RRSP Deadline is soon, and I’m making some moves.

As the March 1st RRSP contribution deadline approaches, I’ve been relatively busy trying to get things in order.

I must say that Questrade has become a large reason why this is happening. I am re-discovering and really appreciating Questrades’ services lately. Firstly, I realized not that long ago that I can trade mutual funds really easily using Questrade. Second, and probably a bit more important – is that they have what they call ‘the Mutual Fund Maximizer’.

The Mutual Fund Maximizer sounds pretty stupid, but in actuality it can save you a TON of money. How? Read on my friend.. see, when you or I go the bank or a broker to buy mutual funds – you don’t actually think they do it for free do you? I’ll give you an example.. if I were to stroll into my Royal Bank and purchase a mutual fund for my RRSP account in the amount of say about $5000. The mutual fund which I chose has a MER (management expense ratio) of 2%. Part of that 2% (which comes directly from my $5000 investment on a yearly basis) goes right back to the company that holds the fund, manages the fund, and sells the fund.. forever!

This may seem fair to you, but not to me! I can understand why they would get it perhaps when I first bought the fund.. but why say, after 10 years of doing nothing.. are they still getting it?

Questrade does their best by rebating you or giving you the portion that they recieve directly (called trailing fees) into your account. After all, you’re doing all the work – why should they benefit? In most instances, the trailing fees are around 1% of the MER, but they have a pretty handy lookup tool where you can find out exactly what it is.

Just for an example – I just purchased $400 worth of RBC Global High Yield Advisor Series today. This fund has a NAV (current price) of $9.25 approximately, which is really irrelevant to me. I’m actually purchasing it by the dollar amount. The MER on this fund is 1.64% which equals to around $6.56 yearly. Ok, this really is a bad example as the amounts are so small, but add a few zeros into that number and you’ll see what I’m talking about.

So if I had purchased this fund through RBC between the fund manager, and the bank – they would receive the $6.56 MER every year for as long as I owned the fund. With the Mutual Fund Maximizer however, I looked up the % I get back using Questrades rebate lookup tool, and it’s 0.720%. Which means I get $2.88 back into my account, which reduces the MER to 0.92%, and I’m only paying $3.68 back to ‘the man’.

This may seem like small potatoes to you, but let’s look at some different numbers.

Say for example I purchased $400 a month for 12 months for 10 years and the fund stays at $9.25. Quick math tells me that equals $48,000. If I were to have simply bought that fund through RBC or a broker – I would have paid $4329.60 to RBC during that time. If I purchased via Questrade the same way – I would only have paid $2428.80. Simply by using Questrade and getting back the trailer fees (which is what they call it) I saved myself $1900.80!!

On another note – I just opened up a TFSA account as well at Questrade. Why? Well.. if I do any regular trading.. why not?? The basic principle is that I can contribute up to $5000 a year and trade to my hearts content.. with no tax implications. If I made $20,000 the first year by getting some crazy options trades to come into my favor.. I can cash that out and pay no taxes on it baby! Sweet!! I also ‘believe’ that since the account was at $20,000 – I can re-contribute that amount as well instead of being held to the $5000 yearly limit. I’m not sure about that however… I can’t see myself going above the $5000 ‘play around amount’ for quite some time.

The way I look at a TFSA is exactly that.. a play around trading account, and I’m not funding it until my line of credit, and all other bills.. are looked after first