Sep 082015
Color Legend

IN THIS POST, click to jump ahead:

Why use RBC Mutual Funds?

My employer offers contribution matching up to 3% into a group RSP with RBC. Within it I am restricted to owning GICs and RBC mutual funds. If you’ve done any of your own research or read some of my other pages you know that I am not a fan of mutual funds. At first I thought I could just open my own RRSP elsewhere and contribute there, but in doing so I’d give up the 3% salary contribution match.

Second idea. What if I just transferred any contributions from my RBC account into my other RRSP biweekly as they came? Turns out RBC charges $50 to transfer funds, and it will take 2-4 weeks to transfer. Biweekly transfers would cost me $1200/year. Monthly transfers would cost $600/year. And that doesn’t include the opportunity cost of keeping that money out of the market for up to a month.

My RRSP has upwards of 38 years to appreciate(since I’m only 27 right now), so an annual or even bi-annual transfer is almost certainly in my future. The promise of even marginal gains(<0.5%) using ETFs or index funds will make a huge difference over time. In fact here is a quick calculation:

  • $10,000 at 10% compounded 38 years = $374,043
  • $10,000 at 9.8% compounded 38 years = $349,051
  • Difference in return = 0.2%. Difference in cash = $24,992

Compounding interest is a magical thing!

I can’t just let the money sit there and rot away until I accumulate enough to justify a $50 transfer. It’s time to take a close critical look at what my options are. Continue reading »