I know their fees is high , but the return was 9.08 (average 5 % over years ) this year and already subtract the management fees, I already had 5000 in that fund and it gained to 5500 then I sold it to more aggressive fund . for some one like me who dont have a lot of money it is hard to have a devirsed portfolio without the help of mutual funds.
Do you have any better investment that give me a better return for the same risk level ? I personally couldn't fund some thing better than mutual funds , there are some ETFs there , but most of them their risk is above average.
Did I miss some thing ? can you show me in numbers how I am wrong if you invest it for 5 years ?
Yep you missed something.
Your current deal is 3% fixed for 12 month and prime + 1% variable rate afterwards.
A HELOC locked into fixed mortgage rate right now is prime + 1%. At current rate, you get a fixed 4% per year for the next 5 years. (Better if you can lock in more than 5 years, which is what I did. 10 years, though I am not sure if HELOC locked mortgage is the same as a traditional mortgage where the term is legally required to be renewed every 5 years). At best, your scheme gives you a 3% for 1 year and maybe 4% for the 4 years after. So my scheme, you are paying 1% to insure that your rate doesn't go up for the 5 years of your investing period. This is basic risk free reward calculation on borrowing.
The risk of prime rate going up is very high at the moment. US fed taper is happening as we speak. FOMC meets about 8 times a year, assuming that they plan on reducing $10B per meeting, it means that they plan on tapering to $0 QE by the end of 2014. 2015 is when we see interest rate actually rising i.e. the rate that affects prime. So by this risk reward analysis, it is best to lock in a 5 year fixed rate than a variable rate if you plan on doing rate arbitrage for 5 years.
So the above is the analysis on the borrowing side which you probably have not done yet. Below is the analysis on the buying side. Let me destroy it for you.
I haven't read too much into the mutual fund past performance that you provided but 8.9% frankly laughable. The S&P did ~27% increase while the TSX did ~8.5%. Your fund did 8.9%... asset wise. Did the nice mutual fund guy told you the performance is asset wise? Unit wise, if you go back to 2007, the unit still cost $18 which is the same cost as today at $18. Which means that the asset growth has been due to dilution of issued unit due to increased investment from retail investors.
All the technical jargon aside, if there's one thing that you get out of this is this (and let's use their own graph). Dec 2007, the fund's asset is valued at $40,000 based on their graph. Today it is valued at $47,000. That's only a 17.5% increase over the last 6 years. That's a mere 2.7% per year growth. It is just a fund that tracks the index funds and took 2% from you. SPY that tracks US S&P, in the same period, gained 20%.
Listen to the others. Do the couch potato and don't let your 2% ripped off from you.
Your mind is already made up so I'll just say this with the hope that it'll sink in a bit later to help you. A decades ago, I'd think like you and without the benefit of the Internet to help me sort through my strategies. Here are the wisdoms that is imparted through this whole thread.
-You are borrowing too much vs your disposable cash according to the few financial tidbit you've disclosed.
-10% is not guaranteed return. I'd say, in my experience, mutual funds does 10% return rarely and this is probably going to be the best annual return for this mutual fund for a while.
-2% MER is too high.
