The High Cost of Mutual Fund Fees

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$321,000 lost to fees 

$1000 invested in the stock market 50 years ago would be worth $514,000 today. However with fees of 2.2% the investor would only be left with $193,000 today. $321,000 would have been lost to fees.

Speaking in Toronto on December 4, 2000, John C. Bogle, founder of the Vanguard Group, presented, in great detail, data to prove that "mutual fund investing is an expensive home to long-term investors." One thousand dollars invested 50 years ago in the S&P 500 would have grown to $514,000. However, with fees of 2.2%*, financial intermediaries would have taken $321,000 of the sum leaving only $193,000 for the retiree.

Bogle used the word "shocking" to describe this loss of 63% of the market's cumulative return to the intermediaries. All mutual funds charge an MER (Management Expense Ratio) fee. In Canada the average MER is 2.2%, Canadians pay among the highest mutual funds fees in the world.Most mutual fund holders are not aware of the MER, the MER is deducted at the source from the mutual fund company. For example when you receive your mutual fund statement at the end of the year it may state that your investments increased by 4.5% , however  your actual performance was 6.7% and the mutual fund company deducted the 2.2% fee from your return.The MER fee may not sound like much but as you can see over time the fees will add up to thousands of dollars.

How to eliminate the MER fee?

Eliminating the MER fee is simple....avoid mutual funds. A solid portfolio built upon the principles of value investing will ensure that you never pay extra fees.

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15 comments

Are you thinking about investing, but never get around it? | Simply Investing Mar 8, 2014 01:47pm
[…] statement) you are wasting money. Over time this could add up to over $300,000 lost to fees. Click here, and here to read more about […]
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For every $10,000 you have invested in Mutual Funds more than a third is lost to fees! | Simply Investing Mar 8, 2014 01:56pm
[…] 25 years the amount lost will be $5,613, more than 50% of your initial investment! Mutual fund fees take out a big portion of your earnings. The good news is that you can avoid these fees all […]
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Top 5 Reasons Why Mutual Funds Fail | Simply Investing Mar 8, 2014 04:47am
[…] 1.       Mutual funds charge a fee, the Management Expense Ratio (MER), to cover their expenses. An MER virtually guarantees that mutual funds will lag the stock market performance. In a previous post I discussed the high cost of mutual fund fees. […]
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Why I Left the Mutual Fund Industry | Simply Investing Mar 8, 2014 07:27am
[…] in the RBC Canadian Equity Fund would have cost just under $6,400 in fees! I’ve written about high mutual fund fees before, and I urge you to see for yourself by using the mutual fund fee calculator to determine the […]
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How to Be a Successful Investor | Simply Investing Mar 8, 2014 07:28am
[…] The High Cost of Owning Mutual Funds […]
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Mutual Funds vs Simply Investing | Simply Investing Mar 8, 2014 07:46am
[…] Over time MERs can really add up and have a negative effect on your earnings. […]
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Do Mutual Fund Salespeople Favour Commissions Over the Best Interest of Their Clients? | Simply Investing Mar 8, 2014 08:34am
[…] the high fees? Avoid them, avoid purchasing investments with high fees.  I’ve written about the high cost of mutual funds fees before, and the solution is to invest on your own. No one cares more about your money than you do. […]
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Why I Started Investing On My Own | Simply Investing Mar 8, 2014 08:47am
[…] the time but this constant selling (low) and buying (high) was detrimental to my portfolio, and the fees made things worse. After 10 years I did not have much to show for my investments, but I held on to […]
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Are These Your Top 4 Reasons For Buying Mutual Funds? | Simply Investing Mar 8, 2014 10:26am
[…] people invest in mutual funds, but do mutual funds make good investments? Could you be wasting thousands of dollars of your hard earned money? Mutual funds are a popular investment tool made up of a pool of money […]
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Can You Buy Stocks Using Your RRSP? | Simply Investing Mar 8, 2014 11:17am
[…] matching contributions while taking charge of your own retirement money. Plus you can avoid the high fees mutual funds typically […]
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Are Your Investments Making You Money? Are You Happy With The Results? | Simply Investing Mar 9, 2014 06:44am
[…] The solution for earning more money is to start investing today, taking action will give you results. Just thinking about doing something or worrying about it will not give you results. In fact, not taking action will actually make you lose money. Keeping your money in mutual funds may cost you thousands of dollars in fees. […]
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Everything You Always Wanted To Know About Simply Investing But Were Afraid To Ask (13 Top Questions!) | Simply Investing Mar 9, 2014 06:56am
[…] your lifetime you could lose over $300,000 to fees when you “leave it to the professionals”. The Simply Investing course makes it easy for you to […]
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Want To Invest Successfully In Only 15 Minutes a Month? | Simply Investing Mar 11, 2014 04:33am
[…] charge a fee called the Management Expense Ratio (MER). The higher the MER the more you stand to lose. In my opinion you will never achieve financial success by investing in high cost (high MER) mutual […]
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DividendDreamer Sep 13, 2014 08:00pm
This is the best article I have seen lately. I could not agree more. The mutual fund managers get paid way too much while killing the return for the investor. It is far from best choice for most investors. Good luck, Robert
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Worried About Not Having Enough Money? | Simply Investing Dec 29, 2014 05:51am
[…] or reduce the hidden fees you pay in mutual […]
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