| Every investment is faced with costs that go | | | | mainly the cost of hiring the fund managers, |
| towards running its operations. Mutual fund | | | | which normally ranges between 0.5 and 1% of the |
| management fees are the biggest challenge facing | | | | assets. This may sound like a small cost to incur, |
| the investment fund today. The reason is | | | | but think of what it translates to on a 250 million |
| because, they eat into your returns in the course | | | | dollar investment. The second factor is the |
| of operation. This makes the investments to end | | | | administrative cost which includes expenses like |
| up with performance that is below average. To | | | | postage, record keeping and other customer |
| make it worse, the costs are hidden through | | | | services. |
| layers of financial jargon that many people have | | | | There is also the 12B-1 fee which goes towards |
| no time or capacity to understand. | | | | advertisements and market promotion of the |
| The mutual fund fees can be broken into two | | | | fund. This reminds you that nothing god comes |
| categories; those that are purely to help you | | | | easy. However, no fund manager has the right to |
| remain invested in the fund, and those that you | | | | charge you high fees with the promise of high |
| incur when you want to redeem your shares. So | | | | returns because, there is no correlation between |
| you see, either way, you stand to incur the costs. | | | | the two factors. Other fees that go with those |
| The costs incurred when buying shares is known | | | | that have to do with management are |
| as the load of the fund. | | | | redemption fees, exchange fees and account |
| The management fees are not just imposed, | | | | fees. It would be good to get to know about |
| they are determined through a given expense | | | | them before you go about complaining about |
| ratio. The ratio is composed of three factors, | | | | being ripped off. |