Miscellaneous Fees in Mutual Funds

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Miscellaneous Fees in Mutual Funds

Mutual funds may charge fees other than sales loads.

What other fees do they charge?

• The sales load on reinvested dividends is the charge imposed when a customer reinvests his or her dividends into a mutual fund. Due to competition among funds, few funds charge this fee.
• Management fees are charged to compensate those who manage a fund’s portfolio. They rarely exceed one percent of the fund’s assets.
• The exchange fee, usually a flat fee, is a charge on money that is transferred from one fund to another within the same fund family. Most funds do not charge this fee for transfers within the fund family.
• Brokerage costs are incurred by a fund as it buys and sells securities.
• Interest expenses if a fund borrows money to buy securities (this is not very common among mutual funds, however).
• There are also accounting fees and custodian fees.

Things to consider about fees

Compare both the internal costs of funds and their performance over the same period. Fees and costs can be justified if a fund outperforms similar funds with low or no fees. Be careful to compare funds with similar objectives and investment strategies, though. Choose funds that are suitable to your investment objectives that you believe have the ability to provide superior performance for the fees they charge.