Financial Advisors, who are they? Well I’m here to give you the inside scoop! ETFs, S&P, TSX… do these acronyms make you nervous? RRSP, TFSA, RRIF, RESP, index mutual funds… have you broken into a cold sweat yet? Do you find that your financial worries are keeping you up at night? Questions like,“Do I have enough to retire?” “Will I have to work until I’m 70?” “Can I afford to have my first kid or another one?” “Can I afford to buy my first house or my first rental property?” But I have a financial planner! They’re professionals and they’ll take care of all those questions for me. Phew, right? Well, they should be, technically. But how many of you can answer those questions with some sort of confidence based on what your financial advisor has told you? I have heard A LOT of justifications on why “my financial advisor is great!” “They’re friends of the family… we went on a cruise with them… lots of people we know use them… they’re good at all that investing stuff… they have lots big clients so they must be good.” Nothing riles me up more than hearing answers that really have NOTHING […]
Straight Talk About Fees and Penalties on Mutual Funds
Mr. Canadian Budget Binder received a question from one of his readers and asked me to craft a guest post to answer it. Question: Can you explain MER Fees and Penalties regarding investments? What Does MER stand for? MER means Management Expense Ratio. There are a variety of expenses that make up MER. Some are: The fee paid to the fund managers for managing and investing your money Legal and audit fees of the fund Advisor sales compensation and trailer fees (ongoing service fees) Advertising expenses that promote the fund The cost of buying and selling the stocks the fund holds How does this impact my investing return? All published returns for a fund are net returns, after the MER has been deducted. In simple terms Fund A has a return of 10%. Its MER is 2.5%. The net return to the investor is 7.5% Fund B has the same 10% return but has an MER of 2%. The net is now 8%. The lesson we can learn from this is that lower MER’s usually mean more money for the investor all other things being equal. Some investors have focused exclusively on buying investments with the lowest cost. There are investments […]
Reader Question: RRSP’s-The Need To Know Basics
YOUR RRSP QUESTIONS ANSWERED Reader Question: I want to save for retirement. Where is the best place to save for this? I have been told NOT to use RRSP. Can you help? Saving for retirement is a good thing and RRSP’s (Registered Retirement Savings Plans) are a popular tool for doing so. I don’t know the client’s age or his/her income so this answer is predicated on the fact that the client has several months of income in an emergency fund. An emergency fund is a base component of proper planning and should be done before making any RRSP contributions. Also, it assumes the client is making more than $40,000 in income per year, as incomes under $40,000 don’t benefit much from tax savings on RRSP contributions. Below I will try to define some of the Basics of RRSP’s and also illustrate some of the long-term advantages. When Did RRSP’s Begin? RRSP’s first came into existence in 1957 as a government supported effort to help Canadians save for their retirement. Types of RRSP’s There are broadly speaking three main types of RRSP’s Individual RRSP-where the contribution is made in your name and held in your name. Spousal RRSP– […]
