Sunday, 7 December 2014

Osteopathy Business Tip # 97

Mutual Fund or Index Fund?

To retire wealthy, I urge my students to save 10% of their annual income into different investment systems. Stocks are the most common investment methods, with managed mutual funds being the most popular way of investing in stocks.

However only 4% of managed mutual funds beat the market, and with an average fee of 3.1% of total investment they are quite costly. Investing in index mutual funds is safer and they outperform 96% of the managed mutual funds in the long term. Also their Management Expense Ratio (MER) & fees are less than 1%.

When an index mutual fund and a managed mutual fund offer the same interest rate, in your life time, investing in index fund would save you over $350,000 because mutual funds charge you 2.1% more on average.

The portion of your investment fund that you allocate to stocks is best to be invested in an index fund within a registered saving plan such as RRSP in Canada, or 401(k) in USA that has MER of less than 1%.

You should max out your allowed investment in a registered retirement plan before investing anything outside the plan.

Dr Shahin Pourgol, MBA, DC, DOMP, DO
National Academy of Osteopathy
National University of Medical Sciences
Graduating Successful Manual Osteopaths in 45 Countries

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