Does 1% Really Matter?

When it comes to investing and your portfolio does 1% really matter? If you are paying an MER of 2.5% instead of 1.5% is it a big deal? What about if your portfolio returns 7% instead of 9%?

If your investment horizon is between 1 and 2 years than a couple percent really doesn’t matter. Your portfolio won’t be affected in any meaningfully way. However, if you are a long term investor 1 or 2% certainly does matter and will have a huge impact on your total portfolio return. I created the below chart to illustrates just how much difference 1 or 2 percent can make. The chart makes the following assumptions:

1. Initial investment of $10,000 in year 1.
2. No additional contributions.
3. Interest compounded annually.
4. All interest is reinvested.



So although it may seem petty to be wasting time and squabbling over a one or two percent difference it could mean a difference of hundreds of thousands of dollars in retirement.