One key to wealth creation is mitigating taxes. Usually when investors move money out of one non-registered fund and into another, they have to pay capital gains. To alleviate that problem, fund companies created a “corporate class” structure, which lets people move between funds without triggering gains.
According to Mackenzie Investments, if you invested $100,000 in a corporate class fund that earned 6% a year, you would have $370,268 after 25 years, assuming it’s taxed annually at the top marginal rate. If you held an interest-paying investment over the same period, you would have made $239,841. In some ways, it’s like an RRSP; you only pay when you withdraw, which means your investments can grow tax-free. This is why it only makes sense to put non-registered investments in corporate class funds.
(Research, editorial and spiritual support provided by Bryan Borzykowski)