What does Management Expense Ratio (MER) measure?

Management Expense Ratio (MER) measures the total costs associated with managing a mutual fund, expressed as a percentage of the fund's assets. This ratio provides investors with insights into the expenses they will incur when investing in the fund, including management fees, administrative fees, and other operational costs.

Understanding MER is essential for investors as it impacts the overall returns on their investments. A higher MER can eat into performance, reducing the net returns over time, which is especially important in the context of long-term investing. By comparing the MER of different funds, investors can make more informed decisions about which funds are cost-effective relative to their potential returns.

The other options involve different aspects of mutual funds. The average return of a mutual fund focuses on its historical performance, which is distinct from the operational costs. The performance of the fund compared to a benchmark assesses how well it has done relative to a market index, while sales charges relate to transaction costs associated with buying or selling mutual fund shares. These elements are separate from the MER, which zeroes in specifically on management and operational expenses.