MER stands for Management Expense Ratio. It is the annual cost of managing an investment fund, such as a mutual fund or ETF, expressed as a percentage of the fund’s total assets.
How It Works
If a fund has an MER of 1.5%, it means $15 is taken annually for every $1,000 invested to cover management fees, administrative costs, and other expenses. The MER is deducted directly from the fund’s returns, so investors don’t pay it as a separate bill.
Why It Matters
- Impact on returns: Higher MERs reduce long-term investment growth.
- Comparison tool: Helps investors compare the cost efficiency of different funds.
Final Thoughts
MER is an important factor in choosing investments. Lower MERs generally mean more of your money stays invested and grows over time, especially for long-term portfolios.