Avoid Mutual Fund Fees
It is an open secret that mutual fund fees can cost you quite a fortune in one lifetime, especially in Canada where fees are even higher than other industrialized countries. Given the fact that there are other low-cost options available like ETFs, investors often forget or ignore what they are paying in the long run.
Toronto-based digital wealth management firm Nest Wealth released some cold, hard figures to put the fees you will be paying holding mutual funds into perspective. For example, if you take a 25 year-old investor starting with a $10,000 investment and adding $5,800 for the next 39 years, at a rate of 6.5 percent return and 2.35 percent mutual fund fees, the investor would have a balance of $229,000, but the fees paid would be $323,654.50.
With those kinds of fees, it is possible to buy a small house in many Canadian cities. It always pays to pay attention to what you are paying for fees and what you can do about it. A study released by Environics Analytics found out that the average Canadian household’s liquid assets amount to $229,000. If you are paying annual 2.35% fees on investments, it will definitely take out a good chunk out of your retirement, considering many ETFs fees are below 0.50 percent.
Nest Wealth offers some neat calculators and portfolio-building tools on its website. You will be able to visualize how different fees or mutual fund MERs affect your investments in dollar terms and what kind of customized portfolios are suitable for you based on your scenarios.
Regardless, you are building your portfolios online or face to face with a qualified financial professional, always do your own research and make best-educated decisions that suit your needs and lifestyle.