Management Expense Ratio (MER)

A Management Expense Ratio, or MER, is the annual fee that a mutual fund or ETF charges to manage your money. It’s expressed as a percentage. If a fund has a 2% MER and you have $10,000 invested, you’re paying $200 per year in fees.

You won’t see this fee come out of your bank account. It gets quietly deducted from your returns inside the fund, which is part of why so many people never realize they’re paying it.

Why it matters

In Canada, mutual fund MERs are among the highest in the world. A typical Canadian mutual fund charges between 1.5% and 2.5% per year. By comparison, a broad Canadian index ETF might charge 0.05% to 0.25%.

That gap might not sound like much, but it compounds over time. On a $50,000 portfolio growing at 7% per year over 25 years, the difference between a 2% MER and a 0.20% MER is roughly $100,000 in lost growth. That’s money that stayed in the fund company’s pocket instead of yours. We break this down further in our guide to investment fees.

This doesn’t mean every mutual fund is a bad deal, or that the cheapest option is always the best. But it does mean fees deserve your attention. Before you invest in any fund, check the MER. Your brokerage or a quick search on the fund company’s website will show it. Once you know the number, you can decide whether what you’re getting is worth what you’re paying.

In Greenline

Greenline calculates the total fees you’re paying across all your funds and shows you the dollar amount per year.