By April 11, 2013 Read More →

Fees and Investment Returns

Fees and Investment Returns Calculator
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The Management Expense Ratio (MER) is the fee that an investment fund company charges you to manage the money you invest in a fund, such as a mutual fund. The MER is set as a percentage of the fund’s assets. The percentage varies depending on the fund, from less than 1% to over 3%.

The MER lowers your investment return by that percentage, every year your money is in the fund. If the fund had an annual return of 6% before deducting the MER of 2%, your net annual return would be 4% (6% minus 2% MER).  The less you pay for your investments, the more you keep, making the cost of investing something you should try to minimize as part of your financial plan.

See Also: MER Infographic

For example, let’s compare a $100,000 investment in two mutual funds over a 20 year period. Both funds earn the same 6% annual rate of return but Fund 1 has an MER of 1% while Fund 2 has an MER of 2%. The net return after deducting the MER is 5% forFund 1 and 4% for Fund 2.

Fund 1 will grow to $265,330 while Fund 2 grows to $219,112. By investing in a less expensive fund, you will wind up with an extra $46,218 after 20 years.

Use this financial calculator to compare the effect of different MERs on the performance of two hypothetical investments.

MERs and Investment Returns Calculator

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