You never write a check for it. There’s no line item on your statement that says “fee.” But it’s there, quietly taking a cut of your investment every single year, before you ever see the number.
It’s called an expense ratio, or MER if you’re in Canada. It’s the percentage of your investment that goes toward running the fund, the management, the admin, the trading costs behind the scenes. Say a fund charges 1% and you’ve got $10,000 in it. That’s about $100 a year, taken automatically. No check, no notification, just a slightly smaller number than there should be.
Here’s the part that catches people off guard: 1% doesn’t sound like much. But fees compound the same way returns do, just backwards. Over 20 or 30 years, the gap between a fund charging 0.1% and one charging 1% can add up to tens of thousands of dollars. Not because the pricier fund did worse. Just because more of the growth got skimmed off on the way.
The fix is simple, though. Look up a fund’s expense ratio before you buy it, it’s public, usually right there on the fund’s fact sheet. Broad index funds tend to run well under 0.2%. Actively managed funds often sit at 1% or higher.
None of that makes higher fees wrong, exactly. Some strategies genuinely cost more to run. The real point is just knowing the number exists in the first place, instead of assuming it’s zero because nobody ever charged your card.
Want to see what you’re actually paying across your own accounts? That’s the kind of thing Go.Up Academy walks through with you.
Want a quick starting point on this instead? Ask Scout, it’s free. https://www.goupinvestments.com