Many Canadians are paying their advisors and mutual fund companies to keep cash in money market funds that are actually racking up losses.
Money market funds, which invest in short-term debt securities, are commonly used as a safe, liquid way to store cash and generate returns in investment portfolios over the near term. A typical portfolio could hold tens of thousands of dollars in them, as investors bank cash in uncertain markets.
But rock-bottom interest rates are resulting in rock-bottom yields, which in some cases are smaller than the fees the funds impose.
Most mutual fund companies offer money market funds. Like any other mutual fund, investors pay for them through annual management expense ratios (MERs) based on a fixed per cent of the amount invested in the fund. The fees go toward fund management, administration, and in many cases to compensate the advisor who sold it in the form of a trailer fee. Read more…..
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