Mutual Fund Fees – Expense Ratio/Annual Operating Expenses

Apart from sales fees mutual funds also charge a fixed percentage of total assets under management on yearly basis. Unlike transaction fees these fees are not directly charged to investors but are deducted from the assets. This cost information is listed in the prospectus of a fund. This fees is charged to meet the below expenses

Portfolio Management Fees
Distribution charge (in the U.S)
Other expenses

Portfolio Management Fee is charged to meet Portfolio Manager, research specialists and other employees’ salaries. This charge is high for growth funds in comparison to debt funds since more research is required to find out potential growth stocks. For Index funds it is very less as there is no research is required literally.

December 12, 2009 | Filed Under Mutual Funds | Leave a Comment

Mutual Fund Fees – Sales Charge/Entry –Exit Loads

Mutual Fund units can either be bought directly from the fund house or from a distribution agent. Some percentage of your investment is deducted to account for administrative fees of the distributor. This could be done at the time of purchasing units (entry load) or at the time of redemption (exit load) or at both the times.

Entry load is also called ‘Front end Load’ and Exit load is also called ‘Back end Load’. These two loads are called ‘Sales Charge’. Because of entry load you will get less number of units (than you would get in its absence) and because of exit load you will get fewer amounts at the time of redemption (than you would get in its absence). Instead of charging at the time of entry or exit a fund can charge uniformly, which is called level load.