Investing

LOC of Mutual Fund and Net Worth Calculation

  • Last Updated:
  • Dec 3rd, 2020 5:18 pm
[OP]
Newbie
Dec 2, 2020
0 posts

LOC of Mutual Fund and Net Worth Calculation

Hello All,

I am planning my next financial year and wanted to get your inputs if any of my assumptions or calculations are wrong. Please also let me know if something is missing. I have $100,000 in a mutual fund with the ticket symbole TDB422. Year-over-year growth of TDB422 is as follows, and I am assuming that the average from the last 5 years will be applied for the next year. Year-over-Year Growth.png
I have a line of credit with 3.95% interest.
Compariso.png
I am making four comparisons where either $20,000 or $1,000 is taking out from either the LOC or the mutual fund. Compariso.png
This analysis is looking at not repaying the amount taken out for one year, the mutual fund grows according to the average 5 year history, and the net worth is calculated only from the LOC and mutual fund amounts. Can anyone spot an error in the comparisons?

It's crazy to see that taking out $20,000 from the LOC instead of the mutual fund will cost $25,078 in net worth calculation. Somebody please correct me.
2 replies
Jr. Member
Jun 17, 2018
122 posts
95 upvotes
Hamilton, Bermuda
czubakabra wrote: Year-over-year growth of TDB422 is as follows, and I am assuming that the average from the last 5 years will be applied for the next year.
That's debatable...

Also, your math does not take into considerations taxes. Furthermore, never forget that taking money from your LOC instead of selling mutual funds results in a more leveraged portfolio overall. This increases the standard deviation of the actual returns... Not to mention your mutual fund is concentrated in a single sector.
Newbie
Mar 29, 2011
56 posts
53 upvotes
ottawa
That and your fund won't return 25% next year. Past performance is not indicative of future returns.

Also, in your first calculation, you have removed 20k from the fund, and then have -20k cash. You don't get the growth on 20k, so by your ridiculous ror assumption, you are out about 5k in growth.

Top