Canadians pay some of the highest mutual fund fees in the world- The opportunity cost of investment fees impact your portfolio
- Small fee reductions can mean big portfolio growth
Cage match: how do your mutual funds perform?
Let’s look at two different funds invested in the same securities, returning an average of 6% per year before management fees. For the purposes of these calculations, we will be using the mutual fund fee calculator from GetSmarterAboutMoney.ca.
If you start with a portfolio of $100,000 and contribute $10,000 a year, how much does the higher fee fund cost you over 25 years?
|
Fund #1 |
Fund #2 |
|
|
Initial investment |
$100,000 |
$100,000 |
|
Annual investment |
$10,000 |
$10,000 |
|
Average return before management fee |
6% |
6% |
|
Management fee |
2.42% per year |
0.77% per year |
|
Average return after management fee |
3.58% per year |
5.23% per year |
|
Total after 25 years |
$624,603.50 |
$840,363.04 |
Investing in the fund with the lower fee means your portfolio is almost a quarter of a million dollars larger than it would be if it was invested with the fund with a larger fee. The same amount invested; the difference in returns is an incredible $215,759.54.
