Finance Resources
Investment Planning
Stock Market
Futures & Options
Mutual Funds
Home » Mutual Funds » Expert Tips on Mutual Funds » Understanding Mutual Fund Fees

Understanding Mutual Fund Fees


When you're buying a mutual fund, one of the most important things you need to know is the amount of fees that will be deducted from your investment or paid by you. These fees can have a real impact on the return you make.

First, there are fees that some mutual funds charge as commissions when you buy or sell a mutual fund. These fees are called loads and are calculated as a percentage of the amount you're buying or selling. A mutual fund can be:

  • a front-load fund, meaning that you pay a certain percentage of your purchase as a commission up front
  • a back-load fund, meaning you pay the commission (as a percentage) when you sell all or part of your holdings in the fund
  • a constant-load fund that takes out fees on a regular basis
  • or a no-load fund, meaning you pay no commission. This is the only type of mutual fund the average investor should buy.
  • It's not uncommon for a load to be as high as 5.75%, so if you invested $10,000 in one of these front-load funds, you would lose $575 immediately. Back-load funds are no less painful. Either you see the fees deducted from what you thought were your earnings or, worse yet, you may lose money on your investment and still have to cough up the back-load funds when you sell.

    There are excellent mutual funds with no load, such as Vanguard and Fidelity funds and many others. These funds often out-perform the loaded funds.

    Expense Ratio

    Before buying a mutual fund, investigate the fund's expense ratio. This is the percentage of the fund's assets that are deducted from earnings each year to cover the fund's operating expenses. Some funds have reasonable fees not exceeding 1%. Others are 3% or more. This comes right out of your earnings, so the lower the fee, the higher your return.

    The expense ratio is made up of the 12b-1 fee, which is a fee to cover the marketing of the fund to potential investors, and the management fee, which pays the salaries of the fund's managers. Not all funds charge a 12b-1 fee, but if they do, they're legally required to list it in the prospectus (the formal document offering to sell stock to the public).

    Some funds, such as Vanguard, do an excellent job of keeping fees low so that as much as possible of the income made by the fund is returned to the investors, not paid to the managers. To put another fund's fees in perspective, compare them to Vanguard's.



    Mutual Fund Fees, Dollar Cost, Mutual Fund 12b-1 Fee, Benchmark for Mutual Funds, International Funds, Index Funds, Philosophy, Turnover Ratios, Tips, Expense Ratio, Mutual Fund Prospectus, Reasons to Buy a Mutual Fund, Benefits, Disadvantages of Mutual Fund, Advantages, Disadvantages, Open ended Mutual Fund, mutual fund, mutual fund companies, Close ended Mutual Fund, Advantages of Close ended Mutual Fund, tata mutual fund, icici prudential mutual fund, investment, insurance

    Domain Registration | Windows Hosting | Linux Hosting | Java Hosting | Virtual Dedicated Server | Dedicated Server | Reseller Web Hosting | Unlimited Windows reseller hosting | Unlimited Linux reseller hosting | Cheap Windows reseller hosting | Cheap Linux reseller hosting | Cheap Windows hosting | Best Windows hosting | Windows hosting Multiple Domains | Unlimited Windows hosting | Compare hosting plans | Cheap Linux hosting | Best Linux hosting | Linux hosting Multiple Domains | Unlimited Linux hosting | Cheap asp.net hosting | Best asp.net hosting | unlimited asp.net hosting | Cheap asp.net reseller hosting | Unlimited asp.net reseller hosting | Java Features | Cheap Java hosting | Best Java hosting | unlimited Java Hosting | Unlimited Linux reseller hosting | Java Hosting Multiple Domains| | Matargashti Full Song | Matargashti mp3 Download | Matargashti Video Download | Matargashti Song Tamasha | Prem Ratan Dhan Payo Songs Download | Prem Ratan Dhan Payo Songs mp3 Download | Prem Ratan Dhan Payo Songs Video Download | Pinga Song Download | Pinga Full Song mp3 Download | Pinga Song mp3 Download | Pinga Song Video Download | Latest Bollywood Updates | Bollywood Updates | Prem Ratan Dhan Paayo Songs Download|
    © ProfitGuruOnline-2024. All Rights Reserved.