three bond funds

The first bond fund bargain offers a defensive way to get some exposure to the bond market at a time when interest rates are expected to rise and put downward pressure on bond prices. It's the Claymore 1-5 Year Laddered Government Bond ETF , which has a management expense ratio of just 0.16 per cent. This is a very strong alternative for the average small investor to building a ladder of one- through five-year government bonds.

If you prefer mutual funds to exchange-traded funds or don't have a brokerage account needed to access ETFs, then consider two funds that combine very low costs with top returns over virtually all time frames. One is Phillips, Hager & North Bond and the other is Beutel Goodman Income (note: we're talking about the D-series for each). The people running these funds flat out know what they're doing, and the returns they generate are eroded by far lower fees than almost all competitors charge.

Bargain No. 3: A balanced fund

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All you need for a fully diversified RRSP portfolio is in Mawer Canadian Balanced RSP, which is made up of seven domestic and global stock and bond funds in the high-quality Mawer family.

At 0.98 per cent, the management expense ratio is less than half the average 2.11 per cent for the five largest funds in the global neutral balanced category. You could own an ETF portfolio for roughly half of what this Mawer fund charges, but you'd have the cost of buying and rebalancing your ETFs. Mawer does it all for you in way that generated average annual returns of 8.3 per cent over the past 20 years.

Bargain No. 4: Another balanced fund

CI Signature High Income's management expense ratio of 1.58 per cent sounds high by the standard of the funds mentioned above. But it's actually quite a bargain because it includes compensation for investment advisers, whereas the previously mentioned funds do not.

Beyond the fee, what distinguishes this fund is a long record of returns that are consistently above average in the global neutral balanced category along with volatility that is well below average.

Bargain No. 5: Low-cost ETFs

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Exchange-traded funds rule for low-cost investing, and Vanguard ETFs are consistently among the cheapest available. That's why Vanguard's funds are starting to take market share away from more established companies in the ETF world.

Vanguard ETFs are listed on the New York Stock Exchange, which means your broker will charge you foreign exchange fees to buy them. You'll have the offsetting benefit of paying ongoing ownership fees that are outrageously low. The Vanguard Total Stock Market ETF has a fee of 0.07 per cent and gives you exposure to both large and small companies in a single package. That's $7 (U.S.) in fees per $10,000 in invested.

Bargain No. 6: More low-cost ETFs

Listen up if you're avoiding ETFs because you invest regularly and don't want to continually pay brokerage commissions. Using the pre-authorized cash contribution plan offered by Claymore Investments through a variety of brokerage firms, you can make repeated purchases of Claymore ETFs at no cost once you've bought your initial position.

Claymore also offers no-charge dividend reinvestment for its ETFs, and a no-charge systematic withdrawal plan. Caution: Check with your broker before investing to see whether it offers these Claymore programs. Not all firms are on board.

Bargain No. 7: Low-cost online brokers

Questrade and Virtual Brokers are the low-cost leaders among brokers with a wide mix of registered and non-registered account types. They offer commissions for online stock trades that range from $5 (Canadian) to $10 for all customers, not just those with big accounts.

Most brokers now charge just below $10 for trades if you have $50,000 in assets; if not, then you'll pay $19 to $29. A unique exception is CIBC Investor's Edge, which charges $6.95 per online trade to customers who maintain $100,000 in total business with Canadian Imperial Bank of Commerce (brokerage plus banking).

Want to know how brokers compare on fees and other features? Click here to check my latest ranking of online brokers.

Bargain No 8: Cheap index funds

Every cost-conscious investing writer has good things to say about the TD e-Series of index funds, but they remain obscure for two reasons. One, TD Asset Management spends zero to market them. Two, you have to buy them online from TDAM or TD Waterhouse online brokerage.

The appeal of the e-Series is that they nail the prime attribute of an index-tracking investment - low fees. Management expense ratios for the e-Series range from 0.31 per cent to 0.5 per cent, which is strikingly close to ETF territory. In fact, the e-Series reminds me of what ETFs used to be: A compact, no-frills collection of portfolio-building components for smart investors.



TOP BARGAINS - WHAT YOU NEED TO KNOW



Savvy investors know fees are a big factor in deciding what to invest in and where to buy it. Here are some of the top investing bargains. You can learn more about these specific mutual funds by doing profile searches for them on our website.



Low-cost mutual funds for DIY investors: D Series funds



-Notes: PH&N's D series funds have a $5,000 minimum investment, while RBC, Beutel Goodman and McLean Budden have a $10,000 minimum.



Three bond funds: Beutel Goodman Income, PH&N Bond and Claymore 1-5 Yr Laddered Government Bond ETF

-Notes: No investment minimum for the Claymore bond ETF, but you must pay a brokerage commission to buy and sell it.



A cheap balanced fund: Mawer Canadian Balanced RSP

-Notes: Available through online brokers with a $5,000 minimum and directly through Mawer if you live in B.C., Alberta, Saskatchewan and Ontario and have a minimum $50,000 to invest.

Another balanced fund: CI Signature High Income

-Notes: The minimum upfront investment is $500; available wherever funds are sold.



Low-cost ETFs: Vanguard

-Notes: These ETFs are U.S.-listed, which means you're exposed to the ups and downs of our dollar against the U.S. buck and currency conversion costs.



More low-cost ETFs: Claymore's PAC plan



-Notes: Not all firms offer this program, which allows you to make regular purchases of Claymore ETFs without paying commission fees.



Low-cost online brokers: Questrade and Virtual Brokers



-Notes: Low commissions mean you don't get a full selection of planning tools and research.



Cheap index funds: TD's e-series



-Notes: The upfront minimum investment is just $100, and you pay nothing to buy or sell.



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Bloggers Choose Their Top Bargains

Canadian Capitalist

- iShares S&P/TSX 60 Index Fund : An ETF with an MER of 0.17 per cent.

- Vanguard ETFs: Vanguard Total Stock Market ,Vanguard Emerging Markets and Vanguard Europe Pacific have some of the lowest MERs around.

- Online brokers: Even bank-owned brokers now charge $10 per trade for many clients.

Million Dollar Journey

- TD e-series funds: Among the lowest cost funds in the industry.

- Dividend reinvestment plans: A way to buy individual dividend stocks without commissions.

- Low-cost brokers: Questrade has been joined by many larger firms in offering low commissions.

Money Smarts

- Discount brokers: Commissions as low as $5 allow small investors to buy ETFs and stocks.

- TD e-series funds: The cheapest and easiest way for Canadians to assemble a low-cost portfolio.

- Tax sheltering: RRSPs, RESPs and TFSAs keep the taxman away, which adds to your return.

Larry MacDonald, Canadian Business

- DRIPs: Buy shares directly from companies - no commissions.

- Interactive Brokers and Questrade: IB has the cheapest commissions for non-registered accounts, Questrade the cheapest for registered accounts.

- Low-cost fund families: Companies such as Leith Wheeler, Mawer, PH&N and Steadyhand all have low MERs, sell direct to the public and often provide free advice to clients on asset allocation, etc.



You can find out more about investing bargains by checking a discussion I had with readers on my Facebook page.

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About the Author
Personal Finance Columnist

Rob Carrick has been writing about personal finance, business and economics for close to 20 years. He joined The Globe and Mail in late 1996 as an investment reporter and has been personal finance columnist since November 1998.Rob's personal finance columns appear in The Globe on Tuesday and Thursday, and his Portfolio Strategy column for investors appears on Saturday. More

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