The MER is an indicator of value
It's worth noting that MER fees do not have to be paid separately by the investor; they're deducted annually from the fund and reflected in the fund's daily net asset value (NAV).
Management Fees
The total percentage of the MER may depend on factors such as the size and success of the fund. The fee typically falls somewhere between 0.5% and 2% of the invested assets. The figure is taken from the final total of each fund's assets under management (AUM).
Management fees, typically ranging from 1.5% to 2.5%, are calculated on committed capital and collected annually or as a one-time, up-front fee upon closing.
How Often Is an Expense Ratio Charged? Mutual fund and ETF expense ratios are calculated and charged annually. As a result of this, a high expense ratio can have a big impact on returns over the long run.
The expense ratio is measured as a percent of your investment in the fund. For example, a fund may charge 0.30 percent. That means you'll pay $30 per year for every $10,000 you have invested in that fund. You'll pay this on an annual basis if you own the fund for the year.
Expense ratios are fees that you pay for investing in a mutual fund, but you don't have to pay the fee out of your pocket. Instead, the mutual fund automatically accounts for the fee when it calculates its share price at the end of each day.
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.
The TER is independent of a fund's MER. It typically does not apply to fixed income transactions since commissions for fixed income funds are already embedded in the price of a bond. The TER aggregates all of the trading costs incurred by a fund over the course of a year and is expressed as a percentage of assets.
Management Expense Ratio (MER) Calculation
The MER is the percentage of the annual fees plus the annual expenses, divided by the average net assets of the fund. Typically, MERs in Canada are below 3%.
The MER is expressed as an annualized percentage of daily average net asset value during the period. For example if a fund's MER is 0.78%, this means the fund incurs annual costs of $78 for every $10,000 invested in a given year.
The MER is charged every day (at 1/365 of the annual rate) on the current total value of your holdings. It has nothing to do with the dividends at all.
The MER includes all the costs of managing a mutual fund including operating expenses and taxes. You don't pay the MER directly. It's paid by the fund itself. Mutual funds have MERs so they can provide value and benefits to investors.
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.
An annual fee is a cost you pay credit card issuers for having certain cards. It's normally due once a year, but some issuers ask for monthly installments.
A MER above 1.5% is usually considered high, and some MERs are higher than 3%.
Management expense ratio (MER)
Expressed as a percentage of assets under management (AUM), it captures the management fee, operating expenses and taxes incurred by a fund on an annual basis.
TER (Total Expense Ratio)
The TER of a fund includes the basic fund management charge (AMC) and a number of additional costs such as audit and legal fees, plus commissions paid to analysts for research and performance fees.
RER (kcal/day) = 70 * (BWkg)0.75
These total daily energy requirements can then be ESTIMATED by multiplying the RER by an appropriate factor to estimate maintenance energy requirement (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.
By hiring a single investment advisor, you receive more streamlined advice as only one person manages all your money matters removing any chance of conflicting advice or any disagreement. This also allows the chosen individual to clear up your doubts and offer guidance to you on how to best attain your financial goals.
Expense ratios are annual fees that investors pay to cover a fund's expenses, such as management and marketing. If you invest in a fund with a 1% expense ratio, you'll pay $10 annually for every $1,000 invested. Expense ratios are subtracted automatically, making them easy to miss.
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.
ETFs often provide more tax advantages since investors only pay capital gains taxes when they sell their shares. Mutual funds offer benefits like professional active management and stronger oversight, though these features usually come with higher costs.