July 20th, 2010 by 1stmilliondollar
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When I was kid, my mom always told me to invest in real estate. Why? She said that the number of people is always increasing; while the land is not. It means that the house price will always go up. Well, we live in Indonesia, a developing country; so population was (and is still) growing.
Now, we realized that it is not true that house price will always go up. The Big Picture has shown a chart of global housing price. It compares housing price in a couple of countries from 1997 – 2008.
As you can see in the picture below, Germany and Japan has been experiencing decline in house price in the last 10 years or so. To me, it is really scary.
July 9th, 2010 by 1stmilliondollar
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There have been a lot of discussions recently that average people should just stick with index mutual funds. There are two main reasons, i.e.:
- Index funds are usually has lower management fees compared to actively manage funds.
- Many actively managed funds cannot beat index funds in the long term.
Recently, we questioned ourselves, can find actively managed funds that can beat the index in the last couple years? If yes, should we switch some of our money to these actively managed funds.
We ran a simple query on Funds Filter from The Globe and Mail; searching for Canadian equity funds that have MER lower than 2% and no load. We found a couple of interesting actively managed funds, i.e.:
- Mawer Canadian Equity (MER: 1.26%)
- PH&N Canadian Equity D (MER: 1.11%)
- RBC O’Shaughnessy Canadian Equity (MER: 1.47%)
Then, we did the same charting to what we did recently with index funds, i.e. comparing the return of these funds to S&P/TSX in the last 10 years.
July 8th, 2010 by 1stmilliondollar
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As you might know, that our Lazy Portfolio currently uses CIBC Canadian Index. It is not really the best option to invest in Canadian index, as we discussed in our previous posting, Comparing Canadian Index Fund.
Why did we choose CIBC Canadian Index fund then? It is just a historical reason. When we first came to Canada, we opened our first bank with CIBC. The reason is because CIBC has a “small branch” in Singapore, where we used to live. We opened our bank account when we were still in Singapore. Since then, we have been happily doing all our financial needs with CIBC. This includes investing our money in CIBC’s index funds.
Recently, we tried to do a simple calculation. Currently we have about $20K invested in CIBC index funds. We pay a little bit more than 1% of management fee. It means we have to pay about $200 every year to CIBC for managing our money.
If we looked at TD e-series funds; most of them have management fee of less than 0.5%. It means we can save more than $100 every year just to convert our investment to them.
If we look further, there is a performance difference between CIBC Canadian Index and TD Canadian Index. CIBC Canadian Index is lagging by more than 5% compared to TD Canadian Index in the last 10 years. Although it doesn’t mean that TD Canadian Index will always outperform CIBC Canadian Index; we think that paying less fees is still better.