Author Topic: Help me with this math please - Cdn investing  (Read 4471 times)

Wannabe Mustache

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Help me with this math please - Cdn investing
« on: June 03, 2015, 04:43:49 AM »
Since reading this blog I changed my RRSP from a regular Mutual Fund to TD eSeries mutual funds which have lower MERs.  I diversified using a couch potato strategy so I have 4 funds.  Each fund has a MER of around .33%.

A few weeks ago I went into Scotiabank to discuss my RESP and getting a better fund. It's MER is 2.2% and I was thinking of moving the account to TD eSeries funds but first I thought I would see if Scotiabank had anything similar. The investment advisor told me that if you add up all the .33% MERs they would be almost the same as the 2.2%. 

Does that make sense? As soon as he said it, I thought that can't be right and said something to that effect which he acknowledge but he obvioiusly didn't understand it either.

Would I have to go into each fund and calculate the % of total funds? 

My RESP has about $22,000 in it if that is relevant.

WerKater

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Re: Help me with this math please - Cdn investing
« Reply #1 on: June 03, 2015, 05:01:57 AM »
An MER of 2.2% is insanely high. Stay away from that. Even the 0.33% are high compared to Vanguard funds (but would be reasonable in europe). And no, it makes no sense whatsoever to add up the MERs of your single funds. By the way, usually, we would talk about TER; if I understand correctly MER is only a part of TER.

Wannabe Mustache

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Re: Help me with this math please - Cdn investing
« Reply #2 on: June 03, 2015, 05:33:24 AM »
Thanks for your reply, I knew it didn't make sense to just add them up.  Can you explain why to me please?

As for the .33% - these are still mutual funds but they are index mutual funds. I chose them because I didn't have a large balance and I want to contribute monthly and because, honestly, I'm afraid of trading ETFs myself. 

My RESP (registered education savings plan) for my daughters is over 20,000 so I could go ETFs but since I contribute monthly I would have to change that all up, maybe contribute quarterly.

fb132

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Re: Help me with this math please - Cdn investing
« Reply #3 on: June 03, 2015, 05:42:17 AM »
Thanks for your reply, I knew it didn't make sense to just add them up.  Can you explain why to me please?

As for the .33% - these are still mutual funds but they are index mutual funds. I chose them because I didn't have a large balance and I want to contribute monthly and because, honestly, I'm afraid of trading ETFs myself. 

My RESP (registered education savings plan) for my daughters is over 20,000 so I could go ETFs but since I contribute monthly I would have to change that all up, maybe contribute quarterly.
Investing in ETF's isn't hard, the only annoying part is opening an account with a broker (it can be with the bank or my favorite Questrade). I can tell you by experience, I prefer Questrade since ETF's don't cost anything to purchase them compared to banks who charge 7-10$ per transactions...and if you follow the couch potato model portfolio's, you only have 3 ETF's to purchase with an average MER of 0,19% which is pretty good. If you go with the bank, make sure to purchase ETF when you have a big lump sum or else their transaction fee's will hurt you.

fullpampers

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Re: Help me with this math please - Cdn investing
« Reply #4 on: June 03, 2015, 06:19:27 AM »
I was going to go with e-series too, but then questrade came out with the free-to-buy ETF's, so it only made sense to go with that. Like fb132 said, opening the account is the most annoying part.
I'm in the process of opening an RESP with them and a second RRSP for my girlfriend.

GuitarStv

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Re: Help me with this math please - Cdn investing
« Reply #5 on: June 03, 2015, 06:34:11 AM »
Canadian's pay some of the highest fees in the world for mutual funds.

TD's eSeries is one of the very few available that has a reasonable fee.  The person you were talking to is either an idiot or a liar.  You don't add up the MERs from the different index funds to find the average MER.  If you want to know the average MER for your TD investments you do something like the following:

TD Canadian Bond Index Fund e MER =  .5
TD Canadian Index Fund e MER = .33
TD U.S. Index Fund e = .35
TD International Index Fund e = .51

So if you follow their balanced portfolio (40/20/20/20 split) you're going to be paying:
Portfolio MER = (.5*.4) + (.33*.2) + (.35*.2) + (.51*.2)
Portfolio MER = .2 + .066 + .07 + .102
Portfolio MER = 0.438


That's a far cry from 2.2%.

morning owl

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Re: Help me with this math please - Cdn investing
« Reply #6 on: June 03, 2015, 06:39:09 AM »
The investment advisor told me that if you add up all the .33% MERs they would be almost the same as the 2.2%. 

OK, hold on, is the Scotiabank rep actually saying that if you have (for simplicity's sake) $10k at 2.2% mer then that is the equivalent MER payment as having $2.5k invested in 4 funds at .33% MERs? (First of all, 2.2 / 4 is .55, and second of all, that is not how percentages work!)

A percentage is a percentage -- numerator divided by denominator. If you are paying .33% MER on 4 funds, then add them all up and you are still paying .33% on the total amount.


forummm

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Re: Help me with this math please - Cdn investing
« Reply #7 on: June 03, 2015, 06:56:01 AM »
You don't add the MERs and check out Vanguard's ETFs available to you. Some of them are as low as 0.05%.

Le Barbu

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Re: Help me with this math please - Cdn investing
« Reply #8 on: June 03, 2015, 07:06:40 AM »
Since reading this blog I changed my RRSP from a regular Mutual Fund to TD eSeries mutual funds which have lower MERs.  I diversified using a couch potato strategy so I have 4 funds.  Each fund has a MER of around .33%.

A few weeks ago I went into Scotiabank to discuss my RESP and getting a better fund. It's MER is 2.2% and I was thinking of moving the account to TD eSeries funds but first I thought I would see if Scotiabank had anything similar. The investment advisor told me that if you add up all the .33% MERs they would be almost the same as the 2.2%. 

