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| Greetings! |
Finally, we are seeing an upswing in the markets. With any luck your June statements even showed a bit of recovery! In this issue, we invite you to take a closer look at your investment portfolio during this relatively quiet time of year. Pour yourself a glass of cool lemonade and check out our comparison of mutual funds versus ETFs and consider which might be a better fit for you.
If you are tired of living paycheque to paycheque and your credit card balance is weighing you down, now is also a good time to look at the way you manage your cashflow and the debt you are carrying. While there are some promising signs of recovery in the economy, you'll be in a better position to take advantage of opportunities with a strong financial foundation.
Need some help claiming or reclaiming control of your money? Then grab a friend and join us for a evening of tips, tools and money talk at our Madness of Money evening. You'll get tons of ideas on how to transform your relationship with money and it's also a great way to meet Karin & Sheila and to find out about our programs. Reminder: Early Bird Pricing for the Fall Build Your Own Financial Plan programs ends July 31st. |
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Mutual Funds vs ETFs - Which One Wins? by Karin Mizgala
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For most Canadians, mutual funds are a mainstay of their investment portfolio. Many investors, however are angry and frustrated with the high fees they are being charged and with mutual funds that barely outperform the market - if they do that. (Studies are showing that 70-80% do not outperform). The big question I am now being asked is whether to switch out of mutual funds into ETFs (exchange traded funds).
In a couple of important respects ETFs are similar to mutual funds in that they are packages of investments bundled by a financial institution for sale to the investor and they are designed to diversify risk and opportunity. The essential distinction of ETFs is that they are a basket of investments tied to a specific "index", such as the S&P/TSX composite index, Dow Jones Industrial Average or the S&P 500. Your personal ETF investment therefore mirrors the fortunes of whatever index your ETF fund is tied to. If the S&P/TSX, largely comprised of bank and commodity stocks, does well, then you do well. If not....., well, you get the picture.
Here are some things to consider in making your decision on which one to purchase:
Lower fees are certainly a good reason to consider an indexing strategy. As I wrote in a previous column, recent studies have shown that Canadians are being charged amongst the highest fees in the world for their mutual funds. Fees for indexing typically range between one-half and 1% - as opposed to costs of up to 2 ½ % for equity mutual funds.
ETF fees are lower for three primary reasons. First, they do not require the same level of market research that mutual funds do, because they simply track an index instead of deciding on the merits and demerits of a bundle of stocks. Second, they are mainly sold through discount brokerage firms and this helps to keep costs down. Third, with ETFs you get little or nothing in the way of advice or service.
Lower fees are not everything, however. One of the main downsides to ETFs is that you are largely on your own to research, evaluate and to buy/sell them. There are now hundreds of ETFs to choose from and you have to ask yourself if you're really willing to do the background investigative work.
One reason to invest in a mutual fund portfolio is the advice that you get - or should get - when investing this way. Yes you pay more, but a good advisor will consider such things as your risk tolerance, net worth, your retirement plans, and the rest of your portfolio mix, to better advise you on the funds that are best suited to you at the various stages of your financial life.
If you have over $500,000 to invest, you may qualify to work with an investment counsel firm where fees are much lower than the typical mutual fund portfolio, and you get advice too. If you don't fit that profile, but don't want to go it completely alone, then check out low cost mutual funds, like those offered by Steadyhand, Leith Wheeler or Phillips Hager & North. The level of advice that you get with them will largely depend on the size of your portfolio, but their funds are well worth considering.
Whatever route you decide to go, ETFs, traditional or lower cost mutual funds, you will be best served if you keep your investment decisions in line with your overall financial objectives and the time and energy you want to devote to your investments.
