– Here are your answers:
1. Management expenses (which are typically expressed as a percentage) are
deducted from assets of the fund at the rate of 1/12 of the annual amount
2. MERs vary significantly with the type of fund. A 1.9% MER would be on
the low side for an equity fund but high for a bond fund.
3. You say most funds “offer” 4%-6%. That’s not the case. They “offer”
nothing. I believe you are referring to an annual rate of return. The
average Canadian equity fund posted an average annual compounded rate of
return of 8% in the five years to Nov. 30, 2016. The average U.S. equity
fund posted an annualized 16.3% in the same period.
4. The published returns of mutual funds are net of fees. The performance
figure is your actual return after fund charges and expenses.
5. The rate of inflation in Canada, as measured by the broad total consumer
price index is 1.2% as of the latest reading in November, not 2%. The Bank
of Canada’s target rate is 2%.
6. There are many fund companies that offer lower fees. They include, for
example, Steadyhand, Mawer, Beutel Goodman, and Leith Wheeler, among
others. To find a fund’s MER, use the
Fund Library fund browser
to search for a fund, and click on the fund name to see detailed
information in the FundCard. – Gordon Pape
is one of Canada’s best-known personal finance commentators and
investment experts. He is the publisher of
The Internet Wealth Builder and The Income Investornewsletter, which are available through the Building Wealth website.
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