Would you sign a contract to buy a new car or a new home without knowing the price? Of course not. Before committing to a major purchase, you want to be sure the cost is reasonable.
Buying investment products should be no different. You deserve to know the costs. But there are two problems.
First, most investors are simply unaware what they are paying for mutual funds and other investment products. The industry uses its considerable influence to keep it that way.
Second, even those who understand that they are incurring costs of 1% or 2% annually are unaware that the power of compounding turns these accumulated annual costs into ultimate losses of 30% or 50% of their total investment returns over time.
Millions of Canadians have signed up for investment products with little or no understanding of the impact of costs. The results are predictable: Canadians pay the highest investment product fees in the world.
The industry owes Canadians true transparency and, frankly, honesty regarding the impact of investment costs.
In the meantime, don’t blindly sign up for investment products! Make sure (i) you know exactly what fees will be directly charged or simply deducted from your investment and (ii) use the T-Rex Score calculator to project the impact of your investment costs over time. You will then be in a position to make a better informed investment decision!