It is the beginning of the month and it’s time for an update on the market value of one of my Retirement Savings Plans. October 31 marked the end of the “bank year” and now we are into a new fiscal year. We are going to take a look at the changes I have made in my Retirement Savings Plan since I transferred it from my old financial institution to my new personal banker.
I don’t believe in paying for something that I can do myself. I don’t believe in paying an annual fee or a per transaction fee for the services of an Investment Broker. With a little time and research (along with a subscription to the right personal finance blog) anyone can learn about investment management and personal finance. I prefer to hold mutual fund because the cost is lower.
Of course mutual funds have an annual Management Expense Ratio (MER) that covers the fund manager’s salary, as well as any administration costs. However, those fees are removed before the rates of return are ever published. It is important to know the MER of a Mutual Fund, although it is not extremely important information.
An average MER can range from 1.5% to 2.5% of the total mutual fund holdings. Mutual Funds that have an MER below 1.0% are usually Money Market Funds and Index Funds They are both passively managed Mutual Funds and therefore do not require a lot of work from the fund manager.
Money Market Mutual Funds are short term Mutual Funds that invest in short term fixed income investments, with maturities less than a year. There is not a lot of research involved as the investment options are usually limited to banker’s acceptances, treasury bills, commercial papers, and bank deposits.
The performance of Index Mutual Funds is based on a specific market index as opposed to individual stock and bond investments. The MER is generally lower with Index Mutual Funds because they are also not actively managed. There performance is based by tracking the performance of a market index.
An entire quarter has passed by since our last Retirement Savings Plan update back in July. Within the last 3 months my little Retirement Savings Plan has made some good progress. Although I would like to think that I had something to do with it since I chose and changed my investment options. Here is a current overview of my Retirement Savings Plan:
Book Value July 2010 November 2010 Change
$13,560.09 $ 14,066.46 +$506.37
Market Value July 2010 November 2010 Change
$13,617.51 $ 14,724.85 +$1107.34
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Photo By Faramarz
Hey Kristina,
Have you done a long term cost comparison between holding the shares of the mutual fund vs. buying their biggest holdings directly? A lot of people seem to feel that mutual funds are cheaper, but its not clear me that this is the case. I guess you have to ask, cheaper compared to what?
Best,
James
hey i am shakshi and i want say that the Putting your funds away in a savings account can be a great source of funds in case of a emergency. It makes a great deal of sense to simply put away money into an interest bearing account for these types of events, instead of having to take out a loan or bill a credit card for them. If you do either of these things will result in more debt and higher interest payments
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avings Account Interest Rates
I prefer mutual funds because I would rather indirectly pay 1.5% of the total mutual fund assets rather than 2.5% per year directly from the value of my investment portfolio. I also don’t believe in paying a fee per transaction with a full service broker or in a self directed account. I have never compared long term costs, it’s just a personal opinion.