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Home / Finance / Stock Market Investing / Mutual Funds
Mutual Funds Expenses
By:Michael Saville
Copyright 2006 Michael Saville
Sometimes investors think of mutual funds as a straight choice between no-load funds or load funds, because that is what they read about in the financial or popular press. But, there are a host of mutual fund expenses that can be charged to a no-load mutual fund as well as a load mutual fund.
About 99% of mutual funds charged fees. So the trick is to find a mutual fund that has low yearly fees so that they don't significantly reduce the money you make on your fund. Mutual funds have a variety of costs. These costs include yearly management fees, administrative charges, taxes and loads.
Many investors are now familiar with loads because we frequently hear the terms, load or no-load in the media. The other costs are usually not discussed by the media but these can have a dramatic effect on how much benefit you get from the fund in real terms. Some mutual funds charge an upfront or back-end load, while others have no-load. Know what load your fund charges. Many are as low as zero, while others are as high as 8.5%.
Loads can be used to pay your broker's fee, and other administrative costs. Some, but not all mutual funds have 12b-1 or b fees. These fees are used to pay for advertising and other administrative costs. A fund with a 12b-1 fee of .25% or less is still considered a no-load fund.
Some mutual funds have what is called a low turnover rate. When mutual fund managers buy and sell a high number of stocks, with frequency, within a fund, it will have a high turnover rate, causing a higher capital gains tax, the opposite is true with low turnover mutual funds. Check the fund reports for the turnover rate. A rate of 80 or less is usually considered low.
Taxes are not a reason to not buy a mutual fund, after all, taxes are just a fact of life. For funds within a retirement account taxes are deferred until they are sold at retirement.
Index funds are known for their extremely low yearly management fees, because they are not actively managed. Some average .20%, which is extremely low, almost insignificant. All mutual funds are charged yearly management fees. These fees are the vehicles, which enable the fund to pay its costs. Choose funds with low yearly management fees. These will be charged for the life of the fund you choose; therefore it is prudent to focus on funds with low yearly fees. Examples of low fees are charges of 1.25% or less. Of course, you may be less concerned with management fees if the fund performs well. You can expect a typical growth mutual fund to return 12% or more with compounded interest. Don't forget, compounded interest happens over a period of years. Compounded Interest is the way interest is paid on mutual funds. This means interest is paid on previous principal and interest, not just the principal. Therefore you get interest paid on interest, over and over again. Compounded interest gives you a distinct advantage over simple interest savings account. However, in comparison, a 3% bank savings account could lose 2% to inflation and another 1% to taxes, with only simple interest returns, your true interest rate could be zero.
Mutual funds are liquid accounts, funds can be withdrawn at any time, without penalty in most accounts, (exceptions are accounts with back-end loads and retirement accounts). Know if your mutual fund pay- out date is quarterly, every six months (bi-annual), or yearly. If you take money out of your mutual fund pay-out date, you will loose your interest payment, on that money, for that year if it is yearly, and so forth.
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Article keywords: no-load funds, mutual funds, no load fund
Article Source: http://www.articles2k.com
Visit www.buy-mutual-funds.com to get my free five-part course on no-load mutual funds investing
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- 6). What are mutual funds loads? By : Michael Saville
Copyright 2006 Michael Saville
Loads are the most talked about fees that mutual funds charge. A "load" on a mutual fund is just another way of saying that the fund charges a sales commission for purchase, sale, or both. There are funds that charge loads and there are funds that do not charge loads (known as "load funds" and "no load funds" respectively).
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- 9). Mutual Funds Expenses By : Michael Saville
Copyright 2006 Michael Saville
Sometimes investors think of mutual funds as a straight choice between no-load funds or load funds, because that is what they read about in the financial or popular press. But, there are a host of mutual fund expenses that can be charged to a no-load mutual fund as well as a load mutual fund.
About 99% of mutual funds charged fees.
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| New Mutual Funds Articles |
- 1). What are mutual funds loads? By : Michael Saville
Copyright 2006 Michael Saville
Loads are the most talked about fees that mutual funds charge. A "load" on a mutual fund is just another way of saying that the fund charges a sales commission for purchase, sale, or both. There are funds that charge loads and there are funds that do not charge loads (known as "load funds" and "no load funds" respectively).
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- 2). Is An Index Mutual Fund The Best Choice For Long-Term Investing? By : Alexander Korablev
Do you believe that the world economy will grow? Do you believe that US economy will grow? I do. The major stock indexes are indicators of economy grow. You can make money use this opportunity buying index funds. Investing into index mutual funds is easy, interesting, and profitable. It takes 5 minutes every month! If you are long-term investor, index funds is for you!
It doesn’t matter what index you choose.
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- 3). What are no-load mutual funds? By : Michael Saville
Copyright 2006 Michael Saville
No load mutual funds are mutual funds whose shares are sold without a commission or sales charge. The reason for this is that the shares are distributed directly by the investment company, instead of going through a secondary party. This is the opposite of a load fund, which charges a commission upon the initial purchase at the time of sale.
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- 4). Mutual Fund Expenses By : Sachin A
An informed investor knows where his money is going. For an investor in mutual funds, it is essential to understand the expenses of mutual funds. These expenses directly influence the returns and cannot be neglected.
The expenses of mutual funds are met from the capital invested in them. The ratio of the expenses associated with the operation of the mutual fund to the total assets of the fund is known as the “expense ratio.
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- 5). Why You Should Buy No-Load Funds! By : Sachin A
Load is defined as the fee or the commission that an investor pays to a mutual fund at the time of purchasing or redeeming the shares of the mutual fund.
If the commission is charged when the investor buys the shares, it is known as a front-end load. On the other hand if the commission is charged when the investors redeems his shares, it is known as a back-end load.
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Switching your job? Retiring? Congratulations! A window of opportunity opens for you with the Rollover Individual Retirement Account or Rollover IRA.
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- 8). Why you should avoid load Mutual Funds (part 2) By : Michael Saville
Copyright 2006 Michael Saville
Paying a load is akin to throwing away most or all of the supposed advantage you get from having a salesman choose a fund for you. If it's true that asset allocation accounts for 95 percent of investment results over long periods of time, then only 5 percent is left over as a reward for having the "right" fund and the "right" manager.
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- 9). Operating Mutual Funds - how these profit exploding money makers actually work By : Duncan Roberts
Although investing in mutual funds isn't the type of subject associated with wild parties and celebrations - it is something the serious investor should consider as a way of increasing their total worth.
"But what EXACTLY is a mutual fund" I hear you ask - "how does it work, who does what and how much do they cost?"
Hang on, slow down - one question at a time please.
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