MER Calculator: What Fund Fees Cost You, and What the MER Includes

A fund’s management expense ratio (MER) is its yearly cost of management fees and operating expenses, shown as a percentage of the fund’s value. You don’t pay it directly: the fund pays it, and it comes out of the return you see. The calculator below puts two MERs side by side on the same savings and shows the gap in dollars.

How the numbers are worked out, and what they leave out, is in how the calculator works.

What is an MER?

The MER adds up what it costs to run a fund: the management fee paid to the fund company and the fund’s operating expenses. Operating costs can include accounting, legal and audit fees, regulatory filings and taxes, says the Nova Scotia Securities Commission. Mutual funds and ETFs both have one, and ETF MERs are usually lower than mutual fund MERs in the same class.

The MER is charged whether or not the fund does well, and you pay it even in a year when the fund loses money. The figure in a fund’s documents is a past one: an ETF Facts document uses the MER from the fund’s most recent management report of fund performance.

MER vs management fee vs TER: what’s the difference?

The terms overlap, which is why they get mixed up:

• Management fee: one part of the MER, paid to the fund company. When the fund pays a trailing commission, that comes out of the management fee too.
• MER: the management fee plus operating expenses.
• Trading expense ratio (TER): the fund’s trading costs, reported on its own beside the MER.
• Fund expenses, or fund expense ratio: the MER plus the TER, the total an ETF Facts document shows as the fund’s ongoing expenses.

“Management fee” can also mean something else: a fee an adviser charges, as a percentage of your account’s value, for managing your overall account. That fee is separate from the funds’ MERs.

Fund costs are also getting easier to see in dollars. Under total cost reporting, the yearly report on charges from your dealer adds the fund expenses you paid as one dollar amount for the account, and the first of these reports covers the year ending December 31, 2026.

How is the MER taken from your return?

A fund’s fees and expenses come out of its assets before its returns are worked out and published. So the return on your statement is already net of the MER. The Nova Scotia Securities Commission’s example: a fund that earns 6% with a 1% MER shows a 5% return on your statement. The cost doesn’t stop at the fee itself, because the money paid in fees also stops growing.

Where do trailing commissions fit?

A trailing commission is paid out of the fund’s management fee, so it is already inside the MER. The Ontario Securities Commission says it typically runs 0.25% to 1.50% of your investment a year. So the MER you enter in the calculator already includes the trailer, if the fund pays one.

Fund series sold through fee-based accounts generally pay no trailer and have a lower management fee, because the adviser is paid a negotiated fee instead. In one fund company’s Fund Facts, a Canadian equity fund’s Series A has an MER of 1.83% and its Series F 0.73%, so $10,000 invested costs $110 a year more in Series A . To compare the two fairly in the calculator, add the adviser’s fee to the Series F MER: in a fee-based account it is typically negotiated between 1% and 2% a year. What series are and who is paid what: mutual fund series and trailing commissions.

What else does an ETF cost besides its MER?

Three costs come from buying and selling an ETF on an exchange, not from the fund:

• Commissions. You may pay one each time you buy or sell; they vary by brokerage firm, and some firms offer commission-free ETFs. They add up if you trade often. Our brokers hub compares firms.
• The bid-ask spread. The bid is the highest price a buyer will pay when you sell, and the ask is the lowest price a seller will accept when you buy. A narrow spread usually points to a more liquid ETF and a better chance of trading at the price you expected. Prices can swing more near the open and close, and the ETF Facts form suggests a limit order or another time of day.
• A price above or below NAV. An ETF has a market price and a net asset value, which is calculated after each day’s close. Units can trade at a premium or discount to it, by an amount that varies with the type of ETF and the period; a large gap at the end of the day can be a sign the ETF is less liquid.

If an adviser or robo-advisor manages the account, its fee comes on top of the funds’ MERs (robo-advisor fees compared). For the full side-by-side with mutual funds, see ETF vs mutual fund.

What counts as a low MER?

Mutual fund MERs range from less than 1% to more than 3%, the Ontario Securities Commission says. Index ETFs, which track an index rather than being actively managed, can have lower MERs.

Morningstar, a fund-research firm, put the asset-weighted median fee for Canadian funds at 1.76% for equity funds, 1.90% for allocation (balanced) funds and 0.89% for fixed-income funds, in a study dated 30 March 2022. It graded Canada’s fees “Below Average”.

Among the funds on this site’s family pages, all-in-one ETF MERs run from 0.18% to 0.43%, and S&P 500 and Nasdaq-100 ETF MERs from 0.08% to 0.39%. Each fund’s MER, with its date, is on the all-in-one ETFs and S&P 500 and Nasdaq-100 ETFs pages, and other kinds are on ETFs in Canada by category. A higher MER can pay for active management or, through a trailer, for advice. Still, a fee gap that looks small can grow into a large gap in returns over the years.

Where do you find a fund’s MER?

A mutual fund’s fees are in its Fund Facts and simplified prospectus, and an ETF’s are in its ETF Facts and prospectus. In ETF Facts, look under “How much does it cost?”. A fund that is too new to have filed a management report of fund performance shows no MER yet. If the fund company waived some expenses, the document says the MER would have been higher without the waiver.

How does the calculator work?

The calculator works month by month. It adds the monthly contribution at the start of each month, then grows the balance by one twelfth of the expected annual return minus the MER. It runs a third balance with no fee, and “value lost to fees” is the gap between that balance and each fund’s: the fees plus the growth those fees would have earned. The difference column subtracts one fund’s final value from the other’s.

It doesn’t include the trading expense ratio, commissions, bid-ask spreads, tax or inflation, and a minus sign typed in the return box is dropped. A trailer needs no separate entry, since it is already in the MER.

Where to go next

• ETF vs mutual fund: the choice side by side.
• How mutual funds work: series, sales charges and Fund Facts.
• All-in-one ETFs: each fund and its MER.
• Compound interest calculator: growth without fees.
• ETFs explained: the hub’s front page.