THE BEECHMONT CREST ONLINE GUIDE TO STOCKS AND INVESTING
MUTUAL FUND FEES
Pay attention to the various fees that mutual funds charge, as these can significantly decrease your earnings. For example, if you invest $1200 in a fund that has a 7% commission, then the value of your investment is really worth only $1116.
Funds are required by law to clearly list their fees in the prospectus--- so you can usually avoid surprises if you read this carefully.
No-load funds: Funds that do not charge a load/burden, or sales commission. Most money market mutual funds are no-load.
Low-load funds: These are funds with low burdens of only 2% or 3%.
Load Funds: These funds usually involve middlemen: financial planners, brokers, etc., who charge a commission on the shares of the fund that they sell.
Management fee: A fund manager’s got to eat too, right? All funds (both load and no-load) charge a management fee of .5% to 1%.
Deferred load: This is a fee that is applied if you sell your shares in the fund within a specified period of time after purchasing them. (A typical deferred load structure would be a 4% or 5% fee if you sell within the first year of ownership.)
Back-end loads: These are fees that a fund charges whenever you sell your shares. Back-end loads are based on the net asset value (NAV).
12b-1 fees: You can thank the SEC for these fees. In 1980 the SEC passed a regulation authorizing funds to deduct marketing and advertising expenses from the fund’s assets. The ceiling on 12b-1 fees is 1.25%.