Demystifying investment fund fees

All about loads, fees, commissions, and MERs

When it comes to investment funds, fees and costs can be both complicated and contentious. What’s the difference between an MER and a front-end load? Are fund commissions deductible? What are trailer fees? To help clear up some of the fog, here’s a rundown of how fees and costs are applied in the world of investment funds. READ MORE

Segregated funds offer a guarantee…at a price

The steep ‘peace-of-mind’ premium

Both mutual funds and segregated funds provide investors the opportunity to invest in stocks and bonds managed by a professional money manager. The managers of both mutual funds and segregated funds look to invest the funds contributed by individual investors in a range of investments, depending on the mandate of the fund (e.g, stocks, bonds, or a mixture of both). When you purchase these types of funds, you are pooling your money with other like-minded investors to achieve a desired investment return. The difference between the two types of funds lies in how they are structured. Let’s look at mutual funds first: READ MORE

Is being a couch potato financially healthy?

Active versus passive investment styles

A friend of mine says she invests in a “couch potato portfolio,” and her returns are higher than my portfolio of mutual funds, which the company says is actively managed! I’m not sure I understand what a “couch potato” portfolio is, or whether it’s something I should be using. Can you help?

Asked by C.S., Toronto, Ontario

The “couch potato” portfolio is so named because it takes a “passive” approach to investing. It is predicated on the theory that markets are efficient, or smarter, than any single person. Studies have shown that the passive, or couch potato, investment strategy on average beats about 80% of professional money managers over time, so yes it is very possible your friend’s portfolio outperformed yours. READ MORE

Teed off with ‘T-series’ funds

There are better ways to generate retirement income

“T series” mutual funds, so named because they are supposedly “tax efficient,” have become a popular type of mutual fund for investors seeking a steady, high annual cash payout. The payout rate is given in the name of the fund. For example, a “T6 series” fund pays out at a 6% annual distribution rate. Now, most funds do not produce enough income to pay out 6% distribution. So how do they get such a high payout rate? Simple: They give you your own money back. Is it worth it? READ MORE

Don’t be seduced by the high-yield come-on

You’ll see them at your local bank branch, those amateurishly handwritten whiteboard signs advertising a $700 or $800 monthly income on a $100,000 investment. That’s equivalent to around a 9% annual yield. With your average bank savings account paying some fraction of 1%, that yield looks mouth-wateringly good for yield-starved investors. Until you ask someone about it. At which point you’ll learn the truth.