What’s truly frustrating is how few Canadians really understand what an RRSP is, never mind what the best investment strategies are. Most Canadians feel this pressure to put money into their RRSP, without making time to research where to put the money or what vehicles to invest in. Many investors simply “park” their RRSP contribution, which means they put it into an RRSP account, but don’t actually invest in anything. It just sits idle in the account, earning nothing, until it is finally invested in something (if it ever does get invested). Of course, the banks LOVE it when customers park their money in an RRSP account at their branch .. because once they’ve got it, it is MUCH easier to force the client into buying one of the investment funds that the bank owns. I don’t know if you’ve ever been through that process, but it’s kind of scary what happens when you go to the bank to discuss RRSPs. They lay out 3 different brochures in front of you, each for a different investment fund. Of course, they’re ALL owned by that bank, so they don’t care which fund you pick since they’ll make money regardless of what you do. It truly amazes me how manipulative the financial industry is against its own clients, and how the average person who doesn’t really understand investing and financial fundamentals really gets SCREWED by the system. The whole industry is specifically designed to make investors feel ignorant, and makes the investor feel that investing is a really complicated process that they need “professional advice” from – which the banks are happy to provide (of course, this simply isn’t true). In addition, the industry PURPOSELY withholds critical information from investors so that they can’t really see just how unfair the whole process is. For example, if you have any mutual funds, pull out your last statement that you received. What is the Management Expense Ratio that they charge you? Well, isn’t THAT strange. It’s not ON your statement, is it? They’re not required to disclose what they charge as an M.E.R. How on EARTH are average investors supposed to figure out what they’re investing in if they’re not even told how much they’re being charged in fees? It’s laughable, and yet the system continues to churn along because so few people even ask these kinds of questions. Let me give you a SCARY example. Let’s assume you have $10,000 that you invest in a Mutual Fund. That particular fund charges an M.E.R. (Management Expense Ratio) of 2.5% (which is the average MER fee in Canada these days). That means every year, the Mutual Fund deducts 2.5% from your account for the “service” of managing your money for you. So let’s say you have that Mutual Fund for 20 years, and it makes 8% each year. Of course, that’s more than ANY mutual fund has averaged over 20 years, but let’s assume you get lucky. (And you will need a LOT of luck if you rely on Mutual Funds to make you wealthy, by the way.) After 20 years, the results are as follows: – Your total gross balance after 20 years is a little over $46,600. Not bad from starting with $10,000. – Your NET balance (after the impact of the M.E.R.) ends up being a little over $26,411 – That means you’ve lost $20,198 ……. or 43% of your total return ……… to the financial industry! Think about that. The M.E.R. has cost you 43% of the total returns you WOULD have made without paying that fee. And yet, they play games with the numbers to make you think things like “2.5%.. that’s not that much, who cares?” You’re starting to see what I don’t think the financial industry is TRULY interested in helping you get wealthy. This is why I’m so passionate about trying to encourage people to take care of their OWN investments, and really UNDERSTAND what’s happening with their investments. Sure, it’s work because it means you have to educate yourself. But in the long run, the manipulation, deception and unfair tactics that the financial industry uses will absolutely KILL your dream of financial freedom if you don’t understand how it all works. So, when you hear the ads telling you to ‘park’ your RRSP contributions and suggests that you invest in their mutual funds, I hope you’ll take a second look, and decide to start educating yourself on this stuff. Your financial freedom depends on it.]]>