Cost & Fees on Investments

There are two categories of costs or fees when it comes to investing through professional money managers. Mutual funds have Management Expense Ratios (MERs) and sales fees.

MERs are charged by mutual fund companies for management of assets held within individual funds. The cost varies from fund to fund and is usually based on the type of investment (broadly categorized as fixed income or equity). Typically fixed income funds range from 1-1.75% while equity funds fall between 2.1-2.9%. MERs are charged regardless whether the fund has made or lost money throughout the year. All funds must report their performance after MERs have been applied.

It is my belief that it is worth the cost to invest through professional fund managers, as investors are able to leverage on their expertise, geographic coverage and access to information. Relinquishing control of the security selection to fund managers also reduces some of the negative emotional effects that can be involved in investing.

Mutual funds also apply sales fees when sold, either front-end, back-end (also known as deferred sales charge) or low-load. Some funds offer a no-load version but these are typically provided through banks or discount brokerages, where investors receive minimal (at best) advice and service. The sales charge applied is decided between the client and advisor. Generally though front-end fees are used when investors plan to only invest for a short-term period while back-end fees are applied when investing for long-term goals (+7 years). Examples of the fee breakdown are provided below.

Note that the front-end/back-end fee model is not usually applied on investment portfolios greater than $500,000. At this level, fees and MERs are applied in a different and more favourable manner. Should you require more information, please free to contact me.

FE Fees

BE Fees

Fund purchase options such as FE, LSC, DSC and the DSC charges on redemption vary fund company to company. Please refer to the particular fund company's DSC charge details provided in the fund's prospectus.