Mutual Funds

Mutual Fund Fees

In order to cover their expenses mutual funds charge fees to the investors. Although these fees are only a few percentage points a year and seem like a minor expense, they create a serious drain on the performance over a period of years.

Some fees to consider are:

Redemption fees

A mutual fund may charge fees when the investor sells shares back to the mutual fund.

Contingent deferred sales charge

A mutual fund may charge sales charges that are reduced at certain time intervals. For example, the fund may charge 6% of the sale price the first year after the shares are bought. Each year thereafter the fee would be reduced by 1% until no fee would be charged. This is an incentive for investors to leave their money in the fund.

Management fees

Mutual funds may charge fees to cover expenses such as advertising, brokers' costs and toll-free telephone lines. These are 12b-1 fees, regulated by law.

Transfer fees

A fee is charged each time the investor transfers money within the company.