Fees Associated with Investing in a Mutual Fund

All mutual funds have fees and expenses that are paid out of investment returns and potentially from fund assets. Some mutual funds also have a sales charge that is paid when buying or selling your interest in a mutual fund.

Some of the associated fees include:

Management Fee – Most mutual funds charge a management fee of between 1% and 2%. This is intended to cover the costs of the investment manager – salaries of the analysts etc

Performance Fees – In addition to the management fee, some mutual fund managers could also earn an incentive fee. They would typically earn 20% of excess returns above a certain pre-agreed level.

Expense Ratio – These comprises the fees that are due to the other parties involved in running a mutual fund as well as advert, marketing and other associated costs.

Trading Fees – These is embedded in the cost of buying and selling individual securities held in the fund.

The sum of the fees vary across mutual funds, so you want to look at the prospectus of each fund so you know what you are paying and how it compares with other funds.

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