Before you buy, invest a little time understanding mutual fund fees and sales charges.

You would never buy a home, a car or even a home entertainment system without researching your purchase beforehand. The same goes for your investment in mutual funds.  It’s especially important to understand the costs and fees associated with the fund as they directly impact your returns.

Generally, there are two costs you want to be aware of before you invest: management expense ratio (MER) and load/sales charges.

Management Expense Ratio (MER)

The MER is the total of the management fees, operating expenses and taxes, and is deducted from the fund’s annual return. Fees can vary greatly, so it’s smart to look into each fund’s MER, alongside performance projections.

Management Expense Ratio

Trailing commissions

A component of the management fee, the trailing commission is an ongoing annual fee, paid to the firm for which the fund advisor works, for the duration that you own the fund. The fee is viewed as an incentive for the advisor to review holdings and advise accordingly.

Loads or sales charges

A load or sales charge is a fee an investor pays when purchasing or redeeming shares from a mutual fund. This fee is separate from management fees, operating costs and taxes. Unlike MER, loads are deducted from the initial investment and paid to the advisor’s firm.

Depending on the funds and brokerages through which they’re purchased, loads may be applied differently. There are 3 types of loads:

Front-end load

This is a fee paid by the investor upon purchasing the mutual fund. The load is deducted from the initial investment and typically ranges between 0% and 5%. In certain cases, the load can be negotiated before you invest in the fund.

Back-end load

With a back-end load, the purchase fee is covered by the fund company who pays the advisor. You’re charged a redemption fee by the fund company when you decide to sell the fund.

There are two basic kinds of back-end loads:

Deferred Sales Charge (DSC):
Deferred sales charge are back-end loads in which the redemption diminishes to zero, typically over a term of six or more years.

Low-loads have a similar structure to deferred sales charges. However, the redemption fee diminishes to zero over a shorter term. The typical term for low-loads is between two and three years.


No-load funds are funds in which no sales charge or redemption fee is charged to the investor. Scotia iTRADE offers only no-load mutual funds to our clients.

Mutual fund series

There are a multitude of different available series, each carrying a unique feature or characteristic. The most common and standardized series are A, D, F and I.

Fees for each series can differ significantly. To help ensure that the series you’re buying is the least expensive version of that particular fund, you’ll want to take time to review and compare fee structures.

Here’s a general comparison of the different series1:



General Description

Key Details



Mutual funds offered by Financial Advisors and others.

The management fees are usually higher to make up for the additional expense of the trailing commissions paid by the fund.



Fund tailored to do-it-yourself investors, typically offered by direct investing brokerages

Typically lower MER than series A



Funds where fee structure is arranged with the advisor

Negotiated fee structure



Funds aimed towards institutional and high net worth investors

Minimum investment requirements

Interested in investing in mutual funds?

Log onto Scotia OnLine, go to “Quotes & Research” and click on “Mutual Funds”. There you will find all the investing ideas on mutual funds.

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