Costs Associated With Mutual Funds
“No matter what mutual fund you invest in, it’s
going to cost you something.”
- Ilyce R. Glink, author of
100 Questions You Should Ask About Your Personal Finances
Mutual funds offer inherent diversification and the convenience
of having a professional money manager handle day-to-day investment
decisions. However, these luxuries do not come without a cost.
Sales Load: basically the commission you pay a broker
to advise you on which fund(s) to choose, ranging from 1%
to 7% of your investment. It can come at the front end, when
you buy into the fund, or at the back end, when you cash out
of the fund. However, there are load and no-load mutual funds,
so it’s up to you whether you’d rather seek out
advice and pay for it or make your own mutual fund choices
and avoid the sales load.
Redemption Fee: if you sell the shares in your mutual
fund after a short period of owning them--usually anywhere
from 90 days to 3 years, you may have to pay a percentage
fee on the money you cash out. This fee is usually about .25%
of the redemption amount.
12(b)1 Fee: some funds charge this fee as a means
of disbursing the costs of marketing and advertising the fund
among all of its shareholders.
Maintenance Fee: an annual fee, often expressed as
a percentage of assets under management that is charged each
year to cover the cost to administer and manage the fund.
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