Does that make sense? As soon as he said it, I thought that can't be right and said something to that effect which he acknowledge but he obvioiusly didn't understand it either.

Would I have to go into each fund and calculate the % of total funds? 

My RESP has about $22,000 in it if that is relevant.

Remember me when I worked for RBC; over a coffee break, a senior manager said "I'll mix a 10% cream and a 2%milk in my coffee so, I'll get a 12%" I facepalmed myself cuz he wasn't joking...This guy gives financial advices for 25+ years...

GuitarStv

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Re: Help me with this math please - Cdn investing
« Reply #9 on: June 03, 2015, 07:18:03 AM »
I like to mix 11 creamers so my coffee is 110% milk.

morning owl

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Re: Help me with this math please - Cdn investing
« Reply #10 on: June 03, 2015, 07:23:18 AM »
If I invest $100 in 20 funds that each pay out 2% dividends, I'll be earning 40% returns! I'll be rich in no time! :)

Retire-Canada

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Re: Help me with this math please - Cdn investing
« Reply #11 on: June 03, 2015, 09:32:09 AM »
The investment advisor told me that if you add up all the .33% MERs they would be almost the same as the 2.2%. 

As noted they are either evil or stupid. Either way not somebody you want advising you.

Wannabe Mustache

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Re: Help me with this math please - Cdn investing
« Reply #12 on: June 03, 2015, 10:59:12 AM »
Thanks all.  I don't think he was a liar, I don't think he understood. I knew it was wrong but wasn't sure exactly why, I thought I would have to go in and calculate with each fund.  Now that I see the mean of the MERs calculated it makes total sense to me. 


RichMoose

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Re: Help me with this math please - Cdn investing
« Reply #13 on: June 03, 2015, 12:57:08 PM »
The investment advisor told me that if you add up all the .33% MERs they would be almost the same as the 2.2%.

This right here is the perfect reason to leave Scotia and manage investments yourself. What a joke!

nobodyspecial

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Re: Help me with this math please - Cdn investing
« Reply #14 on: June 03, 2015, 01:15:05 PM »
The investment advisor told me that if you add up all the .33% MERs they would be almost the same as the 2.2%.

This right here is the perfect reason to leave Scotia and manage investments yourself. What a joke!

I'm not sure if this would be a sell recommendation on Scotiabank stock, or a buy - because they have obviously invented a brilliant new sales strategy

MsSnowBlack

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Re: Help me with this math please - Cdn investing
« Reply #15 on: June 03, 2015, 01:59:11 PM »
Since reading this blog I changed my RRSP from a regular Mutual Fund to TD eSeries mutual funds which have lower MERs.  I diversified using a couch potato strategy so I have 4 funds.  Each fund has a MER of around .33%.

A few weeks ago I went into Scotiabank to discuss my RESP and getting a better fund. It's MER is 2.2% and I was thinking of moving the account to TD eSeries funds but first I thought I would see if Scotiabank had anything similar. The investment advisor told me that if you add up all the .33% MERs they would be almost the same as the 2.2%. 

Does that make sense? As soon as he said it, I thought that can't be right and said something to that effect which he acknowledge but he obvioiusly didn't understand it either.

Would I have to go into each fund and calculate the % of total funds? 

My RESP has about $22,000 in it if that is relevant.

Remember me when I worked for RBC; over a coffee break, a senior manager said "I'll mix a 10% cream and a 2%milk in my coffee so, I'll get a 12%" I facepalmed myself cuz he wasn't joking...This guy gives financial advices for 25+ years...


This is hilarious! It reminds me the article I read the other day in G&M regarding a couple who both have financial jobs but purchased a huge house they can barely cover the mortgage. If they can't manage their own finances, how reliable their advice would be?

Le Barbu

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Re: Help me with this math please - Cdn investing
« Reply #16 on: June 03, 2015, 04:52:44 PM »
I cannot find an advisor who manage money better than me so I got to manage it myself

Kaspian

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Re: Help me with this math please - Cdn investing
« Reply #17 on: June 08, 2015, 01:05:30 PM »
The investment advisor told me that if you add up all the .33% MERs they would be almost the same as the 2.2%. 

As noted they are either evil or stupid. Either way not somebody you want advising you.

Wow--that is either the worst or most devious math I have ever heard of coming from an advisor!  You don't add up the MER of the 4 investments, you really just take their weighted average.  Give TD your Scotia info, get them to move it over. 

Quote
Nigel Tufnel: The numbers all go to eleven. Look, right across the board, eleven, eleven, eleven and...

Marty DiBergi: Oh, I see. And most amps go up to ten?

Nigel Tufnel: Exactly.

Marty DiBergi: Does that mean it's louder? Is it any louder?

Nigel Tufnel: Well, it's one louder, isn't it? It's not ten. You see, most blokes, you know, will be playing at ten. You're on ten here, all the way up, all the way up, all the way up, you're on ten on your guitar. Where can you go from there? Where?

Marty DiBergi: I don't know.

Nigel Tufnel: Nowhere. Exactly. What we do is, if we need that extra push over the cliff, you know what we do?

Marty DiBergi: Put it up to eleven.

Nigel Tufnel: Eleven. Exactly. One louder.

Marty DiBergi: Why don't you just make ten louder and make ten be the top number and make that a little louder?

Nigel Tufnel: [pause] These go to eleven.


nobodyspecial

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Re: Help me with this math please - Cdn investing
« Reply #18 on: June 08, 2015, 05:13:33 PM »
That scene comes to mind every time I hear anyone working in finance talking