On Mutual Funds - a story: Part I

Of course, there are certain advantages to it like greater diversification which reduces risk, and ability to participate with less money and being able to select the level of risk you want to take.

... you must have a crystal ball 'cause that was what someone told me before which made me go along with mutual funds. (But there's a happy ending to my story ... non-fiction, of course :-).

When I left the Royal Bank employment to start my own business, I had a little amount ($10k) stashed in a registered plan that was funded half-and-half by employer/employee and since I was no longer with the company, it was no longer being funded. However, it sat invested in a *money market account* and it regularly earned a small interest and it kept growing steadily.  My money went up steadily over the years to $17K. Then, with a stroke of bad luck, I met a Filipino *mutual fund manager* (daw) of some sorts and what you had written (and I quoted above) was basically the same *selling point* he had said ... basically it will reduce my risk in investing. 

In hindsight, I really didn't have any risk as it was in a Royal Bank money market account and although it was earning a *guaranteed*  small interest payment (between 1 to 3% apr), it would never have a negative result.  But I became *greedy* after perusing a multi-colored (with all the pie charts that would make an investor hungry), smiling-faced happy investors pics (replete with *proven* testimonies)  and oh-so enticing mutual fund brochure touting 10% growth plus, plus, plus. I was already counting my chickens. It was such a great pitch that I threw caution to the wind and went along the (later unhappy) trails of mutual-funding.  And I didn't even know what it was all about. I was hooked in like a fish, wide-eyed ... line and sinker too. Within two years, my little nest egg plummeted to a quail's egg. Down to $12k.  My pinoy friend was very apologetic saying the market had taken a downswing (wasn't his fault really) and that he had no
control as he just *submitted* my contribution to his *real* fund manager ... and he was genuinely sorry, I suppose, that he even offered to help me take my money out of his mutual fund hands :-).

I was so dejected, but for every dark cloud there must be enough rain to drown our sorrows and beyond that, a silver lining. The sun will come out tomorrow, as little Annie would sing.

Well, in a downside market, another sector of the *investing industry* came crashing down as well.  The real estate market was going bust.  Three years ago, I went shopping for bargains and I saw one being auctioned off for $50k less than its market value. A 6-BR 2,000 (total) sq ft. brick bungalow, full basement with a half-acre lot.  My money was coming down fast in the mutal fund so I decided to pull out, which after processing and all damned fees, went south even further to $8k. To get a better credit, I paid off $3k of my debts and used what's remaining of my money ($5k) as a *bidding money* and, if successful, my deposit would be used for closing costs.

One minor problem ... if I didn't come up with the rest of the purchase money, either through cash or mortgage loan, I'd lose my deposit. (I'm not even a gambling aficionado).

My real-estate agent (a Lebanese-Canadian Muslim) didn't believe we could win it. My competitors (he said) were all developers with money coming out of their ears.  I had one chance to bid and that's it. "If we win, fine," he lamented, "but I doubt it." He telephoned and announced that our bid *amount* languished at the bottom. "Oh well," I uttered. "Don't worry, there are other houses around," he encouraged.

At the end of auction, I received a frantic call from my agent. "We did it!" he screamed, I thought my eardrums would pop.

I don't know what happened but I beat out 6 developer/investors who were slated to tear down the house and build townhouses in the huge-lot property.  For some unknown reason, Re/Max (the realtor) along with CIBC (the bank owner who foreclosed on the property) awarded me the auctioned house.  With a better credit, thank God, I was able to secure a loan. A mortgage broker (an Indian-Canadian  Muslim) ... a friend of my real estate agent, offered an 80% lower interest first and 20% second. However, he said, if I have a *job offer* to show, (he knew I was retired), he could bump it up to 95% first mortgage with a lower rate and 5% second mortgage at a higher interest.