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


10 Most Popular Cosmetic Procedures Before the Holidays
With reunions and other get-togethers scheduled during the holiday season, most people want to look their best at this time of year. For some, that means filling in those wrinkles with a bit of botox, or having a nip and tuck down here and there. || Posted November 23 2013


10 Reasons to Shop Small Business Saturday on Nov. 30
After the retail insanity of Black Friday, consider checking out locally-owned companies on Saturday, Nov. 30. || Posted November 13 2019

‣ 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
Bat bite
Paid: 0.00
On October 25th I was bitten by a bat during mid morning, animal control told me to get the rabies shots due to the fact that several rabid bats had been found in the area... [more]
-Rita W
Rabies Vaccine Cost
7 stitches to shin
Paid: 371.00
My son had 7 Stitches to his shin he fell in the woods and was cut by a old fence. They were super nice in and out, in about one hour. 155.00 for the visit and the remainder was for the Stitches ... [more]
-Tavanna
Stitches Cost
2 Car Garage
Paid: 1700.00
Looks FANTASTIC! The guys done a fabulous job and did it in one day! Highly recommend! 615-739-2146... [more]
-Chad Dunn
Epoxy Flooring Cost
Commercial Real Estate Brochure
Paid: 200.00
Quick turn around time! 4 revisions with PDF and hyperlinks embedded. Website management available too... [more]
[email protected]
Graphic Designer Cost
Fairly priced
Paid: 0.00
My baby boy choked on some food this evening. While we were on the phone to the emergency services the blockage cleared. Ambulance was sent anyway to make sure everything was ok... [more]
-Thank you NHS
Ambulance Cost
Ripped Off
Paid: 46.00
I asked the nail technician how much for a full set. He said he will let me know as soon as he gets the nails on my fingers (WTH?) ... anyway on the board the price said $28 and up...... [more]
-Kay.
Manicures and Pedicures Cost