Summary of Mutual Fund Expenses

Like any investment portfolio, mutual funds have expenses that are passed on to the investor. Sometimes these expenses, such as marketing and distribution costs, are paid by the individual investor; at other times, costs are paid by the fund and borne equally by each shareholder.

Fees and charges are in themselves not a bad thing. If you work, you expect to get paid a fair amount. The same is true for investment companies, managers, and advisors. The key is in getting what you pay for. A sales charge or commission might be worth the expense if you get good investment advice and service. Advisory and management fees might be worth the expense if the advisors and managers provide value to the fund that the investors enjoy.

As an educated investor, you should compare the expenses and performance of like investments to see whether the performance and service are worth the expense. There’s no need to pay for services you don’t need, but if you do, determine what they are worth. A mutual fund prospectus discloses all the costs. You can compare the performance by tracking the history of several funds. Be sure to compare funds with similar investment objectives, style, and strategies. Choose funds that meet your investment objectives and that are suitable to your needs.