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2023-02-28-basis-points-cost-you
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basis points cost you
how much does the difference in fund management fees (MER) cost you in the long run?
ex.
MER 0.50 %
"Mutual Fund"
ex TD US Index Mutual Fund - I Series
ex. WealthSimple managed
MER 0.03 %
"ETF"
ex. iShares S&P ETF
Invest $ 100,000 for 30 years
assume both have identical 7% underlying index performance
math
Mutual Fund
100,000 * (1.07 - 0.005) ^ 30 = $ 661 436
ETF
100,000 * (1.07 - 0.0003) ^ 30 = $ 754 848
Difference
$ 93 412 less (in future dollars)
$ 12 375 less (in current dollars)
12.375% less
What equivalent ETF investment?
$ 754 848 = X * (1.07 - 0.0003) ^ 30
X = 754 848 / ( (1.07 - 0.0003) ^ 30 )
$ 87 625
ie. $ 12 375 less
2023-02-28
#personal-finance
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