May 242018
 

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So you are ready to start investing in Exchange Traded Funds (ETFs). You understand how mutual funds are costing you tens of thousands of dollars and it’s time to take control of your own future. Or maybe you are a crazy gambler and want to try your hand in the stock market. Either way it’s time to actually open an account. But where should you start?

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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 »