M is for Mutual Funds and Knowing All the Fees Involved

Mutual Funds and Knowing All the Fees Involved

Mutual funds can be a great investment option. However, they incur fees so make sure you do your homework when choosing a fund. An easy way to compare mutual funds is to look for a number called the fund’s total annual fund operating expenses; this is the also called the fund’s expense ratio. Here you will see that one fund may charge .53% and another 1.25% this difference can add up and make a big difference in dollars earned on your investments.

Here are some of the different fees that funds may charge on an ongoing basis:

Management fees – these fees pay the fund’ portfolio manager.

12b-1  ̶  fees are capped at 1% of your assets in the fund annually; they are used to pay for the cost of marketing and selling the fund, shareholder services and sometimes to pay employee bonuses. Not all funds charge this fee.

Other expenses may include the cost of providing services to shareholders outside of the expenses covered by 12b-1 fees or portfolio management fees. Transaction fees for trades made may be included. This amount is not reported separately as the other fees.

Here are some fees that are based on your situation or actions you take, these may or may not apply:

Account fees  ̶  you may be charged a separate fee to maintain your account, particularly if your investment falls below a set dollar amount.

Redemption fees  ̶  may apply when investors sell shares shortly after buying them, and they can vary anywhere from a few days to over a year. It would be important to know how your fund assesses redemption fees, especially if there is a chance that you will need to sell shares shortly after purchasing them.

Exchange fees  ̶ are charged when you move your money from one fund to another fund offered by the same investment company.

Purchase fees  ̶  may be charged a front-end sales charge at the time you buy shares of the fund.

How do you look up a mutual funds expense ratio?

You can find detailed information on fees in the in the fund’s prospectus, or you may choose to look them up online. Here are two sites that can help you:

Yahoo Finance Lookup – type in your ticker symbol and go to profile. Then scroll down to fees and expenses, this is where you will find your expense ratio.

FINRA Fund Analyzer – this tool estimates the value of the funds and impact of fees and expenses on your investment. It gives you the ability to look up applicable fees and available discounts for funds. Type in your ticker symbol and view full details. Click on Analyze, and you will get a projection of future values over a chosen period, after fees and expenses. It also, allows you to choose the amount invested, the rate of return and holding period.

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About Ann Zuraw

Ann Zuraw, the voice behind "Chicks, Chat and Change", is a Certified Financial Planner (CFP®), Chartered Financial Analyst (CFA®), and Certified Divorce Financial Analyst (CDFA™). If you have comments on this post contact Ann Zuraw

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