explaining mutal funds

[KISS_ME]

Was hoping to get some explanation on the fees to a mutual fund. I've found a few resources from google which explains the fees but was hoping to get a few specific questions answered.

Firstly. I understand there is a front load/backload fee (front load for me) each time i throw in money into it. Also in my case there is a MER fee thrown in at year end on towards the entire account balance. So for the math of 6% front plus 2.8% MER would come out to be 8.8% annual fees. Is there something im missing here?? The number seems insanely high. I mean, i need to make 8.8% returns on my money just to break even nevermind making any profit. Am i doing the math correctly or am i getting boned with this investment?

Secondly. What are your thoughts about investing? Im thinking of just self managing my money and throwing it into index companies w/ a few higher risk bets for returns. I dont think the mutual fund route is working too well for me.

[Zewind]

It disgustes me when other Advisors put clients into front loaded mutal funds. My clients are in either DSC (distrubted sales charge, comes with lower MER's) or No load (slightly higher MER).


For your front load they take a cut of the top, but only when you make a contribution. So first year it may be 8.8%, but the next year its only the MER.


If youd like to have a second opinion pop me a PM

[KISS_ME]

Well this is a RRSP so i contribute monthly to this. I would assume that means I still apply to the front load each time?

[e36bmw///]

nm

[leftwing]

Also got to take inflation into account which puts your required return around 10+% which would never happen with a MF.

One thing you could research is the "couch potato strategy." You can buy ETFs that mirror the index, so pretty much no matter what you will equal the index. And the fees are way lower on ETFs. I would definitely manage your own money if you have the time to do a little reading on strategies and the basics. Investopedia is a tremendous source.

[Paul]

Originally posted by Zewind
It disgustes me when other Advisors put clients into front loaded mutal funds. My clients are in either DSC (distrubted sales charge, comes with lower MER's) or No load (slightly higher MER).

If youd like to have a second opinion pop me a PM

DSC = deferred sales charge, as in the charge is on a declining scale. As long as you're holding the fund for 5 years, and don't plan on making additional contributions to it...sure DSC'd funds are fine.

Us "other advisors" use Front End funds because we don't necessarily want a fee to persuade us from making a decision for whats best for the client, i.e.) when the markets are pulling back and we want to trim a position then a Front End fee fund would have no hit in penalty to the client to liquidate that position.

I've never charged more than 2% on a FE fund for any purchase no matter how small.

You must work at Investors Group to think that DSC funds are the shit.

[91_Integz]

Originally posted by Paul


DSC = deferred sales charge, as in the charge is on a declining scale. As long as you're holding the fund for 5 years, and don't plan on making additional contributions to it...sure DSC'd funds are fine.

Us "other advisors" use Front End funds because we don't necessarily want a fee to persuade us from making a decision for whats best for the client, i.e.) when the markets are pulling back and we want to trim a position then a Front End fee fund would have no hit in penalty to the client to liquidate that position.

I've never charged more than 2% on a FE fund for any purchase no matter how small.

You must work at Investors Group to think that DSC funds are the shit.

Exactly!

Rule #1 - do no EVER buy a mutual fund with a Front End Load, or a DSC.

Being fee concious is the easiest way to enhance long run returns. No reason to ever pay any sort of fee when buying OR selling a mutual fund - there are plenty of alternatives out there that don't charge these types of fees.

[KISS_ME]

The load fees are per thr mutal fund and not per the sales advisor right?? Also what is the average fees? Some say 2% sounds like a far cry from my 9%

[atgilchrist]

You're not actually paying 9% in the first year. All fees come out of the 2.8% MER. On a DSC fund, the advisor is paid a large initial commission, and and insignificant trailer. The fund company charges a withdrawal fee on an annually declining basis if you withdraw those funds before 8 years passes. An FEL find pays the advisor a smaller level commission every year as long as the money is managed. The MER fees aren't withdrawn from your account directly, but rather at the fund level before you see your investment returns or statement amounts.

If you are in an advisor fee based structure, you can negotiate with your advisor what your annual fee paid will be, and this would be withdrawn from your account directly, and is tax deductible in a non-registered account. This route is typically cheaper than dsc/FEL management, but advisors typically only work fee based accounts for larger accounts and high net worth individuals.