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What Is MER?
MER stands for Management Expense Ratio. It's the annual fee charged by a fund (mutual fund or ETF) to cover operating costs, including management fees, administrative expenses, and other costs.
MER is expressed as a percentage of your investment. A 1% MER means you pay $100 per year for every $10,000 invested.
How MER Affects Your Returns
Here's the critical part: MER is deducted automatically from the fund's returns before you see them. You never write a cheque, so the impact is invisible—but it's very real.
Example: $100,000 Over 25 Years
- 0.25% MER (typical ETF): Final value = $432,194
- 1.00% MER (average mutual fund): Final value = $368,890
- 2.00% MER (expensive mutual fund): Final value = $295,303
The difference between 0.25% and 2.00% MER is over $136,000—money that could have been yours.
Typical MER Ranges
- Index ETFs: 0.05% - 0.25%
- All-in-one ETFs: 0.20% - 0.25%
- Robo-advisors: 0.40% - 0.70% (including underlying ETF fees)
- Actively managed mutual funds: 1.50% - 2.50%
- Bank mutual funds: Often 2.00% or higher
⚠️ Important: Many Canadians unknowingly pay 2%+ annually on mutual funds sold through banks. Over decades, this costs hundreds of thousands of dollars.
What You Get for Higher Fees
In theory, higher fees pay for active management—professionals trying to beat the market. In practice, research consistently shows:
- Most actively managed funds underperform index funds
- Past performance doesn't predict future results
- Higher fees don't correlate with better returns
- The fee drag is the only certain outcome
💡 Note: Focus on what you can control: fees, diversification, and staying invested. Low-cost index ETFs handle all three.
How to Find a Fund's MER
Check the fund's fact sheet or prospectus, available on the provider's website. Compare MERs before investing. Even small differences compound into significant amounts over time.
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About Maple Wealth Guide
Maple Wealth Guide is an independent Canadian financial education website. Our team of educational writers researches and explains investment concepts, retirement-related topics, and personal finance information for Canadians aged 50 and over. We are not licensed financial advisors and do not provide personalized recommendations. All content is for educational purposes only.