Search thousands of topics on CostHelper.com

BROWSE ALL TOPICS >> babies & children  cars  consumer electronics health & personal care home & garden personal finance  pets  schools small business sports weddings
CostHelper > Personal Finance  > Taxes & Financial Planning > Mutual Fund

Mutual Fund Cost


How Much Does a Mutual Fund Cost?

 
post Post    

Also called an investment company, a mutual fund pools money from many investors, with the buying and selling decisions made by a professional money manager guided by the fund's official strategies and objectives.

Typical costs:

  • Mutual fund costs include the fees you pay when you buy, sell or exchange your shares, and for ongoing operating expenses.
  • Sales charges may apply when you buy mutual fund shares (called a front-end load) and if you sell within a certain period of time (a back-end load); funds without a sales charge are called no-load. On a $10,000 investment with a 4.5 percent front-end load, the sales charge would be $450, leaving $9,550 invested in the fund.
  • No-load funds may still charge purchase fees, redemption fees, exchange fees and account fees, and have annual operating expenses of up to 0.25 percent annually. Generally customers order no-load shares directly from the mutual fund, rather than working with a financial advisor or sales rep.
  • Total annual fees for any mutual fund can be up to 2 percent, and are usually reported as the expense ratio of the fund. This includes up to 0.75 percent for what is legally known as 12b-1 fees, which pay for marketing and distribution. According to the Securities and Exchange Commission[1] , $10,000 invested in a fund with a 10 percent annual return and a 1.5 percent charge for operating expenses would be worth roughly $49,725 after 20 years; if the fund expenses were only 0.5 percent, the 20-year value would be about $60,858, or an 18 percent difference.
  • NASD has a mutual fund expense calculator comparing the impact of fees from three different funds.
  • Mutual funds are relatively easy to obtain and they spread investments over a range of stocks, picked either by the fund's manager or a formula. Butt there's no guarantee of success; the biggest cost of a mutual fund could be if it loses money.
Related articles: Stock Broker, Financial Planner, IRA, Credit Card

What should be included:
  • The SEC gives a brief overview of how mutual funds work[2] and the various types, such as money-market, bonds or index.
  • Mutual funds usually target specific types of investments, such as high-tech stocks or municipal bonds. They can also reflect personal views: Pax World Balanced was one of the first "socially conscious" mutual funds. It got high marks from Consumer Reports, as did The Greenspring Fund[3] . There are various mutual funds targeting everything from environmental sustainability to religious values, but an article at MSN.com argues that personal beliefs don't necessarily lead to profitable investment choices.
  • Usually there's a minimum initial requirement of $1,000 or more, although sometimes it's waived for regular, monthly investments or when buying the shares with money from an IRA savings account.
  • The advantage of professionally managed funds is that someone else is making the buying and selling decisions for particular stocks, bonds or other investments; the disadvantage is that someone else is making the decisions, according to The Motley Fool[4] .
Additional costs:
  • A fund's turnover rate shows the percentage of its holdings that change each year. Buying and selling stocks costs money, so a high turnover rate means higher expenses. Turnover rates vary dramatically, from 5 percent or less, to as high as 85 percent.
  • For small investments (for example, $2,500 or less), mutual funds may charge an annual maintenance fee of $15-35 or more.
Shopping for a mutual fund:
  • The Massachusetts Securities Division gives an overview of what to consider in selecting mutual funds. A mutual funds' fees, objectives and level of risk are legally required to be listed in the fund's prospectus; its statement of additional information gives added details, such as an audited financial statement and a list of holdings. If an annual report is available, read that as well.
  • While most advertisements, rankings and ratings stress a mutual fund's past performance, the SEC[5] says that studies show that is no guarantee of the future; fees and expenses may be a more reliable predictor of performance.
  • The Mutual Fund Education Association, a nonprofit trade group, lists ways to buy mutual fund shares[6] and provides links to the leading mutual fund companies[7] .
  • The Investment Company Institute, a national association of mutual fund companies, gives links to its members.
post Post    
CostHelper News


Forgotten Expenses In a Home Addition Budget
Items like construction costs, permit fees or debris removal aren't the only expenses to consider when calculating the total costs of a home remodeling project. || Posted August 5 2013


7 Lesser-Known Discounts for the 50+ Crowd
As they age, members of the Baby Boomer generation don't like to admit that they're senior citizens, but they love getting discounts. It's kind of a quandary, because some of the best deals available are reduced prices for older folks. || Posted October 21 2013

‣ All CostHelper Blog Posts


What People Are Paying - Recent Comments


 

Comment On Your Experience With a Mutual Fund
 
Subject:  *
Amount Spent:  *
Company: Fund Name: 
Comments: 
Purchased:  Year: 
City:  * State:  *
 
Information about you:
Email:  * Email addresses are not displayed.
Name:  This is the name we'll display with your post.
me on this computer
*=required field.
 



External Resources:
  1.  www.sec.gov/investor/pubs/mfperform.htm
  2.  www.sec.gov/answers/mutfund.htm
  3.  www.greenspringfund.com/
  4.  www.fool.com/investing/beginning/what-should-i-invest-in.aspx
  5.  www.sec.gov/investor/tools/mfcc/mfcc-int.htm
  6.  mfea.com/
  7.  mfea.com/decide/investment_tools/fund_companies.fs
More Personal Finance Topics
Check Out All Costs for Personal Finance How Much Does Closing a Home Cost? How Much Does a Traffic Ticket Attorney Cost? How Much Do Funeral Flowers Cost?

Search Thousands of Topics on CostHelper.com

 
Today's Featured Cost Articles

About CostHelper
CostHelper is based in Silicon Valley and provides consumers with unbiased price information about thousands of goods and services. Our writers are experienced journalists who adhere to our strict editorial ethics policy.

CostHelper Community
Flu symptoms
Paid: 5932.68
Couldn’t stand headache pain when I caught the flu in March 2019. Threw up pain relievers, couldn’t eat or drink. After 5 hours of pain decided to hit ER... [more]
-GayLynn
Emergency Room Visit Cost
Financing
Paid: 20000.00
How do people afford wells? No one finances?... [more]
-Kourtney
Well Drilling Cost
1 yr 23lb Male Neuter
Paid: 424.08
The price would have been $282.08, but I opted for the blood work and to have it done via laser versus scalpel. I was still surprised by the cost, but I didn't really have anything to compare it to... [more]
-Joelle
Dog Spay or Neuter Cost
Is this cost of tax preparation correct
Paid: 1845.00
Each year our tax preparation cost goes up faster than inflation. we started at $800.00 in 2012 and now our bill for preparing taxes this year is $1,845.00... [more]
-smallbizchris
Business Tax Preparation Cost
Termite inspection/WDOR as required by the VA
Paid: 125.00
Called Terminix,,which I thought was an upstanding company,,guy came out did the inspection,,I told I'm a Vet and its required by the VA in order to complete the refinance of my home,,also it is required by the VA to use the VA approved for... [more]
-Felix Vaughan
Termite Inspections Cost
New 317 sq ft deck quote
Paid: 10500.00
This contractor built my fences out of redwood heartwood. They just quoted me for a redwood deck and I think it's a decent price. Curious to know what others think. I'm in the SF Bay Area where costs are usually higher for everything... [more]
-Ariana Faustini
Redwood Deck Cost