Investing
Understanding Investment Fees
Learn how investment fees work, where to find them, and why small differences in cost can matter over time.
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Investment fees in 30 seconds
Investing can involve costs charged by a fund, investment firm or platform, advice provider, transaction, or account. Fees are not automatically “bad”—they pay for products and services—but investors should understand what they pay, how much they pay, and what they receive.
Hypothetical illustration only
Why small fees can become meaningful
This fixed illustration starts with $10,000, assumes 6% gross annual growth for 30 years, no deposits or withdrawals, and models an annual fee by subtracting it from the gross growth assumption before annual compounding. It is not a forecast and does not represent typical returns or fees.
Before either fee assumption
$57,435
Scenario A · 0.5%
$49,840
Scenario B · 2.0%
$32,434
Difference between scenarios: $17,406
The point is mathematical, not predictive: ongoing fees reduce what remains invested, leaving less money available for potential future compound growth. Actual fund fees and returns are reflected differently and vary over time.
A common fund-cost measure
What is an MER?
MER stands for Management Expense Ratio. It expresses certain ongoing costs of managing and operating an investment fund as an annual percentage of the fund’s average assets. It generally reflects the management fee, operating expenses, and applicable taxes included under the fund’s disclosure. It does not necessarily capture every cost an investor may face.
The fund pays these expenses, so they are reflected in the fund’s returns rather than normally arriving as a separate monthly bill.
Simplified example
$10,000 balance × 1% MER ≈ $100 over one year
The actual dollar cost changes as the fund’s value changes. MER is calculated and paid through the fund; this multiplication is only a simple way to understand scale, not an exact bill calculation.
Product costs
What costs can funds have?
Mutual funds
Costs may include the MER, fund trading expenses, permitted purchase or redemption charges, compensation arrangements where applicable, and separate account or service fees. Deferred sales charge options were prohibited across Canada beginning June 1, 2022, so older descriptions should not be treated as current purchase options.
ETFs
Costs may include the MER, trading expenses inside the fund, brokerage commissions where charged, bid-ask spreads, and separate account or platform fees. ETFs are not automatically cheaper; costs vary by product and investing arrangement.
ETF trading
What is the bid-ask spread?
Bid
Price buyers are offering
Ask
Price sellers are asking
The difference is the bid-ask spread. Because an ETF trades on an exchange, that spread can represent another trading cost, especially when the spread is wider.
Beyond the product
What about advice and account fees?
Depending on how someone invests, advisory fees, account administration fees, platform fees, trading commissions, and other service charges may apply separately from a fund’s MER.
Not every investor pays every fee. The purpose is to identify where costs may appear.
Compare cost and value
Is the lowest fee always best?
No. Cost matters, but it should be considered alongside the investment objective, risk, diversification, holdings, strategy, services or advice provided, and fit with the investor’s goals. A lower fee does not guarantee good performance or suitability.
A higher fee does not guarantee better performance
Paying more does not guarantee higher returns, lower risk, or better future results. Investment outcome and cost are related considerations, but they are not the same thing.
Canadian disclosure documents
Where can you find the fees?
Fund Facts and ETF Facts are standardized documents containing key information about Canadian mutual funds and ETFs. Depending on the document, review the sections describing fund expenses, MER, trading expense ratio, purchase or trading charges, and other costs—along with holdings, risk, and performance information.
Before investing
Ask these questions
- 1.What does this investment cost each year?
- 2.Are there trading, buying, or selling costs?
- 3.Are there account or advisor fees?
- 4.What services am I receiving for the cost?
- 5.What does the fund actually own?
- 6.How does the cost compare with similar options?
- 7.Have I read the Fund Facts or ETF Facts?
Long-term effect
Fees affect compounding too
When fees reduce a balance, less money remains available to potentially compound in later periods.
The current ProMoney Compound Growth Calculator uses the growth assumptions entered and does not separately model investment fees.
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Key takeaways
What you should remember
- Investment fees reduce the return that remains with the investor.
- Small ongoing fee differences can become meaningful over long periods.
- MER is one common measure of ongoing fund expenses.
- An MER may not represent every cost an investor pays.
- Mutual funds and ETFs can both have fees.
- Lower cost does not automatically mean better.
- Higher fees do not guarantee higher returns.
- Fund Facts and ETF Facts can help investors understand costs.
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Sources & last reviewed
Official references
- Last reviewed
- August 2026
- Primary sources
- Ontario Securities Commission and Canadian Securities Administrators guidance