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T Holistic view part 2: factors affecting mutual fund returns his week we will discuss the many factors affecting your ultimate return from speci c mutual fund invest- 15 | Thursday, August 21, 2014 | OAKVILLE BEAVER | www.insideHALTON.com ments. This is the second in a two-part series about taking a holistic view of all variables before making decisions. Last week's column covered factors for deciding asset allocation and articulating those decisions in a written Investment Policy Statement. There are many important factors that can help investors make wise mutual fund investment decisions. The goal of a fund is to provide a strong return. This is done by increasing the fund's value by producing revenue while managing its costs and expenses. Dollars & Sense Peter Watson Guest Contributor and the expenses were $5 then the net gain would be $95. Potential for con ict of interest A fund's operating expenses can be tricky because they have the potential for a conict of interest. Some mutual funds have a xed administrative fee charged by their rm to the fund. Those rms either sub-contract that work to other rms or do the work themselves. There is a con ict because these rms receive more pro t if the fees are high or they mark up the costs provided by other rms. Having a fund structured where the manager pro ts from higher administration costs means fund investors and fund managers have a signi cant direct con ict of interest. The fund's management expense ratio -- commonly referred to as the MER -- is a combination of management fees charged by the management company and the fund's operating expenses paid by the fund. The MER costs are paid by the mutual fund and, therefore, reduce the return to the investor. In simple terms, if your fund made $100 On a "governance" basis, this gets a failing grade. A rm might promote its MER as being a speci c gure. It may add to that fee because of its conict of interest and ability to make additional revenue from administration of that fund with no incentive to better manage expenses on behalf of the investors they serve. The trading expense ratio (TER) covers trading commissions and fees. A more actively-traded fund will have higher costs. These are in addition to the MER. Trading can be expensive. These costs are harder to identify, not reported and can be signi cant disadvantage to the fund. They come from a need for immediate acsee Understanding on p.16 Announcing A BrilliAnt new Blyth AcAdemy Burlington locAtion for your grAde 5-12 child, locAted in the VillAge SquAre in Burlington. Join us for a ribbon cutting ceremony: thursday september 11th at 10am Village Square, 422 Pearl Street Units 14­21, Burlington The Flooring Challenge" " We Dare anyone to Match these Deals! INSTALLATION & UNdErpAd INCLUdEd! W NE Shaw Two Tone ShorT Shag pEErLESS HEAVy BErBEr $ 1.99 SQ.fT. $ 2.99 SQ.FT. KArASTAN ELEGANT pLUSH SHAG $ 3.99 MIrAGE HArdwOOd SQ.fT. $ STARTING AT 7.99 SQ.fT. ALL IN-STOCK AREA RUGS... UP TO www.blythacademy.ca 100's of persian rugs, Karastan, Designer and Discounted Area rugs. Hurry in for the best selection. 1/2 prICE Or LESS! SuperStore Following locations only: 125 Cross Ave. TrAfALGAr VILLAGE OAKVILLE · 905-849-4472 OpEN SUNdAyS 228 KING ST. E. Hamilton · 905-546-1921 Visit us: Better advice? Better car insurance? Better visit. Better car insurance starts with real advice from an RBC Insurance advisor. They can reveal benefits like Family Friendly PricingTM*, Vanishing Deductibles and Replacement Car Drop Off & Claim Start. Come in and talk to a Real Advisor. Underwritten by RBC General Insurance Company. ® / TM Trademark(s) of Royal Bank of Canada. Used under licence. *This offer is only available to residents of Canada. The savings is only applied to the cost of the insurance when combining more than one insurance product. This offer can't be combined with any other offer and may be changed or cancelled without notice. Certain conditions apply. At Prince Michael Dr. off Dundas St. E. 905-257-8200 At the Olde Oakville Marketplace 905-815-8121 At Appleby Line near Dundas St. 905-332-2551 TM