MERs and other managed fund expenses

Thursday 3 June 2004

If a novice investor were to make a decision of which funds to invest in based purely on the cost of investing, then chances are they would invest all their money in index funds. Why? Because index funds have the lowest expense ratios over the range of investment products available ...

By The Landlord

The Management Expense Ratio (MER) is generally considered to be the cost of investing and can vary from 0.5 per cent to in excess of 2.5 per cent. For an investment of $10,000, for example, this MER range can mean the difference between $75 or $250 per annum. Over a 20-year investment, the future value of this difference is equivalent to $7676.41.

The MER is typically the fees and operating expenses as a percentage of the average net assets of the fund. This ratio is likely to include administration, audit, legal and custodial costs but exclude brokerage fees, taxes and interest as these are not considered operating expenses.

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