Have you ever had a time in your life where you put things on autopilot? I suspect that at least once in your life you’ve put either your entire life on autopilot or maybe just a particular area of it. It’s what us humans lovingly call our comfort zone or the illusion of safety and security that we enjoy creating. What we fail to realize is when we do this, we’re not growing and learning! Enter my favourite words to despise – mediocrity and stagnation.
Now think about those two words in relation to your budget, your savings and your retirement. Not exactly the best words you’d like associated with any area of your finances, am I right?
In my ongoing quest to be fearless in 2015 (err, for the rest of my life for that matter), I decided to take back my investments and retirement from the fees, investment advisors that never outperform the market and those powerhouses of profit – the banks.
Set It and Forget It – Not with your Finances!
We’d all like to take the easy path; choose an investment and just leave our money there, wouldn’t we? Easy, simple and no fuss. Well, this strategy will get you a whole lot of nowhere as I found out last week. I thought my retirement was invested well in the mutual funds I had chosen but little did I know that I was paying as much as 2.55% in MER’s on some of them!
How did I feel after discovering that? Not well. A little sick and slightly disgusted that my hard earned money in my RRSP was being chewed up by 2.55% in fees.
What did I learn? That being an active participant in my retirement is a necessity. Ultimately no one cares about my retirement but me. Even if you take Warren Buffet’s “buy and Hold” strategy of investing, I can guarantee you dollars to beans that he didn’t just invest the money and forget about it. He was most certainly paying attention to what those companies were doing and their balance sheet. Being too passive in your retirement strategy is a recipe for disaster.
In my case, I’ve gone ten plus years in set it and forget it mode, leaving my money in mutual funds with two plus percent MERs. Not the best idea but paints a clear picture of how important it is to learn about different types of investment vehicles available to you.
Trusting someone else is not always the answer!
What’s a MER? A nasty fee that mutual funds charge called a Management Expense Ratio. If you’re lucky they can be 0.83%, if not, they can be upwards of 3-6%!! Basically, it’s the fee the fund managers charge for their time spent working the portfolio of stocks in it.
Revamping my own retirement portfolio
The first step in taking ownership of my retirement was taking a look at all the funds in my current portfolio and determining the MER’s I was paying in addition to any other fees. Thank the lucky stars it was only MER’s I was paying and no trailing commissions, etc., they were all built into the MER. So, I made the decision then and there that anything with 2% or higher had to go and I was going to become the captain of the ship. No more paying someone else to underperform the market in a snazzily (yep, I made that up) named mutual fund.
I’m quitting you high fee mutual funds for your lower cost brothers and sisters: Index funds and ETF’s.
The next step was deciding whom I was going to go with as a provider/brokerage. Ultimately, this came down to: who did I have the most money with and who wouldn’t charge me a fee to open a self directed investing account. That decision was simple, and I completed the forms, headed into the bank and voila in a few days I should have my own trading account.
Steps three and four are much more complicated and are currently a work in progress. Three involves researching numerous low-cost investment vehicles and deciding ultimately where to move the money and quickly, as I’ll still be paying those high fees in the meantime. Four is simple: Consolidation. I’m tired of having my portfolio all over the place (read: too many financial institutions), and if I can get transfer fees waived (which I’ve been told yes, up to $150) it’s done and all is golden. Which means waiting a little until all my investments are out of what they’re locked into.
No more measly returns for me! I’m aiming for 6% minimum and no more of these “here’s your rate of return but not your rate of return” advertisements that most mutual funds like to deceive us with.
Why Am I Doing All of This?
- I’m fiercely independent.
- I’m fearless – my mantra for 2015.
- I’m focused and determined to change the state of my life and finances.
- No one can take responsibility for your life/finances but you.
- I am the master of my own destiny. Dream big!
- I’ve reached a level where I want to know more about my investments. Take the fear out of finances – educate yourself!
- I’m creating my story and working hard to get to my dream of financial independence. Not just security, or vitality, but complete and total independence where I can live off the returns of my portfolio.
- You take time to budget so why not take care of your investments?
The long and short of it is, I shouldn’t have sat idly by thinking my money was working efficiently for me. Things change, fund managers change and fees change. If you don’t take the time to educate yourself about what you’re invested in, you’ll pay the price.
Do you do a regular check in of your investments? Why or why not?
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