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Canadian retail investors are exposed to financial markets that are among the most developed yet poorly regulated in the world. They enjoy an overwhelming supply of products and services to address their financial and investment needs. Advice is a component of this unduly complex marketplace. Canadians historically have chosen to invest and manage their financial decisions with the help of advisors. But things are changing . According to J. D. Power and Associates, one third of full service brokerage clients also do some investing online, and 26% of bank mutual fund investors are also using the online channel.
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For any number of reasons there is an increased interest in Do-it-yourself investing (DIY) .Whether its investment dealer shenanigans, greedy commission- driven advisers, high mutual fund fees, the non-bank ABCP meltdown, the Earl Jones fiasco, poor fund performance or advisor fraud, retail investors are looking at alternatives to the commission-driven advisor channel...
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One of the big issues among
mutual fund investors is that they tend to only look at returns,
particularly short-term returns, when approached by their adviser. Risk
considerations are way in the background until the losses pour in some
time later. During the tech boom some investors held 80-90 % of their
portfolio in “exciting” telecom, Internet and advanced science and
technology funds. In 2001-2002 they plummeted and have not recovered to
this day. A number of funds were shut down or merged out of existence.
BUT the losses didn’t disappear for the hapless investors who were
persuaded to buy them.
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Compounding is the process by
which income is earned on income that has previously been earned. The
end value of the investment includes both the original amount invested
and the reinvested income.
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Turnover is an important measure
in many fields of business. In manufacturing, inventory turns is the
ratio of production cost of sales divided by average inventory for the
period, typically one year. In the human resource field, employee
turnover is calculated by taking the number of positions filled to
replace departed employees and dividing by the average number of
employees for the period, again typically one year. In the first case,
the turns ratio provides a pretty good idea of how assets are utilized
and production cycle time. In the case of personnel management, a low
turnover rate indicates a stable workforce and a high turnover rate
might indicate some internal issues. In either case, the metrics are
useful and indeed are often considered key indicators of organizational
performance. Regrettably, portfolio turnover as defined in National
Instrument NI 81 – 101”Mutual Fund Prospectus Disclosure”, is a lot
harder to interpret and use.
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If you have some important legal work to be done, you typically would refer to a lawyer.
If you're putting up a new house you’d have an architect draw up the plans.
Professionals, who spend their time learning their craft and keeping up-to-date, can
indeed be helpful. The same is true for financial planning and advice, with some notable
exceptions. Not all of us have the time, inclination or knowledge to take care of our own
financial affairs. Survey after survey, has in fact shown that a large number of Canadians
lack adequate financial literacy.
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The DSC is an alternative to a
front-load sales charge where the sales commission is paid at the time
of purchase. The funding for the commission of a DSC sold fund is
embedded in the management fee.
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According to Nielsen Media Research, Canada's mutual fund industry spent $67.3-million on advertising in 2000. That figure plunged dramatically to $13.5-million last year. The fund industry has consolidated, margins have been squeezed and discretionary advertising budgets cut.
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The Management Expense Ratio (MER) represents the annual total of management fees and certain other expenses charged to a fund, expressed as a percentage of the fund’s net assets. Non-MER expenses include brokerage commissions, taxes on distributions and sales loads. While this Document focuses on the dominant and most visible impact on returns, the MER, other costs can be significant. In some cases, they may be larger than the costs included in the MER. The management fee component of the MER is typically calculated and accrued daily and paid to the manager on a monthly basis. It is paid, year in and year out, for as long as you own the fund.
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General: Mortgage Funds Worth The Fee?
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Since the fall of equity markets in 2000, investors have moved to less volatile investments like GICs, bonds and other fixed income investments. With bank deposit and GIC rates so low, mortgage mutual funds with slightly better returns arise as a possible alternative. Combine that with the corresponding rise in real estate prices and you’ve got some increased demand for mortgage fund products.
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Posted by root on Tuesday, May 22 @ 02:15:49 EDT (3980 reads)
(Read More... | 20642 bytes more | General | Score: 3.25)
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