Personal Finance

Trying to Understand Investing in Mutual Funds

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  • Nov 25th, 2013 10:47 am
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[OP]
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Nov 26, 2011
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Trying to Understand Investing in Mutual Funds

I currently have an RESP for my son with Scotiabank. I invested in the Canadian Dividend Fund. I originally invested $1000 and got 22.5832 or something units and bought it when it was $44.28 per unit.

On Nov 6 I added $250 into the investment. This was at around 1pm on Nov 6 when I told my advisor to invest $250 into the dividend fund. Now on Nov 12 it shows on my transaction that I bought $250 of the stock. 6 Days after I originally wanted to buy it. Now my account states avg cost/unit $44.48 and number of units 28.1050. Closing price on Nov 11 was $45.32.

So I want to know how many units my $250 bought and at what price? Because Nov 11 price was $45.32 and on Nov 6 I do not remember the price but remembered it being way lower than the $45.32 that was the price on Nov 11.
19 replies
Sr. Member
Nov 16, 2006
560 posts
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Toronto
First of all Mutual Funds usually have a 3 business day settling period, that is why it would show a date of Nov. 12 when you gave them instructions on Nov. 6; it isn't as simple as simply making a deposit. When you place an order to buy a fund as you did, it will take the price after market closing at whatever settling date the system determines, your case being Nov. 11 or 12. Your advisor should be able to give you the breakdown as to the unit cost at each transaction though the math doesn't seem all that complicated as long as your figures are correct.

$1000 original investment at $44.28 per unit average cost; 22.5832 units
$250 additional investment results in additional units of 5.5218
$250/5.5218 = $45.27

To check the work; $44.48 * 28.1050 = $1250.11

Everything seems correct. The average per unit adjusts every time you make an investment into the same fund. It's rare for banks to mess this up but definitely keep your eye open and ask questions if something isn't clear.
Moderator
May 28, 2012
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Perhaps mutual funds, and equities for that matter, are not for you. If you are going to micro-manage each contribution, then you are bound to be disappointed. Think of the broad picture - invest in good quality stocks or mutual funds (that have low mer's) over the long term. If it's an RESP, then there is a fairly long time horizon when started early; the average return should be greater than a fixed investment earning 1-3%.
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Jan 31, 2006
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Mutual funds unit cost is up and down, today may/might be higher or lower than yesterday. But if you purchase on november 6 the unit cost should be based on november 6 price but the actual transaction will show up 3 business days later.
[OP]
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Nov 26, 2011
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Ottawa
Mars2012 wrote:
Nov 12th, 2013 5:04 pm
Perhaps mutual funds, and equities for that matter, are not for you. If you are going to micro-manage each contribution, then you are bound to be disappointed. Think of the broad picture - invest in good quality stocks or mutual funds (that have low mer's) over the long term. If it's an RESP, then there is a fairly long time horizon when started early; the average return should be greater than a fixed investment earning 1-3%.
Thanks to both responses I understand it now. The mutual fund I bave has an MER of 1.72 but the avg annual return is over 8.5 and MER has been supposedly taken out. So technically of it makes more than 3 percent it woild be good.

So I should not worry aboit what prices to get it at just invest on a regular basis. Do you guys think I should also add another investment and add to that or just keep it at one. My bank advisor says I should juat invest in this for now. But till how long I don't know. What about shaving off the gains and reinvesting is there a penalty or something
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Feb 22, 2013
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As you've been told in two different threads now, you need to worry about figuring our your basic financial situation (e.g. your income...) before you worry about in which mutual funds to invest and in which accounts.
[OP]
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Nov 26, 2011
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CWatson87 wrote:
Nov 12th, 2013 9:38 pm
As you've been told in two different threads now, you need to worry about figuring our your basic financial situation (e.g. your income...) before you worry about in which mutual funds to invest and in which accounts.
I haven't said anytjing regarding me in needing to know my financial situation. I am talking aboit my Resp and that to comfortably will reach the $2500 limit for this year. I was just tryong to understand at what price it bought the shares
[OP]
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Nov 26, 2011
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So can someone tell me what I should do with my mutual funds. I have now invested $2000. I don't know how to calculate the percentage of return if someone can show me. As I cannot take money out until another 16-17 yrs do I just keep adding to the investment?
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Feb 15, 2013
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You should start reading books by John Bogle
Moderator
May 28, 2012
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masoud100 wrote:
Nov 24th, 2013 2:36 pm
So can someone tell me what I should do with my mutual funds. I have now invested $2000. I don't know how to calculate the percentage of return if someone can show me. As I cannot take money out until another 16-17 yrs do I just keep adding to the investment?
You will receive quarterly statements for the RESP which states the value up to a certain date. You really shouldn't fixate on the value of the funds from one day to the next. And yes, if you can afford it, put money in every year because you will get the grant(s) for that year.
[OP]
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Nov 26, 2011
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Mars2012 wrote:
Nov 24th, 2013 3:18 pm
You will receive quarterly statements for the RESP which states the value up to a certain date. You really shouldn't fixate on the value of the funds from one day to the next. And yes, if you can afford it, put money in every year because you will get the grant(s) for that year.
How long does it take.to get my grants? I have not recieved anything and currently have put in $2000
Banned
Nov 27, 2006
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masoud100 wrote:
Nov 24th, 2013 4:58 pm
How long does it take.to get my grants? I have not recieved anything and currently have put in $2000
like 60 days
[OP]
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Nov 26, 2011
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sirex wrote:
Nov 24th, 2013 5:24 pm
like 60 days
Ok I invested the first $1000 maybe 40 days ago. How long should pass since I should get worried about the grants not coming in. Also regarding the mutual funds it will take me a while to get the books and read them. Can someone just answer if I have to do anything besides to continue to max out the $2500 limit. Like do I buy other mutual funds as well or just keep adding to this.
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May 28, 2012
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masoud100 wrote:
Nov 24th, 2013 5:45 pm
Ok I invested the first $1000 maybe 40 days ago. How long should pass since I should get worried about the grants not coming in. Also regarding the mutual funds it will take me a while to get the books and read them. Can someone just answer if I have to do anything besides to continue to max out the $2500 limit. Like do I buy other mutual funds as well or just keep adding to this.
You have to arrange with the bank where you want the grant to go. If you don't say where, they will simply put it into a savings-type account. You have the option to move it into whatever you want after the grant money has been deposited into the RESP.

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