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Know Your Numbers by Sheila Walkington
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CREDIT is like a looking-glass, which when once sullied by a breath, may be wiped clear again; but if once cracked can never be repaired. -- Sir Walter Scott 1771-1832, British Novelist, Poet
Things have certainly changed in the world since the Victorian era when Sir Walter and his contemporary Charles Dickens plied their literary trade in the mean streets and grand salons of London. But it seems that credit and debt were major issues then too - just as they are today.
In the story The Old Curiosity Shop, Dickens graphically portrays some rather unsavoury scenes of British debtor prisons, and of the infamous system of indentured servitude, where people would work off their debts as virtual slaves. Today, fortunately, there are a few more options available to us when we start running into trouble with debts and credit!
WHAT ABOUT CANADA IN 2009?
Debt is a huge problem for Canadians, a problem that is only getting worse as the economic downturn continues to reverberate through the lives of ordinary working people. I definitely see this in my own practice, but this fact is also born out in recent studies across the country. The Ontario Association of Credit Counselling Services has reported a 25 to 30% jump in clients over the past three months. It turns out that more than half a million Canadians are behind on their credit payments. British Columbians, for example, saw a 27% increase in average delinquency rates. More and more Canadians are using their credit cards and lines of credit to finance day-to-day expenditures... and the bills are starting to add up! The Certified General Accountants Association of Canada tells us that, as of May, the total national household debt in Canada is at an all-time high of, get this, $1.3 trillion.
YOU ARE NOT ALONE!
Short of signing up as an extra on a Charles Dickens movie, what can the average person do when faced with mounting personal debts and a sense that they are losing control? The good news is that you don't need to face this challenge alone. Help is available! If you are finding there is more month than money at the end of the month, you are not alone. Many of my clients are surprised to find out just how much it costs to make ends meet - and that's not even for any luxuries. People are finding their whole pay is going to cover the rent, bills, groceries and the occasional dinner out. What about holidays, retirement savings and paying down debt?
KNOW YOUR NUMBERS
So what can you do? Well, the first step is to get real about your numbers. What does it really cost you to live? And how does that compare to your earnings? Is there anything left over for savings, goals or debt? Many people dread the thought of tallying up all their expenses, but I say it's where the magic begins to happen. Once you know your numbers you might be surprised and how easy it is to start to take charge. I have seen people make amazing changes to their spending and their finances, once they are aware of their numbers.
THE SOLUTION
If you want to learn more and are serious about taking control of your money and handling your debts then let me offer you a simple solution -- a solution that has already helped hundreds of other women. Take a few short minutes to check out the course that I offer called: Sheila's Debt Free Challenge. Not only will it help you develop a spending and savings plan that works for you, it will also help you get out and stay out of debt! The program is designed for women just like yourself. It is simple and effective - and it works!
THE OPPORTUNITY FOR YOU
If you are curious and want to learn more - check out Sheila's Debt-Free Challenge for more information or to enroll.
STAY TUNED - I'll be offering a Debt-Free Challenge Preview Teleclass on Monday October 5th. Details to follow!
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| Upcoming WFLC Workshops |
Build Your Own Financial Plan - 3 month Teleclass program starts October 6th, or do a Weekend Intensive on either Sept 12th & 13th on Salt Spring Island, or Nov 21st & 22nd in Vancouver. If you're tired of worrying about your finances and ready to take control, this program is for you. Sheila's Debt-Free Challenge - Why spend one more day wondering when you will ever get out of debt? Learn to manage your spending and create a plan to get out and stay out of debt! Classes in Vancouver start Monday, Nov 2nd
MoneyMastery Program - Ongoing telecoaching and education for graduates of the Build Your Own Financial Plan program. Become a more confident and savvy investor so you can achieve your financial goals faster and with more ease.
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Feel free to call us if we can help in any way or if you would like to discuss which one of our programs would best suit your needs. We'd love to hear from you!
Sincerely,
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Karin and Sheila
Karin Mizgala 604-880-4143
Sheila Walkington 604-716-5375 |
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| Save $75 |
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| Offer Expires: July 31, 2009 |
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