tag:blogger.com,1999:blog-5465015914589377788.post6860186970450576828..comments2024-03-20T09:32:16.592-04:00Comments on Michael James on Money: The Impact of MERs on Mutual Fund ReturnsMichael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-5465015914589377788.post-77648368417956829202020-10-31T14:58:29.825-04:002020-10-31T14:58:29.825-04:00The middle reply above is to Canadian Capitalist&#...The middle reply above is to Canadian Capitalist's comment:<br /><br />Thanks for the mention Michael. I did some more research on this topic and here's what I found out. Mutual funds and ETFs report total return as (ending value - starting value + income) / starting value. These dividends may be paid every quarter throughout the year but they are not assumed to be reinvested immediately.<br /><br />Since costs are deducted from the cash balance, equity funds distributions are reduced by the extent of their expenses such as management fees, operating expenses and trading costs.<br /><br />However, this is a real cost to investors. Personally, I reinvest dividends within a month or two of payment and since stock market returns are generally positive, on average, the high fund fees impose an opportunity cost on investors.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-73277917631627504662009-12-04T12:40:09.148-05:002009-12-04T12:40:09.148-05:00Ace. Thanks. Anything that gets the point across...Ace. Thanks. Anything that gets the point across to the maximum number of people sounds like a good idea to me. I'm sure that my more mathematical posts are less interesting to a broader audience. It would be nice to show the effect of larger MERs, but your comparison, especially over a long period of time, works nicely.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-17721604663653679622009-12-04T12:19:18.903-05:002009-12-04T12:19:18.903-05:00Great analysis. Reminded me of a quote from The Bi...Great analysis. Reminded me of a quote from The Big Lebowski "He's a good man, and thorough."<br /><br />Instead of doing the math, sometimes I compare the e-series and I-series index funds from TD. For example, TDB216 (Canadian Index, MER=0.84%) and TDB900 (Canadian Index, MER=0.31%). I don't know for certain that the two funds are identical, but whenever I've compared their holdings they are exactly the same. Over longer time-frames the e-series fund always leads the more expensive I-series fund. Here is a chart in <a href="http://www.google.ca/finance?q=tdb216+tdb900" rel="nofollow">Google Finance</a>. <br /><br />Equations are a quick way to kill the topic around some members of my family. So, do you think this visual approach is a valid way to demonstrate the impact of MERs to those who are less math inclined?Andyhttps://www.blogger.com/profile/02364120848932393247noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-71145267212368024622009-12-03T10:59:53.853-05:002009-12-03T10:59:53.853-05:00Big Cajun Man: I stick it at the end so that thos...Big Cajun Man: I stick it at the end so that those who aren't interested can skip it. You did get the message from the first half loud and clear: HST wouldn't be a problem if the MER wasn't so high.<br /><br />CC: If I understand you correctly, the return seen by an ETF owner who reinvests dividends immediately would be slightly higher than the reported ETF returns for the year. That's interesting.<br /><br />It's true that MER costs are removed from a fund continuously throughout the year and thus the missed income represents an opportunity cost. That's why you can't take the index return and just subtract the MER to get the fund's return.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-16596959092615480982009-12-03T09:56:04.177-05:002009-12-03T09:56:04.177-05:00WO! Slow Down there Math Man!
So the HST is charg...WO! Slow Down there Math Man!<br /><br />So the HST is charged against the MER itself, so if there was NO MER I wouldn't need to pay the HST? Hmmm.....<br /><br />It's like Math can help you in life, wow!Big Descartes Followerhttp://www.canajunfinances.comnoreply@blogger.com