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.
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.
A good ratio is generally viewed as one between 0.5% and 0.75%, balancing cost and value. Note that, because portfolios of actively managed funds must be managed in real time, those funds usually have greater expense ratios than passively managed funds.
Bottom Line. A 1% annual fee on a multi-million-dollar investment portfolio is roughly typical of the fees charged by many financial advisors. But that's not inherently a good or bad thing, but rather should hold weight in your decision about whether to use an advisor's services.
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.
Anything above 1.5% is considered high.
Typically, any expense ratio higher than 1 percent is high and should be avoided. Over an investing career, a low expense ratio could easily save you tens of thousands of dollars, if not more. And that's real money for you and your retirement.
Expense ratios can range from as low as 0.03% for some passively managed ETFs to over 1% for actively managed or specialized ETFs. Factoring in 0.5% to 0.75% for actively managed fees is considered to be around the average.
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.
Aim for a “good MER” of 0.25% to 0.75% by investing in ETFs and using a private investment management firm to manage your portfolio.
Total revenue is just twice the amount of ad spend. (Or $2 in revenue earned for every ad dollar spent.) A good MER benchmark depends on the industry, but it is typically anything above 3.0. Meaning revenue is three times more than ad spend, or $3 in revenue earned for every ad dollar spent.
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.
Importance of the Management Expense Ratio
The lower the MER fee, the better off the fund's investors are because the investment return generated is higher.
Some problems like transmitter and receiver phase noise, incorrect modulation profiles and even data collisions can certainly contribute to low reported MER, but the most common causes typically are the things that should be done correctly in the first place. Think cable 101.
How do MERs work? 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.
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.
Low-cost equity mutual funds will have expense ratios of 0.5% or lower. Low-cost bond ETFs often have expense ratios under 0.2%, while low-cost bond mutual funds typically have an expense ratio of 0.4% or lower.
The Rule of 72 is a simple way to estimate how long it will take your investments to double by dividing 72 by your expected annual return rate. Higher-risk investments like stocks have historically doubled money faster (around seven years) compared with lower-risk options like bonds (around 12 years).
Ratios above 1.5% are considered high. In this article, we explore the meaning of the expense ratio, its formula, how it works, and its impact on returns with relevant examples.
Equity Mutual Funds: Typically, an exit load of 1% is charged if units are redeemed within 12 months of investment. Long-term holdings usually incur no charges.
A good rule of thumb is to not invest in any fund with an expense ratio higher than 1% since many ETFs have expense ratios that are much lower. Also, ETFs tend to be passively managed, which keeps the management fee low.
For actively managed funds, you don't really want to go above 1% for large company funds or 1.25% for small company funds, according to Investopedia. There are funds out there that have astronomically large expense ratios, but this is often far too expensive and unjustified.
Invesco QQQ's total expense ratio is 0.20%. Investment returns and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than performance quoted.