How did you learn the stock market?
- Thread starter Heat
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Not sure if it is 6% but it is high (those investment managers make good money) and that is why mutual funds underperform the index.
Honestly, this is strategy would probably outperform most other active managers who don't know what they're doing. Canadian banking is so uncompetitive, heavily regulated and CDN banks are so risk averse that they hardly stand a chance of failing.
Not foolproof by any stretch but if one is lazy, not a bad approach indeed.
Ottawa will never let any of the "Big 5" go down the drain like they did with NORTEL. It is a great strategy for lazy guys (like me
) or people busy raising fat children.Pretty close if you invest in those loaded fund, particularly DSC/back-end funds that are common to mutual fund and insurance companies.
You may get 10% free switches to the front-end version annually without paying the "penalty" for redemption but the higher MER and trailer fees up to 1% to your advisor will definitely eat up the performance. And you are not necessarily get the service you need and deserve from the advisor.
Simply put, treat DSC & Trailer fees as saturated fats you consumed in McDonalds!
Another option could be you invest in front-end funds and the advisor will get the cut, usually 5% for 1st year and decrease to 0% say 3 years from now. But again you will pay the same trailer fee and high MER.
There're F units mutual funds available at those mutual funds companies that are less expensive but the fee-based, not fee-only compensation billed by your advisor cancelled whatever the cost you save.
As far as the mutual funds sold at the banks, the bank manufactured funds are no load but beware of those wrap accounts. These are pretty expensive, "over the counter" financial "solutions" solicited by the in branch advisors without providing much advice according to your specific needs.
BTW, they are inexpensive compared to the segregated funds/variable annuities solicited by your advisors.
mutual fund commissions
Most investors will pay in the range of 1.5-3% in annual management expense fees from the gross returns of their mutual funds and from this, the mutual fund pays an annual service or trailer fee to the adviser [if applicable]. The annual management expense fee also allows the fund company to gradually recoup the 5% they are out of pocket from the initial commission they paid. The investor doesn't pay that 5% commission right out of their pocket up front but they ultimately do pay in the higher annual fees that adviser recommended funds come with and this is what you should be considering if you are deciding to use an adviser vs. doing it yourself.
D.
If an investor commits to a back end or deferred sales charge fund then he is expected to hold for at least 6 or 7 years before redeeming without any charges and these purchases pay a gross commission of 5% to the advisor's company which then passes on 25-75% to the adviser depending on the firm.
Most investors will pay in the range of 1.5-3% in annual management expense fees from the gross returns of their mutual funds and from this, the mutual fund pays an annual service or trailer fee to the adviser [if applicable]. The annual management expense fee also allows the fund company to gradually recoup the 5% they are out of pocket from the initial commission they paid. The investor doesn't pay that 5% commission right out of their pocket up front but they ultimately do pay in the higher annual fees that adviser recommended funds come with and this is what you should be considering if you are deciding to use an adviser vs. doing it yourself.
D.
How did I learn.
The hard way.
Reading about it. Taking the Canadian Securities Course (a must for a person serious about learning). And actually investing (i.e. experience).
It took me about 12 years to learn the best way to do this. Without the 12 years of experience I wouldn't have learned why the best way to invest works.
Warren Buffet and Benjamin Graham have said it better than I, but it boils down to this. Buy the market as cheaply as possible and hold for the long term.
Otherwise, read the Intelligent Investor. Just remember what they say about trying to replicate what Buffett does.
The hard way.
Reading about it. Taking the Canadian Securities Course (a must for a person serious about learning). And actually investing (i.e. experience).
It took me about 12 years to learn the best way to do this. Without the 12 years of experience I wouldn't have learned why the best way to invest works.
Warren Buffet and Benjamin Graham have said it better than I, but it boils down to this. Buy the market as cheaply as possible and hold for the long term.
Otherwise, read the Intelligent Investor. Just remember what they say about trying to replicate what Buffett does.
