Fees Associated with Mutual Funds

| Posted: 12-01-2008 | Comments: 0 | Views: 9 | Rating: (52)

(?)

Mutual funds are divided into three categories with regards to fees, based on how much you will have to pay in charges, and commissions - load funds, low-load funds, and no-load funds. As you might expect, load funds typically charge fees, including commissions and other fees. Low-load funds also charge fees, but typically not as much as load funds. And no-load funds are not completely free of charge, either. They do typically have fees, but they are usually very low. Bear in mind that even no-load fees will typically charge you a fee if you sell your shares within a certain time frame after purchase.

With mutual funds, the class of shares you buy will usually determine the fees you are charged. Remember, even with no-load funds, there are still certain charges involved. Mutual funds aren't usually set up for charity purposes, so the fund has to make money, too!

With Class A shares, you will typically be charged load charges up front. This is a sales commission that will usually vary between 2% and 6% of the purchase. For example, if you invest $5,000, and there is a 5% fee, then you will actually only have $4,750 available for the direct purchase of shares. You will also have fees charged annually. These annual fees are called 12b-1 fees, and are charged even by no-load funds.

Class B shares typically have higher 12b-1 fees than Class A shares. These fees will be based on a percentage of the account. The good thing about Class B shares is that the up-front commissions and fees are usually waived, and you can put 100% of your investment money into shares immediately. The same $5,000 you had before will buy you $5,000 worth of shares instead of the $4,750 you could have purchased if you were charged a 5% commission. The important thing to note is that you must hold the shares for a certain number of years to have these fees waived. If you sell before this time is up, you will be charged a fee based on how long you have had the shares. The fee typically goes down by one percentage point per year, so the longer you keep the shares, the less the fee will be.
Most funds convert Class B shares to Class A shares after the period of deferred charge ends.

There are also Class C shares, which are typically about 1% per year, and other classes that may be listed in the fund's prospectus. The prospectus will tell you the fund's specific fees and terms for the various classes.

There are typically two types of fees charged by mutual funds. The first category is transaction expenses. This category includes load charges, and the charges that you may incur when selling shares. These are paid by the investor. Operating expenses include those 12b-1 fees mentioned earlier, as well as the management fees for the fund. These amounts are subtracted from the fund's return, and come out of the total made by the fund before any money is distributed to investors. A good mutual fund typically has an expense ratio of less than 1.5%.

Something to bear in mind when choosing a fund is to look at the fees as only one part of the big picture. Many investors, especially beginners, head straight for no-load funds because they don't want to be charged so much in fees. But a fund with high fees might vastly outperform a similar fund with lower fees, thus bringing you much more money, even after the fees are considered.

Rate this Article:

Current: 0 / 5 stars - 0 vote(s).

Article Tags: Trading, Stock Market, Funds, Shares, Stock Exchange

Article Source: http://www.articlesbase.com/investing-articles/fees-associated-with-mutual-funds-302974.html

Print article

Send to friend

Publish this Article

Author feedback

About the Author:

For more information on Mutual Funds please visit Free Mutual Fund information and click here for a list of articles.

Submitting articles has become one of the most popular means of generating quality backlinks and targeted traffic to your website. Join us today - It's Free!

Article Comments

Add new Comment

5 Ways To Benefit From Currency Options Trading
By: Abhishek Agarwal | 05/09/2007 | Finance
Free Finance articles for use on your Finance related website. Find articles of the subject of Finance

Forex Trade System - 5 Tips On Choosing The Right Forex Trading System
By: Abhishek Agarwal | 22/12/2007 | Currency Trading

Advantages And Disadvantages Of Currency Trading
By: Abhishek Agarwal | 06/09/2007 | Finance
Free Finance articles for use on your Finance related website. Find articles of the subject of Finance

Currency Trading Systems - Tips On How To Succeed With Currency Trading Systems
By: Abhishek Agarwal | 22/12/2007 | Currency Trading

Online Currency Trading - 3 Factors You Should Be Careful Of While Online Currency Trading
By: Abhishek Agarwal | 22/12/2007 | Currency Trading

Option Trading Software- 12 Valid Reasons To Go In For Option Trading Software!
By: Abhishek Agarwal | 02/04/2008 | Finance
Free Finance articles for use on your Finance related website. Find articles of the subject of Finance

Trading Shares For A Living Via Spread Betting
By: Andy Richardson | 16/03/2007 | Finance
Free Finance articles for use on your Finance related website. Find articles of the subject of Finance

Forex Trading Signals - How And Where To Get Forex Trading Signals!
By: Abhishek Agarwal | 22/12/2007 | Currency Trading

Got a Question? Ask.

Ask the community a question about this article:

Frequently Asked Questions

Differrent machanics of raising new shares
By: litty | 05-08-2008
differrent machanics of raising new shares

When and what is world cane day
By: sumeet | 05-08-2008
when and what is world cane day

When is old age day celebrated
By: sumeet | 05-08-2008
when is old age day celebrated

What is the best way to backup photos from my hard ...
By: matyd | 05-08-2008
What is the best way to backup photos from my hard-drive?

