Fund 1 final value
$547,063
- Net return
- 1.00% fee
How much do management fees really cost you?
Two funds hold the same investments and earn the same return before fees. The only difference is the management expense ratio (MER). Enter your own numbers to see what that gap does to your money over time.
YOUR ASSUMPTIONS
Same fund, different fee
COST OF FEES
16.2% of the final balanceFees cost you $105,491
Fund 2 final value
$652,555
- Net return
- 0.09% fee
Over 30 years you contribute $190,000. The higher fee gives up 23% of the growth the cheaper fund earns.
GROWTH OVER TIME
The gap widens every year.
Fund 2 (0.09%) Fund 1 (1%) Contributions
Illustration only ยท before taxes and other costsHover the chart to explore values
What is a management expense ratio (MER)?
The MER is the yearly percentage a fund takes to cover management, administration and, for many bank mutual funds, advisor compensation. It is not billed to you separately. It is deducted from the fund's returns, so you never see a charge on your statement, only a lower return.
Many Canadian bank and advisor-sold mutual funds still carry MERs around 1% to 2.5%, while broad index ETFs such as VFV or XEQT are far cheaper. Check the fund's fund facts or ETF facts document for the current MER, as fees change.
Why a small percentage becomes a large dollar amount
Fees compound against you. Each year the fee is taken from a bigger balance, and the money taken can no longer grow. A 0.9 percentage point difference sounds tiny, but over 25 to 30 years it commonly removes a quarter or more of the final portfolio.
The calculator applies the same starting amount, monthly contributions and gross growth to both funds. The only variable is the fee, so the difference shown is the cost of fees alone.
How this calculator works
Net annual return equals your assumed gross growth rate minus the fee. That annual rate is converted to a monthly rate, your contribution is added at the start of each month, and the balance grows for the month. The chart shows year-end balances.
The growth rate is an assumption for illustration, not a forecast. It also ignores taxes, trading costs, trailing commissions billed separately and any advice or service value you may receive for a higher fee.
GOOD TO KNOW
Frequently asked questions
Clear answers, without the jargon.
What is a good management fee for an investment fund in Canada?
Broad-market index ETFs often charge under 0.25% a year, and some, like many S&P 500 and all-equity ETFs, charge well under 0.2%. Actively managed mutual funds sold through banks commonly charge 1% to 2.5%. Always confirm the current MER in the fund's official documents.
Is the MER taken out of my account?
No. The MER is deducted inside the fund before returns are reported, so it never appears as a separate charge. It is already reflected in the fund's published performance.
Can a higher-fee fund be worth it?
Possibly, if it delivers returns after fees that beat a comparable low-cost option, or if the fee pays for advice that keeps you investing and avoids costly mistakes. Evidence shows that most actively managed funds trail their benchmark after fees over long periods, so the extra cost needs to be justified.
Does this calculator include advisor fees and taxes?
No. It models only the management fee you enter. Separate advisor fees, trailing commissions, trading costs and taxes would make the gap larger or smaller depending on your situation.