Breaking free of investing costs

Details

Published on Friday, January 22, 2016

Article submitted by Brian McCannell, CFP, PFP, Financial Planner & 

Scott Dyke, PFP, Financial Planner – Investment and Retirement Planning, Royal Mutual Funds Inc.

There are many different investment options available to help you reach your financial goals. It is important to understand the costs involved and how those costs impact your investments. Not all investments have the same fee structure and some may affect your return more than others.

“When it comes to your investments, it is important to be aware of the associated costs,” said Jason Round, head, Financial Planning Support RBC Financial Planning. “The less you pay for your investments, the more you keep, making the cost of investing something you should try to minimize.”

When thinking of mutual funds, Round highlights three costs to look for:

• Management Expense Ratio (MER): This is the total of the management fee, administration fee and GST/HST charged to a mutual fund each year. All mutual funds have an MER.

• Sales commissions: Some mutual funds charge a ‘load’, or one-time fee paid to an advisors’ firm for selling a mutual fund. The load might be charged when you buy the fund, or when you sell it.  Most mutual funds offered by banks do not have load charges.

• Short-term trading fees: Mutual funds intended for long-term investing typically charge fees if units are redeemed within a short time period (e.g. 30 days). The proceeds of this fee go directly to the fund, benefiting the remaining unit holders. The fee is designed to deter excessive trading and offset the associated costs. 

“We encourage clients to ask questions about exit fees, disclosure, total costs of ownership, fees for financial planning services and commissions – the more you know, the better informed you will be about your investments,” added Round.

For more information, visit http://www.rbcroyalbank.com/products/mutual-funds/index.html.