When you invest in a mutual fund, you pay a fee known as the management expense ratio or MER. In short, the MER represents the costs associated with managing and operating a mutual find. MERs are reported annually as a percentage of a mutual find's average annual assets, and they are deducted before the mutual fund's return is calculated.
The MERs of different mutual finds may vary from fund to fund for many different reasons. However, MERs are typically lower for fixed income mutual funds and higher for equity mutual funds. The higher costs associated with equity funds are generally attributed to higher research costs and greater time to select the investments.
Click here for more information