In January we were proud to introduce our new Wealth Management Division ran by Nathan Estabrooks & supported by the whole BRMC family. So as we go forward we are going to use our existing Abbotsford, Chilliwack and Mission Mortgage platform to also educate, motivate and create content to help you understand what a Financial Planner can do for you.
So without further delay here is some info quick retirement savings thoughts.
- Myth 1- Paying high fees is okay if you get the performance right??
The average cost of owning a mutual fund is 3.17% per year!
Below is the impact of fees on fictitious ending account balance:
Tom: $100,000 growing at 7% (minus 3% in annual fees) = $324,340
Jerry: $100,000 growing at 7% (minus 2% in annual fees) = $432,194
Trent: $100,000 growing at 7% (minus 1% in annual fees) = $574,349
Same investment amount, same returns, and Trent has nearly twice as much money as his friend Tom.
By simply removing expensive mutual funds from your life and replacing them with low-cost index funds guided by a competent advisor, you will have made a major step in recouping up to 70% of your potential future nest egg.
- Myth 2: What’s the point in saving $50 bucks a pay cheque??
Well although 50 dollars per pay period doesn’t seem like much, if you start those habits at a young age you will be surprised at what it does for you. If you start saving $50 dollars bi-weekly when you are 25 and assume a 7% return with 1% inflation this will leave you with $256,331 when you are 65.
Take into effect that you should and could start to increase your amounts you contribute as you get older and that is nothing to laugh at. But remember it’s never too late to start saving for retirement at any age, even if you are not 25 anymore. Today is the best day to get on track regardless of age.
- Myth 3: Our returns? What you see is what you get
Average returns are like online dating profile photos. They paint a better portrait than the reality. When the mutual fund advertises a specific return, it’s never the return you actually earn. Why? Because the returns you see in the brochure are known as “Time Weighted Returns.” Sounds complicated, but it’s really not …
Time weighted returns assume that investors have ALL of their money in the fund the entire year and don’t take any withdrawals. But the reality is, we typically make contributions throughout the year
And if we contribute more during times of the year when the fund is performing well (a common theme we learned, as investors chase performance) and less during times when it’s not performing, we are going to have a much different return than what is advertised.
- Myth 4- Your bank advisor has your best interest at heart.
As someone who worked for the banks for 7 years let me let you in on the inner workings of a branch. When you walk into an investment meeting the first thing the advisor will do is sit you down and ask you questions about risk tolerance, and then this program will spit out which fund you should invest in.
While the banks themselves have thousands of mutual funds at their disposal, they usually only offer you the 5 funds they want to push. These funds are often “fund of funds” and have many mutual funds within them. This leads to very high fees. The advisor will very seldom give you other options from this as it is outside their comfort level. As an investment advisor I want you to pay the least amount of fees while getting great return. The bank advisors just aren’t educated enough to provide the high level of advice you deserve.
- Myth 5: Invest with us — we’ll beat the market.
When I hear other advisors bragging about this it makes me roll my eyes and lose interest almost immediately. If an advisor is bragging about beating the market check out the last 5 years or ten years to make sure. Maybe you found the one guy smarter then Warren Buffet. Maybe not though. From 1984 to 1998 — a full 15 years — only eight out of 200 fund managers beat the Vanguard 500 Index. While an advisor can provide calming presence and financial planning tools and guiding your asset mix to ensure your portfolio is customized to your needs, beating the market is unrealistic. Clients that work with an advisors typically make 2% more on their investments because of communication and risk strategies (buying when its down, selling when its high) , not by beating the market. If an advisor brags about this. Run.
By Referral Mortgage Consultants*
“Click, Call, Chat – Award Winning Brokers”
Dave 604 897 2741 Jordi 604 615 1312 www.ChilliwackMortgageBroker.com
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*By Referral Mortgage Consultants – doing business as BRMC is: Verico Preferred Financing Inc / Verico Canadian 1st Mortgage Corp which have a co-brokering agreement and there is a common Mortgage relationship and are licensed with the Verico Dreyer Group. Mortgage ownership, that employees of both Mortgage companies may review, advise and help process the Mortgage files. That Verico Preferred Financing Inc & Verico Canadian 1st Mortgage Corp share the some expense and income from mortgages. Kim Langille Featured on thess site is an unlicensed mortgage assistant only, not a Mortgage Consultant. Jordi Browne featured on this site is the Mortgage Broker of record. “The Broker” is Jordi Browne. Jordi Browne also holds a Life Insurance License and represents Verico Canadian 1st Mortgage Corp. Dave Browne featured on this site has a Life Insurance License too but is an independent agent– Jordi and Dave Browne co-broker life insurance files and share expenses, all income retained by Verico Canadian 1st Mortgage Corp.