Page 185 - A Canuck's Guide to Financial Literacy 2020
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Mutual Funds
A mutual fund is essentially a basket of securities and when you buy a mutual fund, you’re
buying a share of that basket. Many investors choose to invest in mutual funds because
they’re managed by professional portfolio managers and their teams. This gives the investor
a piece of mind when it comes to investing as they don’t have to worry about watching the
market or monitoring their portfolios. For this peace of mind, the manager charges a fee
known as the Management Expense Ratio (MER). There are a wide variety of mutual funds
to choose from and they have different risk profiles.
Management Expense Ratio
Many people think that investing in mutual funds is free. That is not the case. Mutual funds
have a management expense ratio known as the MER which is total annual expenses
relative to the fund’s assets. The MER is the cost of investing in the mutual fund and is
usually expressed as a percentage.
An example of the MER breakdown is below:
