Showing posts with label mutual funds. Show all posts
Showing posts with label mutual funds. Show all posts
Thursday, February 26, 2009
Welcome Back to 1997
The Juggling Dynamite blog brought this movie clip to my attention. It is interesting to watch at this time now that the stock markets are back to 1997 levels. If we don't learn from history we are...
Friday, April 27, 2007
A Loan By Another Name?
Putting money into things like CSBs and GICs, earning low rates of interest, is "safe"... but at what cost? When one looks at the stock market over the long term it is quite a comparison. It can make a big difference. Lately, I have been spending more time looking into mutual funds and have been surprised by the impressive returns. Its not that difficult to find 10 year average rates of 10 % per year or more.
The other day it occurred to me that when we put our money into safe GICs etc we are really "giving the bank a loan" at a guaranteed rate of interest. Then, I guess...the banks turn around and invest the money in mortgages or the stock market, depending on mortgage rates, and that is how they make their profit. It also explains why the interest rates for "safe investments" like GICs go up as the "lock in time period" increases. It has to do with market variability and probability.
I expect that a probability analysis of the return rates in the stock market or for most stock market mutual funds would show that the probability of making say more than 5 percent increases quite a bit as the time period increases. It is likely a pretty safe bet for the banks.
The other day it occurred to me that when we put our money into safe GICs etc we are really "giving the bank a loan" at a guaranteed rate of interest. Then, I guess...the banks turn around and invest the money in mortgages or the stock market, depending on mortgage rates, and that is how they make their profit. It also explains why the interest rates for "safe investments" like GICs go up as the "lock in time period" increases. It has to do with market variability and probability.
I expect that a probability analysis of the return rates in the stock market or for most stock market mutual funds would show that the probability of making say more than 5 percent increases quite a bit as the time period increases. It is likely a pretty safe bet for the banks.
Thursday, March 8, 2007
About Margot Bai's Guest Post on Canadian Dream's Blog
Margot Bai, author of "Spend Smarter, Save Bigger", made a guest post on Canadian Dream’s blog. I have read the free chapters on her book site and have added the book to my library reading list. Margot’s post makes some excellent points and she is an excellent writer.
When it comes to achieving early retirement, I agree with Margot, that ‘buyer beware applies to financial services’, and that we all "need to educate ourselves". I find that I am learning all the time.
On the subject of mutual funds I have a few additional comments. My mutual funds are not locked in, although there is a fee (~2 %?) if you sell them within the first 3 months. Also, not all mutual funds have high fees. I never buy mutual funds with front or rear charges.
The normal MER is about 2.5 % for "stock picker funds". In comparison, an index fund, one that can only be purchased "on-line" with TD Waterhouse, have an MER of only ~0.35 %. This lower MER is an important difference. It gives these index funds a 2 % edge over "stock picker funds" and other index funds... no matter what the market does.
You can find Margot's post at: http://canadian-dream-free-at-45.blogspot.com/index.html
When it comes to achieving early retirement, I agree with Margot, that ‘buyer beware applies to financial services’, and that we all "need to educate ourselves". I find that I am learning all the time.
On the subject of mutual funds I have a few additional comments. My mutual funds are not locked in, although there is a fee (~2 %?) if you sell them within the first 3 months. Also, not all mutual funds have high fees. I never buy mutual funds with front or rear charges.
The normal MER is about 2.5 % for "stock picker funds". In comparison, an index fund, one that can only be purchased "on-line" with TD Waterhouse, have an MER of only ~0.35 %. This lower MER is an important difference. It gives these index funds a 2 % edge over "stock picker funds" and other index funds... no matter what the market does.
You can find Margot's post at: http://canadian-dream-free-at-45.blogspot.com/index.html
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