What Is Your Mutual Fund Actually Costing You

Mutual Fund Fees You Pay

First Published Date: Dec 5, 2008.

These days you will hardly find an investor without having at least one mutual fund. Most of us never pay any attention to mutual fund fees, which can be very confusing and hard to grasp. Many of us do not realize how much of our returns can be evaporated by these fees. I consider one of the best features of mutual funds is that fund companies camouflage fees as a percentage of assets.

There are 3 basic categories of mutual fund fees – management fees which is known as MER, sales fees and special fees. I will discuss the only MER because regardless of what type or class fund you buy, MER is a built-in feature and it will be always there.

MER stands for Management Expense Ratio and expressed as a percentage of fund total value. MER is made of sales, administration, marketing, legal, accounting, reporting and portfolio management costs and charged directly to the fund, thus reducing the value of your investment. You will never see any statement or transaction or invoice or you will never write a check to pay MER as fund companies deduct this cost from funds per unit value every day, making it invisible and hard to track. MERs can run from ?% to over 3% or even more.

Let’s say a fund charges an MER of 2.5% which may sound harmless but when you look at in terms of real numbers, it looks scary and hard to believe. Suppose you have $100,000 in a mutual fund which charges 2.5% MER. Assuming you are 30 and will have this $100,000 invested till you reach 70. How much is your cost? The answer is a whopping cost of $100,000 ($100,000 * 2.5% per year for 40 years) I used very simplified calculations and omitted many other factors.

Remember, there are other costs and taxes to pay as well. Be a smart investor by educating yourself and avoiding fees and expenses. There are a variety of options these days and always do your homework before investing and seek help from someone whom you find knowledgeable and trustworthy.

RBC Launches 5 New ETFs

New Dividend ETFs From RBC

First Published Date: November 16, 2014

RBC Global Asset Management launched 5 new dividend ETFs targeting various sectors in the international markets. These ETFs offer monthly income, along with broad international diversification and reduced foreign currency risk.

Let’s look at these 5 ETFs in brief:

RBC Quant Emerging Markets Dividend Leaders ETF (TSX: RXD, MER: 0.64%) – Holds dividend-paying companies in the emerging markets that have growth potential based on modified cap weighting methodology. The ticker symbol for the US$ version is RXD.u.

RBC Quant European Dividend Leaders ETF (TSX: RPD, MER: 0.49%) – Holds dividend-paying companies in the European markets that have growth potential based on modified cap weighting methodology. RPD is the first European dividend trading on the Canadian stock exchange that is not hedged. The ticker symbol for the US$ version is RPD.u.

The three other ETFs are currency-hedged. These are:

RBC Quant U.S. Dividend Leaders (CAD Hedged) ETF (TSX: RHU)

RBC Quant European Dividend Leaders (CAD Hedged) ETF (TSX: RHP)

RBC Quant EAFE Dividend Leaders (CAD Hedged) ETF (TSX: RHI)

Altogether, there are 8 RBC Quant Dividend Leaders ETFs and 17 total ETFs offered by the RBC Global Asset Management.

How do the fees for these MERs compare? Let’s look at RBC Quant Emerging Markets Dividend Leaders ETF and some other emerging market dividend ETFS. The SPDR® S&P Emerging Markets Dividend ETF charges 0.59% MER, iShares Emerging Markets Dividend ETF charges 0.68%, and HAJ Horizons Active Emerging Markets Dividend ETF charges 0.80 percent. As you can see, RBC’s MER is fairly similar with other ETFs for the same emerging market dividend ETFs.

Always do your research before buying any investment products and seek professional advice if you are not comfortable picking your own.

Barack Obama and Copenhagen Summit

Copenhagen Summit Roundup – Part 3

Published Date: Dec 28, 2009

Many people who followed the United Nations Summit on global climate change are aware that, at the last moments before the conference closed, United States President Barack Obama flew to Copenhagen, Denmark, where the summit was taking place.  However, his actual role is not so well understood.  Did he help the talks?  Or, as many suggest, were his efforts more for show.  Or, perhaps, more realistically, somewhere in between?  Whether or not President Obama’s role had any real and meaningful effect on the Copenhagen Summit probably depends on your perspective and stance on the issue itself.

