Expense Ratios
Mutual funds charge fees and expenses in the form of expense ratios that are deducted
from the fund’s net asset value. This is the hidden cost of investing and we spend
time showing you what you are currently paying in fees, and how you could lower your cost
of investing by utilizing index funds.
Actively managed mutual funds have on average a 1.44% expense ratio while index mutual
funds average just .4%. This one percent cost advantage that index funds have over
actively managed funds means more of your money is working for you, instead of paying the
mutual fund manager to underperform the market!.
Management Fees:
By far the largest component of the expense ratio is the investment management fee. This
fee is a percentage of the mutual fund's assets charged to all of the investors in the
fund. This is how the mutual fund company makes money. This fee covers the mutual fund
company's profit margin, the fund manager's compensation, and the costs of research among
other costs. The identity of items included in the management fees for any fund is
typically not disclosed.
Marketing and Distribution Fees (12b-1 fees):
These fees are for the marketing and distribution of the mutual fund and may not exceed
100 basis points. This is usually paid to the broker or salesman who "sold" the
mutual fund and may be as much as 25 basis points and still be known as a "no-load
fund".
Other
Administrative Expenses
This category includes the servicing of shareholder accounts, such as providing
statements, reports, dispersing dividends, as well as custodial services. |