How much gas does a kohler 5ecd generator burn
By: sherrons3@aol.com | 04-08-2008
how much gas does a kohler 5ecd generator burn

How much income taxes do they take out if you make ...
By: Mango | 04-08-2008
how much income taxes do they take out if you make 1000.00 dollars. Would it be less if you make 2000.00 dollars.

Q&A Powered by:

Latest Investing Articles

Investors Guide To Bulgaria
By: Karl Hopkins | 10/10/2008
Bulgarian country guide providing useful information, history and property investment tips.

An Investors Guide To Canada
By: Karl Hopkins | 10/10/2008
Canadian country guide providing useful information, history and property investment tips.

Bloodletting
By: MTnews | 10/10/2008
Daily Market Commentary for October 10, 2008 Written for day traders, active traders and investors. A review of the market activity for the day, economic data plus, world news from Millennium-Traders.Com

Understanding The Investment Power Of OTC Stocks
By: Nir Dotan | 10/10/2008
For someone who is not very well-versed with financial terms and jargon, trying to jump into investing in OTC stocks is a hard thing. You will have to deal with a lot of different terms and principles which might be confusing in the beginning, but as you get the hang of it, it will be easier and more manageable.

What Should I Do If I Intend To Invest In Penny Stocks?
By: Nir Dotan | 10/10/2008
Many kinds of stocks are traded on stock exchanges. The price, market capitalization, and the stock exchanges where these stocks are traded vary. Penny stocks are stocks with a low value and a low market capitalization.

SEC Filings To Check When Choosing Small Cap Stocks
By: Nir Dotan | 10/10/2008
Companies are obliged to produce and made publicize, fundamental information and statistics for their shareholders and prospective investors. This will eventually provide them with essential facts and information that may guide them in investing.

Are You Investing 401(k) Money in Real Estate?
By: Gordon Hall | 10/10/2008
First of all, What is a 401(k)? I will try and give you a shortened version. A 401(k) is an employer sponsored retirement plan run under section 401(k) of the Internal Revenue Code. A 401(k) lets an employee save for retirement and at the same time defers taxes on his savings and the earnings associated with them until he retires.

A Simple Guide To Buying OTC Stocks
By: Nir Dotan | 10/10/2008
OTC Stocks or over the counter stocks are usually offered by startup companies who have not yet met the requirements needed to be publicly listed in registered stock exchange companies. OTC stocks are offered through Pink Sheets or Over the Counter Bulletin Board or OTCBB.

More from Gary Terrazas

Car Insurance: A Costly Affair In South Africa!
By: Gary Terrazas | 09/10/2008 | Insurance
Insurance can be very costly in South Africa, this is due to the high risk environment in which assurers have to transact.

Exhilarating Night Game Drives
By: Gary Terrazas | 29/09/2008 | Destinations
Feel the excitement as you travel in the pitch darkness in an open 4x4 looking for Lion in an unforgettable safari.

Namibia - Mundulea Nature Reserve
By: Gary Terrazas | 15/09/2008 | Destinations
Mundulea Nature Reserve in northern Namibia lies approximately 170km south east of Etosha National Park in the beautiful Otavi Mountains. This experience is best included at the end of your self-drive itinerary or guided holiday to enable you to relax and enjoy the exploration of this region on foot.

A Guided Bush Walk in Africa
By: Gary Terrazas | 27/08/2008 | Destinations
One of the best ways to completely immerse oneself in the African bush is to participate in a guided bush walk.

Namibia - Nguni Zambezi Luxury Houseboat
By: Gary Terrazas | 19/08/2008 | Destinations
For travellers looking for a new experience, why not try a luxury Houseboat travelling between the Chobe River and the Zambezi River within the new Kavango Zambezi (KaZa) Transfrontier Conservation Area?

Meeting a Lion Face to Face
By: Gary Terrazas | 14/08/2008 | Destinations
Discover the emotional roller coaster of your first eye to eye meeting with a wild lion.

To Do in Table Mountain Cape Town
By: Gary Terrazas | 10/08/2008 | Destinations
Things to enjoy when visting Table Mountain in Cape Town South Africa.

Discover The Ultimate Market Research Method
By: Gary Terrazas | 10/07/2008 | SEM
Find out how to use the Google Keyword Tool to accurately predict the viability of your online target market.

Article Categories

Article Marketing

Article Notepad

Stop Duplicate Content

Term Papers

Need Help?

Sign up for our email newsletter

Receive updates, enter your email below

Use of this web site constitutes acceptance of the Terms Of Use and Privacy Policy | User published content is licensed under a Creative Commons License.
Copyright © 2005-2008 Free Articles by ArticlesBase.com, All rights reserved. (0.19, 17)

Fees Associated with Mutual Funds

Article Comments

Related Articles

Got a Question? Ask.

Latest Investing Articles

More from Gary Terrazas

Need Help?

Site Links

Webmasters

Business Info

Sign up for our email newsletter