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.
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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.
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July 5th, 2010 by 1stmilliondollar
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As we have mentioned a couple of times, we are currently looking for a house in Ontario, Canada. We just moved to Ontario last year and have been renting our place for more than 1 year now.
We are getting really close to make our decision. We have found a location that we like. There is a nice resale home there. It needs a small renovation; but it should not be a deal breaker. It has a good location and nice neighbourhood. It is very close to a good school too (although we don’t have kids yet).
We also found a new construction home nearby. The base price is even cheaper than the resale home for similar size. The construction has not been started yet because the builder is still waiting for permit from the city. However, they are confident that their schedule will be on time.
Now, we have to make our decision whether we should go for resale home or new construction home. We tried to list advantages and disadvantages of new construction home vs. resale home.
Advantages of new construction home:
- It is just “brand” new.
- We are able to choose the design and color that we want.
Disadvantages of new construction home:
- There is no guarantee that we see is what we get. Of course, the builder has a model home, but they have done a lot of upgrades. If we buy just standard home, we have no idea how good the quality is.
- There will be very high closing cost at the end. We need to spend money to pay for utility hook-up, landscaping, home warranty, buy window covering, install a fence, etc, etc. In fact, we have no clue how much money we will need at the end.
Advantages of resale home:
- What we see is what we get. No surprise at the end.
- The neighbourhood has been well-established. No more construction going on when we move-in. It may take a couple of years to build a community from an empty land.
Disadvantages of resale home:
- We have no control over the design. It is given. We can still change the color though, by just applying a new paint.
- Some resale home, like the one that we want, needs a small renovation. It means more $$$.
(Picture is from stock.xchng.)
