I am a 21 year old Canadian who is employed full time. I have no wife or kids nor do I own any property. I have no type of savings set up (investments, CPP, etc.).

Each month I have 400$ leftover after bills and expenses (not including the student loan and savings I'm about to mention).

I have a student loan that requires 14,670 to be paid off in monthly installments at a floating interest rate of 3.7% . It appears I am charged interest daily (assuming this means its compounded daily?) of around 1.50$.

After looking into some mutual funds, a low-mid risk fund managed by TD Bank caught my eye. The fund's average return rate since inception (14 years ago) is 8.84% and a MER of 2.03%. I assume that it's safe to say that it has a return rate of around 6%.

I know that the longer it takes me to pay off my student loan debt, the more interest I will be paying in total. I'm also aware that the more I invest in my mutual fund while I am young, the more money my investment will be worth due to accumulated interest and re-invested dividends.

I have been unable to find a web explanation that addresses my situation.

What is the best possible way to allocate 400$ so that I am paying the least student loan interest while at the same time allowing my mutual fund to grow as fast as possible?

My advanced math skill are quite rusty. I imagine that the solution to this has something to do with systems of equations since it involves two values changing relative to each other.

Thank you.

  • 2
    Don't you have to pay some portion of that $400 to the loans at a minimum?
    – Hart CO
    Commented Oct 1, 2018 at 20:15

1 Answer 1


I would look more into the TER then the MER, because some funds have also high cost for switching there position etc so looking at the total expense is a better measurement then just the biggest position.

I am personally not a fan of managed funds, since in average the index beats the managed fund with lower cost. In the ads you will see often good numbers, but for me that are often the lucky survivors. On retirement contracts i saw often funds performing bad, who had a solid history before like yours.

As a comparision the msci world made around 8 per cent the last 15 years, which is through his high diversification one of the safest investment in stock (atleast for me) - with a TER from 0,1-0,2%.

But getting 3,7% guaranteed, would be my prefered investment even when the big index beat those value regulary. Because if the stocks run bad, you might be a victiom of it in several ways (job market + stock + debt).

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