Mutual Fund Expenses
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Mutual Fund Expenses
Mutual funds charge fees for the costs of running their funds. A mutual fund’s prospectus lists all the fees that the fund charges.
Things To Know
- Mutual fund fees cover the costs of various expenses for running a fund.
- Look for a fund’s fees in its prospectus.
Various mutual fund fees
- A sales charge is a fee you pay when purchasing shares of a mutual fund. By law, sales charges may not exceed 8.5 percent of the amount invested. Funds with sales charges are called load funds.
- Funds with no sales charge are called no-load funds.
- Redemption fees are charges that may be imposed when investors sell shares back to a fund. If a fund has a redemption fee that decreases over time, it is called a contingent deferred sales charge. This may be used as an incentive to investors to keep their money invested. For example, a contingent deferred sales charge might start at 5 percent and decrease by one percentage point per year until it hits zero.
- Mutual funds may charge 12b-1 fees to cover expenses such as advertising, brokers’ costs and toll-free telephone lines.
- They also may charge management fees, and they may charge transfer fees (if you transfer money from one fund to another within the same fund family).
Why you pay these expenses
Above all, it is important to understand the fees that you are paying, as most investments have a cost of some kind. Fees can vary, sometimes significantly, so make sure to compare your options. When considering mutual funds, remember that charges, fees, loads, and commissions are payment for the operating and administrative aspects of running the fund. If you don’t need the benefits of a mutual fund or if the costs are exorbitant, you might want to consider other alternatives. On the other hand, if you perceive value for those costs, they should not be a deterrent to making an investment.
