Wednesday, March 7, 2007

Mutual Fund Fees

I just read an interesting article “Do Fees Really Matter” by Duncan Hood on It was timely as I recently posted on my dislike of mutual funds.

Here is an excerpt from the article that I particularly enjoyed:

“If you bought a cheap mutual fund, wouldn't your performance suffer? Probably not. No one has ever been able to prove that funds with higher fees perform better on average than funds with lower fees. In fact, when Gene Hochachka, a former quantitative analyst for Vancouver mutual fund company Phillips, Hager & North, looked at how fees affected the performance of Canadian funds between 1986 and 2003, he found that for every extra percentage point that was charged in fees, performance went down by a percentage point.”

The article is short and sweet and gives readers a breakdown of how your “real returns” would be affected by both inflation and mutual fund fees. It’s worth a read.


Anonymous said...

Out of curiousity I used my paid commission divided by the market value of the securities bought so far this year.
The result came to .26%, I presume that would be the corret way of fiquring out your "MER" for your personal trading.

If that is correct it's a lot cheaper than any ole mutual fund.

MG (moneygardener) said...

I use the same type of metrics when measuring my 'buy fees', however I do not think you can compare these types of fees to mutual fund fees.

Wouldn't mutual fund fees come off the top (as a percent) of your returns each and every year, whereas your buy fee only occurs as a one time fee on a number of shares in the first year of holding.


Some funds have very high fees.

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