TAKING FEE FROM THE YOUR POT
OF MONEY IS
BUT CAN BE
IF BASED ON HUMAN GREED &
AVOIDING DHARm puruSHaaARth
Globe and Mail:
THE TASK :TO FIND PRACTICE OF DHARm:
conduct an investigation into the value that investors receive for the fees
they pay their mutual fund companies.
THE TOOL: the fee-to-performance
value indicator, a gauge of how much of a fund's returns are soaked up by the
fund company to cover its costs.
To understand how the value indicator works,
you first need to know how the fund industry pays itself from the funds its
PVAF continues to share the knowledge of mutual funds trading from a Globe
and Mail serial on mutual funds trading practices so that YOU can protect and
prosper with this knowledge and the knowledge from
veD of objectives of life called
puruSHaaARth in sNskRUt language
and in veD which is
SCIENCES OF CREATION AND LIFE......the
knowledge contain in veD is an life
operation manual for living human life with purpose, goals and objectives based
on the rules, regulations and laws of DHARm....DHARm
is the operating system in which the entire creation including humans have to
take birth, grow, work to sustain and continue the life travels from one life to
another in sNsaar meaning cycles of life and death.......
The primary universal law of DHARm
is that one should not do any kARm
(thought, word or physical activity) which can hurt oneself and/or any other
Please click on the next line to read the 4th of the serial in Canadian
Globe and Mail
on whether your traders charges you a fair fee or is ripping you off
....if you wish you can read the article on the Globe and Mail web site by
clicking on the preceding red hilite.....
measures impact of company's
Managment Expense Ratio:
Helps show how badly returns are hit
By JANET McFARLAND AND ROB CARRICK
Globe and Mail:
Thursday, June 24, 2004 - Page B8
TORONTO and OTTAWA -- The task: conduct an investigation into the value that
investors receive for the fees they pay their mutual fund companies.
The tool: the fee-to-performance value indicator, a gauge of how much of a
fund's returns are soaked up by the fund company to cover its costs.
To understand how the value indicator works, you first need to know how the fund
industry pays itself from the funds its customers hold. Imagine you own the Acme
Canadian Equity Fund and it reports a return of 8 per cent one year. That's the
gain for unitholders, but it's not what the fund actually earned.
Many investors don't realize that fund companies reduce their returns by a
specified amount every year to cover the costs of running the fund and, in many
cases, paying the dealer or adviser who sold the fund. These fees are bundled
together and measured as a percentage of the fund's assets. The resulting
percentage is called the management expense ratio, or MER.
Let's say Acme Canadian Equity has an average MER of 2.4 per cent -- is this a
good value? The fund fee value indicator can help provide an answer.
Applying this measure is easy and you can do it yourself using information on
Globefund.com. To start, add the MER to the reported return to arrive at a
fund's estimated gross return. Then, divide that number into the MER and
multiply by 100.
If we add Acme Canadian Equity's 2.4 per cent MER to its reported return of 8
per cent, we get a gross return of 10.4 per cent. Dividing this number into the
MER and then multiplying by 100 yields a value indicator of 23. This can be
considered a good value, given that the average Canadian equity fund in our
investigation had a comparable score of 26.8. For more information on comparable
value indicator scores, check the accompanying charts.
A total of 615 funds were included in this analysis, which was conducted with
the help of Globefund.com analyst Tilly Cheung. All the funds had five-year
track records in the Canadian equity, Canadian equity (pure), Canadian dividend,
Canadian balanced, Canadian tactical asset allocation, Canadian bond, Canadian
income trust, global equity, international equity and U.S. equity categories, as
of March 31.
Segregated funds were excluded, as were funds that are strictly for
high-net-worth investors. Also omitted were versions of funds on our list that
were denominated in U.S. dollars or considered domestic content for registered
retirement plans, even though they hold foreign securities.
All funds with negative returns for that period were also separated, because
it's impossible to have a negative value indicator. Suffice it to say that these
funds offered no value at all for their MERs.
To calculate averages for different fund companies, ROB added together all the
funds for each company that were included in the study and averaged their value
indicator scores. Again, funds with negative five-year returns had to be
The averages by company were not weighted by the assets in each fund, which
means larger and smaller funds got the same weightings when calculating a
company's value indicator. However, funds with less than $10-million in assets
were not used in the company's total score.
Note that global and international equity funds are omitted from the charts
displaying the company value ratings and the best and worst funds. These fund
categories have performed poorly enough over the past five years that many top
players had extremely low value scores. Indeed, many global funds had negative
returns over the past five years and couldn't be included in the value
calculation. Including only global funds with weak positive returns in the
best/worst chart would have unfairly singled out comparatively good funds, while
including them in the company value ratings would have artificially dragged down
the results of some firms