How to Avoid High Fee Mutual Funds
Mutual fund fees are a common complication for investors. It has been established that this industry is notorious for both the complexity of the basic fee structure and the amount of the fees within that structure. If you are reading this free investing guide, you have likely discovered that the fees associated with mutual funds are the biggest complication that you experience with this type of investment. These fees have the ability to eat into the return that you receive from your investment. Additionally, these fees are the main culprit behind sub-par performance of your mutual funds. You are not the only person to experience these issues. As a matter of fact, it has been determined that professionals within the industry actually cover up these fees through an intense layer of financial complexity and hard-to-understand jargon. In this free investing guide, you will be presented with a couple of steps on how to avoid high fee mutual funds.
Exploring the Expense Ratio
In order to successfully eliminate excessive mutual fund fees, you must first evaluate the expense ratio. In some instances, this is referred to as, “Management Expense Ratio”. This is considered to be the ongoing expenses that are commonly associated with a mutual fund. The overall percentage when it comes to the expenses associated with the expense ratio ranges from as little as .2% to as much as 2%. The average equity-based mutual fund charge is anywhere from just over 1% to 1.5%. If you have specialty funds or international funds, your fees will be even higher. Many believe that if they pay higher fees on their mutual funds, they will experience a higher return; however, there is no evidence to support any truth associated with this assumption. If you want to reduce the fees that you spend on the expense ratio portion of your mutual funds, you should evaluate how much you are paying for the management fee, administrative costs, and the 12B-1 fee.
“Loads” Fees
In order to reduce the amount you pay in mutual funds fees, you should determine if your investments have any “loads” fees. In all actuality, these types of mutual funds should be avoided; however, if you have already invested in these types of mutual funds, you should know that these fees are simply used to compensate whoever sold you the mutual fund. That could be a broker or a sales person. There are front-end loads and back-end loads with these mutual funds. The front-end fee occurs when you purchase the mutual funds for the sales charge. The back-end fees occur if you elect to sell the mutual fund within a specified time frame. When at all possible, you should focus on a no-load mutual fund to avoid costly fees.
Conclusion
In this free investing guide, you have been introduced to the most common types of mutual fund fees. In order to ensure that you avoid high fee mutual funds, you should make certain that you carefully study the investments that you are interested in and that you know all that you are able to regarding the fees. Not only will you be able to avoid the basic fees, but, you will be able to avoid getting taken advantage of by people that specialize in selling mutual funds. By keeping the information in this free investing guide in mind when working with mutual funds, you are sure to experience a higher return on investment.
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Written by Jon the Saver
