Mutual fund fee Calculator

This calculator is designed to measure the amount of mutual fund fees paid by investors during the entire holding period, based on average annual MER data collected over as many years as possible (up to 10 years). Fees, as measured by a fund’s management expense ratio (MER) are embedded in a fund’s results. Therefore, a fund’s return is net of fees.

In this calculator, returns and fees are two independent variables. Although logically interconnected, in the context of the calculations performed by this tool, a higher fee does not automatically decrease the investment return of the fund. This is due to the fact that both return and fees are given values.

The following is an example:

Both funds returned 5% for the same period. In this example, these two different funds had the same investment return (which is net of fees) but a different MER (as expressed in the field fees). Consequently, the investor ended with the same final investment value after a holding period of ten years, but the total embedded fees paid to the fund during the period were different.

This calculator shows you how fees may affect what you make investing in mutual funds. All returns are based on past performance data collected over as many years as possible (up to 10 years), and updated once annually. The calculations use 10 year average annual returns as a proxy for all time periods, and will not match actual mutual fund return numbers. The tool is meant to show the effects of fees and sales charges on returns in general rather than a commentary on mutual fund performance or specific funds/manufacturers. The tool should not be used to predict future results.

The calculator assumes that:

1. You held your investment for at least one year, and no more than 25 years.

2. You invested your money as a lump sum at the start. You did not contribute more over time.

3. You reinvested any fund distributions. The fund’s return factors in these distributions.

4. The Management Expense Ratio (MER) did not change over the term of the investment. In real-life, MERs can change over time. The average MER is based on data collected over as many years as possible (up to 10 years).

5. There is no adjustment for:

• inflation.
• any taxes due, such as on funds held outside of an RRSP.
• the cost of borrowing (if you borrowed to invest).

6. The Trading Expense Ratio (TER) is factored into the fund valuation. It is not shown as a separate cost. The TER tells you how much the fund spends to cover the cost of transactions like buying and selling stocks. Trading expenses can be a key element of fund costs, and they’re not reflected in the MER.

TERs are embedded in the fund valuation, which is why this calculation does not consider TERs as a separate cost. However, TERs can help investors compare different funds when making their investment decision.

7. If you held a back end load or deferred low load fund, you did not exercise your option to redeem up to 10% of your investment each year, free of fees. Typically unit holders are entitled to redeem up to 10% of the number of shares they held on December 31 of the previous year plus 10% of the shares they purchased in the current year less 10% of the shares they would have received from current year cash distributions - free of redemption charges.

8. The MER is applied to the funds average assets through the year. For example, If a fund has a 2% MER and the fund’s assets at the beginning of the year are $100 and at the end of the year $110, the MER will be applied to $105. Since in practice the MER is charged daily to the Net Asset Value of the fund, this midpoint value is a reasonable stand-in or proxy for the total MER charged during a given period (assuming growth is linear).

The formula is calculated as follows: Calculated MER = value after load and fees (last year)*(1+MER+Fund Return/2)*MER.

9. This calculator is designed to measure the amount of mutual fund fees paid by investors during the entire holding period. Fees, as measured by a fund’s management expense ratio (MER) are embedded in a fund’s results. Therefore, a fund’s return is net of fees.

10. In this calculator, returns and fees are two independent variables. Although interconnected, in the context of the calculations performed by this tool, a higher fee does not automatically decrease the investment return of the fund. This is due to the fact that both return and fees are given values.

11. Series F funds are usually only available through an advisor, often through a fee-based account where you pay a single annual fee for services or through a fee-for-service plan. Since you’re already paying a fee, mutual fund companies don’t pay any commission to the advisor. This keeps MERs lower than those for other funds. The fee you pay to your advisor should be added into the “Other fees” field.