Reading the Mutual Funds Facts Sheet

When it comes to reading the mutual funds fact sheet which is called fund facts at RBC, http://fundinfo.rbcgam.com/mutual-funds/rbc-funds/fund-pages/rbf263.fs, many people have no idea what the different parts are.  Therefore, I will explain the parts that are important for traders and also the regular saver.

At the very top, you will see the Fund code.  This fund code is needed when purchasing mutual funds through a regular broker account.  Therefore, to purchase this mutual fund in:

  • CAD RBF263.
  • USD RBF449.

Below the Fund code is the MER which is 2.10%/year.

To the right of the MER is the minimum investment required which is $500.  Some will have a minimum investment required which will decrease the MER.  For example, a $25,000 investment will reduce the MER to 1.90%.

As you read further down, you will see 1. sales charges which is where the cost to buy, sell or other extra fees are if available.  In the case of this mutual fund, no extra fees.  There can be numerous letters after the fund name such as A, B, C, D, E, F.  You will have to read the mutual fund fact sheet for details on the letter meaning.

2. Fund Expenses is the MER/year and how it is calculated.  In the case of this mutual fund, the MER/year has the TER/year calculated into the MER/year for this mutual fund.  Some funds do not add the TER to the MER, so you will have to add the MER + TER to find the total MER.

Trading Expense Ratio (TER) – If you are buying mutual funds outside of a tax sheltered account, you may end up with a large capital gains tax that you will have to claim on your income tax.  Therefore, I prefer to keep mutual funds in a TFSA, RRSP or other tax sheltered account to avoid the headaches.

When a mutual fund manager is buying and selling securities, he/she will have to pay a broker fee to buy or sell.  Therefore, the more buying and selling within the mutual fund, the higher the TER.  If the broker worked for free, or there is no trading, the TER will be zero.

Farther down, you will come upon the trailer fee or trailing commission.  This commission is paid to your advisor for his/her services.  Some brokers will reinburse this fee if you buy this directly through a broker account without an advisor.

Since there are short-term traders who buy and sell mutual funds with hopes of making a profit, 3. Other fees explains the other fees associated if you sell too early or transfer this mutual fund to another bank.  You will have to ask your bank or broker about the transfer fee.

 

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