Many of us are not aware of just how expensive some financial products really are over the long term. The Management Expense Ratio (or MER) is an excellent example of how fees that are collected over the length of the investment, rather than upfront, can quickly add up. Examine the chart below:
You make a lump sum investment of $10,000. With an MER of 2.75%, over the next 20 years (assuming an average annual ROR of 10%), your fees will total almost $27,000. Your overall return is almost 40% less with the introduction of a 2.75% MER.
Remember, an MER is a fee that is charged every year. Always look at the TOTAL cost of the investment, not just the annual fee. It can make a tremendous difference in your financial future.
