Investing Canada Personal Finance Blog ETF Mutual Fund Dividend

Well that was easy…How a 1 hour bank appointment will save me over $20,000

On Friday I had an appointment at the bank, it last just over an hour – and it will easily result in savings over over $20,000 over the next 10 years (or less).

How is this possible?  It’s actually a lot simpler than you would think.  All I did was follow through on one of my goals for this year.  I finally decided to transfer my high cost RBC mutual funds to my direct investing account.

At the time of transfer I had the following 2 funds:

RBC GLOBAL DIVIDEND GROWTH FUND

RBC CANADIAN EQUITY INCOME FUND

The RBC Global Dividend Growth Fund was my very first Mutual Fund I ever purchased.  I’ve owned this fund for over 10 years.  This fund has been pretty terrible for me (10 year return of 5.3%) AND has really high fees (2.14%).  Truth be told I’ve been unhappy with this fund for years, but just kept putting off doing something about it.  Now that I am taking things more seriously, and have this website to hold me accountable I finally did something about it.  I plan on replacing this fund with an International/Global ETF.  I am currently trying to decide which low cost fund to replace this with.  So far I am leaning towards one of the funds below- although I plan to do some more research this week:

VANGUARD FTSE GLOBAL ALL CAP EX CANADA INDEX ETF (0.27% MER)

ISHARES CORE MSCI ALL COUNTRY WORLD EX CANADA INDEX ETF (0.22% MER)

Even if I end up choosing the Vanguard fund with a slightly higher MER – I would be paying 1.87% less per year in fees than I currently am.  With my current portfolio amount this would result in yearly savings of  $1215.50.  This savings amount would continue to increase each year as my portfolio increases – but even if we assume I don’t contribute to this account ever again, and it returns 0% for the next 10 years, that means in 10 years I will have saved $12,155.00.  The crazy thing is that this ETF outperformed my high cost mutual fund by close to 4% over the last 3 years as well so not only will I be saving money in fees each year, I should be getting a better return as well.

Truth be told, even with the high MER (1.92%) – I’ve been really happy with the Canadian Equity Income Fund.  It has a 10 year annualized return of 10.4%, and currently pays me a monthly dividend of over $200.  I did a little bit of research and found out that RBC offers Series “D” funds for people who use direct investing.  This is the exact same fund – but with a lower MER.  I decided to transfer this fund to a series D fund rather than liquidate my position.  This will reduce the MER from 1.92 to 1.04.  This is a reduction of 0.88% per year. Based on my current shares this will save me: $572 this year (and even more every following year as my portfolio increases).  Even if I never put another cent into this fund – and it returned 0% for the next 10 years – this would result in savings of $5720 over the next 10 years.

While I was at the bank I also finally set up an RESP for my kids and increased my spousal RRSP contributions by $100 every 2 weeks.  I normally hate these appointments – but I’d say that was a pretty good use of an hour.

If anyone has any recommendations on any low cost global/international ETF’s I’d love to hear them so I can research them this week.  Thanks in advance!

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9 thoughts on “Well that was easy…How a 1 hour bank appointment will save me over $20,000

  1. Your ER is still high. Please compare the performance of your active fund with a corresponding index fund. For long term holdings index funds makes absolute sense. For short term investing I would prefer active funds. Global All Cap ex Canada Index ETF looks good.

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  2. I agree the MER on the series D is still higher than I like…but I haven’ yet found an index fund that has performed as well over the last 10 years & which also offers the ability to drip shares via RBC. I will keep my eyes open for sure – and now that everything is in my DI account – it will be easier to transfer/switch if I do find something better.

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  3. I could not find much about RBC CANADIAN EQUITY INCOME FUND. I downloaded a PDF which has some information. It did mention 10.4% annualized return. Since it’s a equity fund … It might be useful to compare against FTSE Canadian High Dividend Yield Index ETF (VDY).

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  4. That fund looks to basically be identical as far as returns go – the only difference is RBC doesn’t allow that one to DRIP and it has about 40 less holdings. Thanks for looking into it! I’ll keep my eye out and obviously if I find anything with similar/better returns with lower fees I’ll jump on it!

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  5. Awesome Jordan. That is a great move. I dont know much about etfs but know geek is pretty into them. Hopefully he helped ya out. Ill be watching what you do. It would be good for me to get more international exposure.

    Either way great move – less fees and more control!

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  6. Thanks CPI.
    I’ve been meaning to make the switch for a while now – and I still plan to do my own analysis and stock picking on Canadian stocks in my TFSA – but I don’t have the time to do it for US/International stocks as well -so I figured an ETF makes sense.

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