Stop Paying High Mutual Fund Fees

Paying mutual fund fees is a part of investing in mutual funds, most people simply do not pay much attention to it. However, if you want to be successful investing in mutual funds, you should pay more attention to the high fees that you are paying to your mutual fund company. Here are a few things to consider about the fees that are associated with mutual funds and what you should know about them.

Mutual Fund Fees

There are number of different fees that can be charged by a mutual fund. These fees are taken directly out of the amount of money that the mutual fund provides to investors in the form of returns. This means that the more money that you pay in mutual fund fees, the less money you will be earning from returns. Because of this, you need to pay special attention to the amount of money that you pay in fees so that you can increase your bottom line as an investor.

Expense Ratio

The expense ratio is generally the largest fee that you will have to pay when investing in a mutual fund. The expense ratio is essentially a percentage of the total value of the money in the mutual fund that will be kept by the mutual fund company. This money is kept by the mutual fund company in order to pay for the expenses associated with running the fund. The expense ratio will cover the salaries of the fund managers. It will also cover administrative costs such as legal fees, rent for an office, and other expenses. 

When you are looking at mutual funds, you should look at the expense ratio and compare it to other mutual funds. Some mutual funds are more efficient than others and charge lower expense ratios. You need to decide if the performance that is being turned in by the mutual fund is worth paying for the expense ratio. If it is not, you may want to switch to another fund.

12b-1 Fees

12b-1 fees are another fee that you may want to avoid completely. This type of fee is charged by mutual fund companies in order to pay for distribution costs. In some cases, it is actually referred to as a distribution fee. This fee is collected from the members of a mutual fund in order to pay for advertising and mailing costs to bring in more investors. This does not actually help the existing investors at all. Bringing more people into a mutual fund does not improve the performance of the fund. Therefore, as an investor, you may want to avoid mutual funds that charge distribution fees. Many mutual funds have realized that investors do not like these fees and have eliminated them.

Redemption Fees

Some mutual funds charge a redemption fee. This is a fee that you will have to pay when you sell your shares of the fund. This fee goes to the mutual fund in order to offset the costs of transaction fees.