Canadian Interest

Expensive Money Market Funds

February 4, 2005

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Since my asset allocation plan calls for 5-10% exposure to cash, I’ve been investigating the different options available to me. In particular, I investigated money market and T-bill funds offered by the big banks. (For the purposes of this post, I am excluding “premium” funds that require a minimum investment of up to $250,000).

The expenses for these funds average about 1%. In an environment where the Bank of Canada benchmark rate is 2.5%, the expenses of these funds are an outrageous 40% of returns. Exactly what insight and expertise these fund managers are providing beyond buying and selling T-bills is completely beyond me.

Compared to the sorry lot of money market funds offered by the banks, Altamira’s T-Bill Fund is a great alternative. The fund is no-load, its MER averages about 0.39% and requires a minimum of $1000. Unless, there are other cheap money market funds available, the Altamira T-Bill Fund is a no-brainer choice for the cash portion of the portfolio.

Expensive Index Funds

February 3, 2005

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One of the biggest advantages of indexing is low expenses. This Globe and Mail article expands on how outrageously expensive index mutual funds eats into investor returns. Except for eFunds offered by TD Bank, it is advisable to stay away from the other index funds described in the article and consider the less expensive alternatives from the iUnits series of ETFs.

RESP 101

January 31, 2005

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We don’t have kids (yet) but it is good to know about education savings plans available. There was a nice introduction in the Sunday edition of the Toronto Star (bypass registration here).