MERs for ETFs - how are they calculated and collected?

[bluedog]

I'm trying to reduce the MERs on various ETFs in my CA PP, but I truly have no understanding how they are calculated.

Are they based on the number of shares one holds or the dollar amount of shares held?

I have a feeling the MERs are taken off the returns, but not quite sure of the mechanism.

My ETFs are w/Ishares (Block Brothers) and Vanguard.

I' m trying to figure out if this is a worthwhile exercise, but cannot figure this out as I do not understand the process.

My trading fees are $6.95.

Many thanks.

[Greg]

I believe that the expense ratio is taken out every trading day. If there were 250 trading days in a year and it was a .25% MER, I believe it then takes .001% out each day from the NAV of all the fund's components.

Or something like that.

[bluedog]

I did contact IShares about this.

The MER is taken out 365 days of the year at the end of the trading day.

So, for instance, if the MER is .25%, you first convert this into a decimal: .25/100 = .0025.

Then, that .0025 is divided by 365 days in the year = .0025/365 = .0000068.

You would then multiply .0000068 x dollar value of shares at the end of the trading day.

For example, for $50,000 share value x .0000068 = .34  per day or .34 x 365 days in the year = $124.10 per year for that holding.

If the MER were only .09% or .0009/365 days = .0000024 x $50,000 = .12 x 365 = $43.80 per year.

So, reducing the MER, esp for larger accounts, will definitely save some pesos when compounded over the portfolio's lifetime.