What Are Mutual Fund Costs and Expenses?

Costs and expenses are the expenses associated with running a mutual fund. Costs and expenses are among the principal criteria for judging the investment quality of a mutual fund. Funds that are 澳洲幸运5官方开奖结果体彩网:passively managed tend to have lower costs and expenses compared with their 澳洲幸运5官方开奖结果体彩网:actively managed counterparts. The "expenꦆse factor" is a key determinant of a fund's investment return to shareholders.

Understanding Costs and Expenses

As with any business, it costs money to run a mutual fund. There are certain costs associated with an investor’s transactions, such as buying, selling, or exchanging mutual fund shares. These costs are commonly known as "shareholder fees." There are also ongoing fund operating costs, and "investment advisory fees" are charged to cover the cost of managing the fund’s holdings, marketing, distribution, custodial, transfer agency, legal, accounting, and other administrative expenses.

Some funds may cover the costs associated with your transactions and your account by imposing fees and charges directly at the time of a transaction. In addition, funds typically pay their regular and recurring fund-wide 澳洲幸运5官方开奖结果体彩网:operating expenses out of fund assets. Because these expenses are paid out of fund assets, they are paid indirectly by the fund's shareh🌊olders.

The fund's board of directors is responsible for overseeing the fund’s operations and management. The fund’s directors function as watchdogs and should protect the interests of the fund’s shareholders and keep costs and expenses to a minimum. One of the most significant responsibilities of a fund’s board of directors is negotiating and reviewing the advisory contract between the fund and the investment adviser to the fund, including fees and 澳洲幸运5官方开奖结果体彩网:expense ratios. The ex▨pense ratio measures how much of a fund's assets are used for administrative and operating expen🅰ses. 

The Impact of Costs and Expenses

Costs and expenses vary from fund to fund. A fund with high costs must perform better than a low-cost fund to generate the same returns. Even small differences in fees from one fund to another can add up to substantial differences in 澳洲幸运5官方开奖结果体彩网:investment returns over time.

The more you pay in fees and expenses, the less money you will have in your 澳洲幸运5官方开奖结果体彩网:investment portfolioℱ. And these feesꦑ and expenses really add up over time.

Types of Costs and Expenses

Shareholder Fees

The following f🅠ees may appear as sharehold🍒er fees:

• Sales loads
• A sales charge on purchases
• Deferred sales charge
• Redemption fee
• Exchange fee
• Account fee
• Purchase fee

Annual Fund Operating Expenses

The following may appear as annual fun⭕d operating expens𓃲es:

• Management fees
• Distribution (and/or service) 12b-1 fees

Other Expenses

The following may appear as other expenses:

• 澳洲幸运5官方开奖结果体彩网:Total annual operating expenses (or the fund’s expense ratio)