Nancy Woods has a feature at GlobeInvestor.com where she answers readers' questions. (If I'm not mistaken, she used to have a similar column at the National Post.) While there are exceptions, most of the ones I've read have had poor content and have been horribly written. This one today is a "perfect" example
The question being asked is:
Vanessa wrote:I often hear and read about the MER on my mutual funds. They are expressed as a percentage but how do I find out what I have actually been charged?
Here are some bits from the reply.
Nancy Woods wrote:The amount of the MER that is specifically charged to your mutual funds is available on the various mutual fund companies' websites.
Horribly written sentence, particularly so in the context of the question. It sounds at first like companies are publishing the dollar amount you paid for your funds on their website! Reading on though, it becomes clear this is not what she meant, fortunately.
The active managed fund can be constantly changing with many decision makers behind it to achieve better-than-average results. Investing using a mutual fund can be a good way to invest in markets or countries that we are not familiar with.
The investment style and process of a mutual fund manager can also affect the MER. A fund manager that frequently changes the fund's investment positions will incur higher costs.
This and a later comment indicates she thinks fund trading costs are part of the MER. They are not. They form a separate Trading Expense Ratio.
There are a myriad of reasons for a higher-than-average MER, but in the end it could be justified by above-average returns. The key is to do the research to find out which funds can give you them.
What kind of research do we need, since any fund can give you above average returns sometimes?
The holdings within an ETF may not change at all during a year. Because an ETF is a closed-end fund, meaning the pool of monies doesn't change, it does not have the cash-flow issue.
May not, as in must not, or might not? Oh, and BTW, an ETF is not a closed end fund, the number of units can vary daily and there is no pre-set termination time.
It is a good idea that you have a clear understanding ...
Can't argue with that!
To be fair, somewhere in between all that she did answer the question. Still, is there any wonder Canadians are believed to be confused about mutual fund fees?