Quick recap: For reference, a good MER is usually between 2-4X, depending on the AOV and a few other factors. While there are still metrics in Facebook that we can use as information, we know that it isn't 100% correct, which makes it unreliable to optimize and scale off of.
Lower expense ratios are better if the investments are otherwise the same. All published performance data is net of costs. So if you're comparing two s&p index funds, the difference in performance will be pretty close to the same as the difference in cost.
Relatively speaking, it's not a high % and is probably barely anything if you don't have a lot invested, but if you don't feel that you are getting value out of the relationship, then . 75% is overpriced. Ask yourself: could I and would I want to do this without a professional?
Long-term investments — ideal for retirement and building wealth — offer higher returns but you'll need to deal with their ups and downs, while short-term investments — best for immediate needs like an emergency fund or a down payment for a house — are typically safer with a lower average rate of return.
A good return on investment is generally considered to be around 7% per year, based on the average historic return of the S&P 500 index, adjusted for inflation. The average return of the U.S. stock market is around 10% per year, adjusted for inflation, dating back to the late 1920s.
$3,000 X 12 months = $36,000 per year. $36,000 / 6% dividend yield = $600,000. On the other hand, if you're more risk-averse and prefer a portfolio yielding 2%, you'd need to invest $1.8 million to reach the $3,000 per month target: $3,000 X 12 months = $36,000 per year.
Anything above 1.5% is considered high.
Industry standards show that financial advisor fees generally range between 0.5% and 1.5% of AUM annually. Placement of a 2% fee may appear steep compared to this average. However, this fee might encompass more comprehensive services or cater to more unique, high-maintenance portfolios.
Fees matter more over longer time frames.
For example, if we look at the 25 funds with the lowest MERs and compare them to the 25 funds with the highest MERs, the returns on a 5 year basis were on average 50% higher. Over a 10-year period, funds with low MERs performed 25% better than funds with high MERs.
Expense ratios ranging from 0.5% to 0.75% are often considered to be low. Expense ratios of above 1.5% are very high and can quickly eat into your returns. Most actively managed mutual funds have expense ratios ranging from 0.5% to 1.5%, whereas most passively managed funds are in the range of 0.2% to 0.5%.
SPY is more expensive with a Total Expense Ratio (TER) of 0.0945%, versus 0.03% for VOO. SPY is up 28.31% year-to-date (YTD) with +$7.13B in YTD flows. VOO performs better with 28.36% YTD performance, and +$103.99B in YTD flows.
Schwab has no account minimum and no commissions for stock, options, and ETF trades. While Schwab doesn't charge any per-trade commissions for options, it does charge $0.65 per contract.
First thing's first: there is no such thing as a universally “good” MER. Although it's common to see a 3x MER referenced as “good” (likely a carryover of the 3x benchmark for LTV to CAC Ratio), a good MER is entirely dependent on your business size, what you're selling, your strategy, and your profitability goals.
It's paid from the fund's management fee, so it's reflected in the fund's MER. It typically ranges from 0.25% to 1.5% of the value of your investment each year. It is to pay for the services and advice the advisor and their firm provide to you. The firm may pay all or part of the commission to your financial advisor.
The MER is the combined costs of managing a fund including operating expenses and taxes. Mutual funds provide important benefits. And like all things that offer value, there's a cost associated with those benefits. The main cost of investing in a mutual fund is captured in the fund's Management Expense Ratio, or MER.
While 1.5% is on the higher end for financial advisor services, if that's what it takes to get the returns you want, then it's not overpaying, so to speak. Staying around 1% for your fee may be standard, but it certainly isn't the high end. You need to decide what you're willing to pay for what you're receiving.
Edward Jones serves as an investment advice fiduciary at the plan level and provides educational services at both the plan and participant levels, if applicable.
But even the best financial advisors are at the whim of the market. Most professional investors who try to beat the market actually underperform it over a given time period. And those who do manage to outperform the market over one time period can rarely outperform it again over the subsequent time period.
A MER above 1.5% is usually considered high, and some MERs are higher than 3%.
For example, a fund with a 1% management fee will charge $1,000 annually for every $100,000 of AUM. The MER or expense ratio represents the total cost of managing and operating a fund and is given as a percentage of the fund's total assets. It includes the management fee and a broad range of expenses.
Understanding Management Fees
Management fees can also cover expenses involved with managing a portfolio, such as fund operations and administrative costs. The management fee varies but usually ranges anywhere from 0.20% to 2.00%, depending on factors such as management style and size of the investment.
Fixed Deposits (FDs): Safe but lower returns (7% return needs an 86 lakh investment for 50K monthly). Dividend Income: Invest in dividend-paying stocks (average 7% yield needs an 85 lakh investment for 50K monthly).
A $100,000 salary can yield a monthly income of $8,333.33, a biweekly paycheck of $3,846.15, a weekly income of $1,923.08, and a daily income of $384.62 based on 260 working days per year.