White House reports coming out of Washington, D.C., state that President Obama’s efforts demonstrate a lofty diplomatic achievement.  Surely, Obama’s speech at the Copenhagen Summit did not mince words as he criticized the lack of a reasonable agreement between the meeting nations.  Perhaps his boldest move was reports that Obama ‘crashed’ a meeting that was occurring between China, Brazil, India and South Africa – four countries that United States representatives had been trying to meet with.  When he noticed that the four countries were meeting, Obama apparently stated something to the effect that, ‘we’ve been wanting to meet with all of these countries, and now here’s our chance.’

Although many concede that the final agreement is far from perfect, journalist and Copenhagen Summit watchers from around the world were pleasantly surprised to hear that, after two weeks of discussions that had basically been stalled, in fact quite stuck, any agreement had been made.  Barack Obama, according to his and the White House public statements is taking credit (albeit according to his own words, Obama admits that his contribution was ‘modest’) for pushing through what many had figured was the impossible; ‘enticing’ China to agree to accountability measures that it had so vigorously resisted.

The final agreement, as noted by climatologists who watched the Copenhagen Summit closely, falls far short of what needs to be done to halt global climate change.  Even so, that point may be mute as several countries are threatening to veto the accord, effectively making it null and void; representatives from Venezuela, Bolivia, Sudan, Saudi Arabia and Nicaragua particularly are incensed that the United States may have forced their, and China’s hand.  If vetoed by those countries, some may, in the end, consider the entire Copenhagen Summit a failure.

Even Barack Obama admits that the long-term picture may be bleak as, to paraphrase his words, ‘by taking one step forward, the frustration and resentment may make us take two steps back.’  Perhaps, however, the bigger step forward was the actual dialogue and contention that all participating nations agree to a transparent process for analyzing progress toward emissions reductions.  Ultimately, only the near future will tell us if the accord will ‘stick,’ and only after decades of living with the ramifications, negative and positive, of the Copenhagen Summit will tell us what the true results of the efforts of key players like U.S. President Barack Obama ultimately played.  Maybe then, Barack Obama can claim he ‘won’ a battle toward reducing global carbon emissions.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the Thegreenlivingblog.com website (however, I will still hold the domain). I will gradually move all articles from this site to A Dawn Journal. This article originally published on the above website on Dec 28, 2009.

Copenhagen Summit, America, And China

Copenhagen Summit Roundup – Part 2

Published Date: Dec 26, 2009

The landmark United Nations summit on climate change that took place in Copenhagen, Denmark, earlier this month is still causing conversation and debate.  Much of this debate was around the conflict between two major players; the United States of America and China.  In a nutshell, the discussion centered around the two countries with the highest per-capita carbon emissions on the planet.  At the core of the debate was the insistence that all countries submit to outside verification, or external monitoring, total emissions.  Still, China is hesitating over this part of the agreement.

What led up to this part of the summit?  Many blame the fact that the United States, up until this summit, had universally rejected many of the climate change accords that had been previously negotiated (at the Kyoto agreements, for example).  Despite the changing attitude toward the United States, in general, toward a more open approach, there is still a bit of ‘bully’ mentality perspective; for example, surveys taken world wide have indicated a more positive view of U.S. Politics and world stance.  But, even so, the U.S. tends to come across as an overbearing force by telling other countries, new to the worldwide power stage (aka China) what to do.

This, of course, set up some interesting discussions.  It can be argued that China has, in some way, surpassed the United States in an economic sense.  China’s economy has been growing, while the United States economy is still in recovery from what some describe as a light depression.  Considered a ‘developing’ country by some standards, China argues that in order to sustain their economic growth and position, they must be given some flexibility when it comes to emissions.  The United States, long the biggest user (per capita) of natural resources, is in no position (paraphrases China) to dictate a reduction in emissions.

In the end, the United States made a situation during the Copenhagen summit that forced China’s hand.  It was, some say, a strategic move by the U.S.  And, others say that it is a bit of manipulation.  Either way, the result was that the U.S. would contribute more than $100 billion to poor countries, via an international fund.  But, there was a catch (here’s where the manipulation might have been involved) in that any major countries signing onto this assistance would be required to to commit to a reduction in carbon emissions by signing a binding agreement and submit to verification by external means or so-called ‘transparent verification.’

