Studies have shown that more that 80% of Canadians don’t know how Mutual Funds work. Are you one of them?
What if I tell you that a Mutual Fund is NOT AN INVESTMENT? Textbooks and experts in the field of money define Mutual funds as “a pool of money that is invested in stocks, bonds, mortgages, real estate, T-bills and precious metals.”
If you have your money in a Mutual Fund, which of the investments listed above is your money invested in? Or is it in a combination of several of them?
Do you have money in a “Stock” Mutual Fund, a “Bond” Mutual Fund, etc; or a “Balanced” Mutual Fund which has investments of Stocks, Bonds, Mortgage, etc in its portfolio?
The biggest problems with Mutual Funds are:
- High Fees: You pay as much as 3% each year to have your money “managed”. Whether your investments grow or not in value, you still pay an annual fee. (Note: the fees on Segregated Funds, offered by Life Insurance companies, are worse than Mutual Funds. They could be as high as 5% per year.
- Professional Management: Most Mutual Fund managers are simply “guessing” with your money. They cannot predict what will happen in the economy, or the world. Uncertainties in the economy and the world have serious implications for your investments.
- High Risks: Most Mutual Funds take tremendous risks with your money resulting in significant losses.
- Lack of Knowledge: the majority of Canadians do not understand how Mutual Fund work or what type of Mutual Fund their money is invested in.
- Financial Advice: The majority of Mutual Fund salespeople know less than the Canadian public about how Mutual Funds work.
- Long Term Investment: Mutual Fund companies, and Banks, love to tell Canadians not to worry about the year-to-year fluctuations in the value of your investments because it’s a “long term game” Your Money and your future is not a game. And why do you have to pay an annual fee, regardless of whether you make money or not, for banks and Mutual Fund companies to “play games” with your money?
What’s a great alternative to Mutual Funds? … a “MIC” (Mortgage Investment Corporation)
Features of a MIC:
- A MIC is a pool of money used specifically for Mortgage Lending
- Provides funding to individuals and commercial entities who might not qualify for conventional mortgages.
- All mortgages are secured by Title registered on each real estate property.
- A MIC is a tax-advantaged Corporation:
- Profits are distributed to investors monthly before corporate tax
- No income taxes are paid by a MIC (could increase return by 40%)
- Investments are not affected by fluctuations in real estate and stock prices.
- Offers high rate of return (8%-10% annually)
- Eligible investments: cash, RRSP, LIRA, TFSA, RRIF
- Loan-to-Value (LIV) never exceeds 85% (average is 75%)
10 year performance of a typical Bank owned equity Mutual Fund vs. a typical Canadian MIC.
- Investing in Mutual Funds and Segregated Funds could have devastating effects on your money.
- Investing in a MIC provides safety of capital and high returns
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