Investors are not always aware of the total fees they are paying. You may be investing in mutual funds and are simply not exposed to the fees as the value that appears on your statement is after costs are taken. You may experience an opportunity cost of investing in a guaranteed product of a set percentage where an alternative investment provided a much higher return (the difference seen as the cost). Regardless we will focus on your true costs of investing and show you how to track these costs down.
1. Mutual Fund fees
Mutual funds have a management fee and an administration fee all wrapped into the only number you need here... the Management Expense Ratio. This fee varies and is around 1 1/2% for a fixed income fund to over 3.0% for an international (or sector) fund. This fee will be included in the prospectus you received upon originally purchasing the mutual fund... but if you don't know what shelf you left this on, check out websites like www.globeinvestor.com or www.morningstar.ca.
2. Trading Commissions
Depending on your account, you may also incur commissions each time you trade or they may roll up into your annual advisory fees. Regardless these costs appear on your statements and are easily found.
3. Administration Fees
There may be additional fees that appear in registered accounts or other service oriented fees. These would appear on your statements as well.
Add these fees together to find out the total fees you are paying. There are many ways to reduce your costs or to ensure these costs actually reflect the value of the investment management you are receiving. Use the following to calculate:
$______________________ in Mutual Fund Management Expense Ratios (MERs)
$______________________ in Commissions on stock, bonds, and mutual fund transactions
$______________________ in Annual Advisory Fees
$______________________ in Administration Fees
$______________________ Your Total Annual Costs of Investing