# Investing Series: What is the difference between weighted, listed, and effective MERs?

This is a part of the Investing Series.

————————————————-

There is the “list” price of an MER (what the cost is), and then based on your investment portfolio, you may be paying more or less depending on how much you have invested in the overall grand scheme of things.

Think of it like buying a house versus buying a place with 2 other people.

If you buy a home, let’s imagine the listed price of the home is \$300,000. Your listed price or cost is \$300,000 and your mortgage is \$3000 a month.

When you buy that same place with 2 other roommates, you split the price at \$100,000 each, so your weighted cost is really 1/3 or \$100,000, and your mortgage is only \$1000 a month.

This means that your effective cost of the place is 1/3 of that \$3000 mortgage or \$1000 on the house.

## Listed MER %

You will find it listed by the financial institution.

It kind of looks like this:

HOW TO GET THE LISTED MER:

Just list it from the site as it says it. E.g. MER: 0.35%, type in 0.35%.

It’s always expressed in percentages (%).

## Weighted MER %

This is the Listed MER % multiplied by your portfolio %, and it lets you know how much you’re really paying, no matter what the listed MER says.

HOW TO GET THE WEIGHTED MER:

Create your portfolio numbers with dollar (\$) amounts and then the percentages (%), and multiply each portfolio fund by the Listed MER.

It’s always expressed in percentages (%).

## Effective MER %

This tells you how much you are paying in dollars (a rough amount), based on where your portfolio is allocated, and how much MER is being charged.

HOW TO GET THE EFFECTIVE MER:

Multiply the weighted MER with the portfolio dollar amount to see how much you actually pay per year.

It’s always expressed in dollar amounts (\$).

## VISUAL EXAMPLE OF LISTED, WEIGHTED AND EFFECTIVE MERS

As you can see, I started with the Listed MERs.

Then I calculated the Weighted MER by multiplying my Listed MER by the Index Portfolio % of what I hold in each fund.

Then I calculated the Effective MER by multiplying my Weighted MER by the Index Portfolio \$ amount of what I hold in each fund.

My total MER fees per year is \$34.57 for a \$100,000 portfolio.

The higher the Listed MER, the more money you will pay, no matter how little you have actually invested in the fund.

As you can see, the XEF.TO or EAFE Index is with a listed MER of 0.30%, and I pay \$8.30 for the privilege of investing in that fund, even though I only have about \$16,600 in it.

In contrast, I have about \$65,000 invested in the VTI or S&P 500 Index fund, and I only pay \$21.08 or 2.53X more in fees for MORE money invested (3.9X more money invested).

If you still don’t quite get it, you can read this post on how to set it up in detail.

• ##### Emily @ Simple Cheap Mom

Thanks for the link. I get that it’s done daily now. The rest seems like it could start falling into place. My brain won’t let me understand black holes either.

• ##### save. spend. splurge.

Keep reading over it and eventually it will make sense. Go to my best posts page too, I have all my investing links there.

• ##### Sally

I only own two index funds right now, I’d like to diversify in 2015. Both have very low MERs, but that was just one reason for picking them. Good post!

Any time

• ##### Emily @ Simple Cheap Mom

Could you explain how the MER gets paid? I never see it come off my statements. Does it happen once a year? Is it prorated if I sell early? I’ve been trying (not to hard obviously) to figure this out for a while. I feel like I should know this already. So it’s the perfect time to humble myself and ask!

• ##### save. spend. splurge.

I have a post on this: What is an MER.

It’s already taken out and what you see as your “shares” is slightly lower as a result (read the post).