Greetings to subscribers, both new and seasoned. As we begin a new year, there is some good news for investors. But let’s deal with last year first. 2022 was a...
2022 Investing: Larry’s Perspective I had intended to post this in January but have been very busy with my regular work and well as a special project. But I hope...
Well, 2020 was a wild year for investors! Markets will continue to bounce around but I hope the 2021 ride is not quite so bumpy. Alas, as always, we must expect the...
Hi Larry! I love to use your T-Rex Score and recommend it to my friends. They are shocked to know how much they’ve wasted in fees.
However, how does the T-Rex Score calculate fees when my friends invest by direct deposit instead of one time investment?
Thanks for your comment! The T-Rex Score is simply designed to reveal the percentage of investment returns you actually get to keep, after fees. For mutual fund and ETF investors who know their annual fee levels (MERs), it is pretty easy to calculate your Score. If you advisor charges you fees directly, you can add any product fees and calculate your Score. For products that do not charge fees, like GICs, you cannot calculate a Score. Hope that helps! Larry
On the surface, it looks like there is a vast misrepresentation in your calculator. What I mean by that, is your calculator shows the fee portion growing over time a higher rate than the investment principle. Logic dictates that 1.74% (example MER) compounded over time, will not grow by as much or as fast as 9.60% (example avg annual NET return) over the same time. Your calculator shows that given enough time, fees will always outweigh net investment returns? This is a bit of a mathematical conundrum because if you separate the two, $10 for example will grow faster and exponentially larger at 9.60% annualized return compared to 1.74%. And as you describe the amount “lost to fees and not compounded” cannot be double counted and added on top of the portion already calculated for MER (that would be absurd). I think you must field similar questions daily so you must already have a response prepared, and if you could please explain your reasoning, I’d greatly appreciate it. Thanks!
The red curve shows total gain over time based on total compound return of underlying assets. The yellow curve show the gain an investor keeps after fees. For example if asset return is 8% compounded (red curve) and fees are 1.5%, the yellow curve show the compound return at 6.5% (what the investor earns after fees. Hope that helps.
Yanjing Qiu
April 15, 2019 5:22 pmHi Larry! I love to use your T-Rex Score and recommend it to my friends. They are shocked to know how much they’ve wasted in fees.
However, how does the T-Rex Score calculate fees when my friends invest by direct deposit instead of one time investment?
Larry Bates
April 19, 2019 12:48 pmThanks for your comment! The T-Rex Score is simply designed to reveal the percentage of investment returns you actually get to keep, after fees. For mutual fund and ETF investors who know their annual fee levels (MERs), it is pretty easy to calculate your Score. If you advisor charges you fees directly, you can add any product fees and calculate your Score. For products that do not charge fees, like GICs, you cannot calculate a Score. Hope that helps! Larry
Craig
April 25, 2019 11:28 pmOn the surface, it looks like there is a vast misrepresentation in your calculator. What I mean by that, is your calculator shows the fee portion growing over time a higher rate than the investment principle. Logic dictates that 1.74% (example MER) compounded over time, will not grow by as much or as fast as 9.60% (example avg annual NET return) over the same time. Your calculator shows that given enough time, fees will always outweigh net investment returns? This is a bit of a mathematical conundrum because if you separate the two, $10 for example will grow faster and exponentially larger at 9.60% annualized return compared to 1.74%. And as you describe the amount “lost to fees and not compounded” cannot be double counted and added on top of the portion already calculated for MER (that would be absurd). I think you must field similar questions daily so you must already have a response prepared, and if you could please explain your reasoning, I’d greatly appreciate it. Thanks!
Larry Bates
April 28, 2019 5:26 pmThe red curve shows total gain over time based on total compound return of underlying assets. The yellow curve show the gain an investor keeps after fees. For example if asset return is 8% compounded (red curve) and fees are 1.5%, the yellow curve show the compound return at 6.5% (what the investor earns after fees. Hope that helps.