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There are many different investment options available to help you reach your financial goals. Regardless of which investment you choose, it is important to understand the costs involved and how they can affect your investment.

Mutual funds offer many benefits to you as an investor, including professional management, investment diversification, easy access to your money and convenience. For many investors, mutual funds can provide all of these benefits at a fraction of the cost of creating a portfolio of individual investments. However, not all mutual funds have the same fee structure and the costs of some funds will impact your return more than others.

The information that follows will help you better understand the costs involved with mutual fund investing so that you can make well-informed decisions and get the value you want out of your investment.

1. Management expense ratio

An MER is the fee charged to manage the money invested in a mutual fund. It is the total of a fund’s management fee, operating expenses and taxes during a given year. Want more details? Check out this article on the anatomy of an MER.

2. Trading expense ratio

The TER represents the amount of trading commissions incurred when the portfolio management team buys and sells equities (stocks) within a given fund. Already published in regulatory documents like the Management Report of Fund Performance, the TER is also disclosed in the Fund Facts document which is required to be provided at point of sale. Want more details? Check out this article on the anatomy of an TER.

3. Sales charges

A load is a sales charge that an investor may incur when buying or redeeming units or shares in a mutual fund. It is separate from the MER and is not to be mistaken for the ongoing trailing commissions that make up part of the management fee.


No sales charges are paid when a no-load fund is purchased or redeemed.

Front-end load

A front-end load is a sales charge paid upon purchase of a fund and is expressed as a percentage of the amount you invest (ranging from 0% to 5%). The sales charge, which is often negotiated with the advisor prior to investing, is deducted from your initial investment and paid to your advisor’s firm.

Back-end load

With a back-end load, you do not pay a sales charge at the time of purchase; instead, it’s the fund company that pays the sales charge to the advisor’s firm. However, if you redeem your mutual fund earlier than the prescribed time limit, you will pay a redemption fee to the fund company.

  • Deferred sales charge (DSC): This is the most common back-end load. The redemption fee rate diminishes to zero over a time frame of typically six to seven years. The amount paid by the fund company to the advisor’s firm at the time of purchase is typically 5%.
  • Low-load: Similar to a DSC, but a lower redemption fee rate diminishes to zero over a shorter time frame of typically two to three years. The amount paid by the fund company to the advisor’s firm at the time of purchase can range between 1% and 3%.

For more information about the costs of investing in mutual funds, please speak with your advisor.


This has been provided by RBC Global Asset Management Inc. (RBC GAM) and is for informational purposes only. It is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. RBC GAM takes reasonable steps to provide up-to-date, accurate and reliable information, and believes the information to be so when provided. Information obtained from third parties is believed to be reliable but RBC GAM and its affiliates assume no responsibility for any errors or omissions or for any loss or damage suffered. RBC GAM reserves the right at any time and without notice to change, amend or cease publication of the information.