The assistance ‘catch’ specifically mentioned “all major nations,” and all who were involved in the discussions, and close observers knew that “all major nations” really meant China.  From the beginning of the summit, China steadfastly refused ‘transparent verification,’ and so this deal was a way to put to rest some of China’s stubbornness on this part of the agreement.  Nevertheless, the end result was what most saw as an important facet to the entire Copenhagen summit.

But, there’s some bad news.  Reports are that China is quite angry over having been ‘forced’ into this particular agreement.  Some Chinese officials made statements that these demands were, in fact, an ‘insult’ to China and might even be considered a violation of China’s sovereignty and national security interests. Another report states that China, more or less, snubbed bilateral discussions that had been previously arranged with President Barack Obama. 

Only time will tell if China and the United States will be able to find some common ground on the talks that started at the Copenhagen summit.  Needless to say, decades may pass before we know the ultimate result of these accords; both environmentally and politically.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the Thegreenlivingblog.com website (however, I will still hold the domain). I will gradually move all articles from this site to A Dawn Journal. This article originally published on the above website on Dec 26, 2009.

Copenhagen Summit – Only The Beginning

Copenhagen Summit Roundup – Part 1

Published Date: Dec 22, 2009

Dubbed the largest environmental meeting in the world, the United Nations Climate Summit that took place in Copenhagen, Denmark, from December 7 thru December 18, 2009.  With almost 200 (192, to be specific) nations from around the globe gathering to discuss possible solutions to the state of our environment, the summit has been getting intense attention since its opening ceremonies, and will surely be examined as the years go by.

The main issues that the climate summit tackled were related specifically to reduce carbon emissions, believed by the vast majority of environmental scientists to be a major contributor to negative changes that we’re seeing in today’s climate, due to human-kinds activity and use (and/or abuse) of natural resources.

The challenge is finding consensus between the 192 countries related not only to the definition of the issue at hand, but the possible solutions, and (more complex) each nations’ role in the solution.  Finally, the summit had to agree on the verbiage of the agreement – this is where much of the debate occurs as all of the countries involved in the summit had to come to a mutual understanding, and stated in a way where they could all agree.

Key challenges also included core issues; carbon emissions, of course, being the main core issue.  Other core topics included the developing worlds’ use of carbon emitting resources, how might a global industrial system operate when considering a reduction of carbon emissions, and deforestation, especially in the rain forest regions of South and Central America.

Trying to agree on any one of these points would be difficult, so you can imagine how heated some of the debate might have gotten when factoring all of these highly complex topics.  Most of the critical debate came from the hardship of finding common ground between developing countries (China, for example) who have quickly growing economies, and are, as a consequence, emitting extremely high levels of carbon-based particles into the environment.  At the same time, there are so-called developed countries (the United States of America), for example, who argue that developing countries must curb their carbon emissions, while (at the same time) some developed countries (and the United States is an example of this) emit high carbon emissions per capita.  Therefore, must of the discussion resembles a finger-pointing type of scenario. 

Ultimately, the summit did result in a lengthy written agreement – critics state that the accord does not go far enough.  Basically, the agreement was to work toward reducing carbon emissions allowing each country to set their own so-called ‘green-house gas’ reduction goals for 2020.  In addition to the goal to reduce emissions, other parts of the agreement state, essentially, that an emissions verification (for accountability purposes) system will be setup, and that deforestation (the stripping of trees in fragile ecosystems like the rain forests in Central and South America) will also be reduced.

Although some may be disappointed by the, let’s be honest, highly limited reach of the summit agreement, the good news might be that the problem of global climate change was recognized as scientifically valid, and deemed an extremely important priority for public health.  In addition, another positive outcome was that all countries agreed that global warming should be limited to 2 (celcius).  Additional talks and actions will follow, and this summit was really only the beginning of a world-wide look at this global issue.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the Thegreenlivingblog.com website (however, I will still hold the domain). I will gradually move all articles from this site to A Dawn Journal. This article originally published on the above website on Dec 22, 2009.