A:

The fees and expenses charged for investments vary. The fees usually depend on the type of investment and the investment company with which you are investing. Typical fees and expenses charged by investments include but are not limited to: administrative expenses, advisory fees, and load fees (front-end and back-end).
Administrative expenses are fees charged for daily administrative functions that the investment manager needs to do. Some of those administrative functions include recordkeeping and investment maintenance. Some investment companies might charge a fixed fee or a percentage of the assets (money) in your investment portfolio.

Another fee charged by investment companies is advisory fee. Some investment companies charge this fee when they help an investor design a portfolio or for giving investors financial advice about their investment alternatives. Advisory fees are standard business practice which compensate the money manager for his/her services. Unlike mutual funds and professional portfolio managers who will charge approximately 1-3% annually of the total assets under their management, hedge funds can often use a structure where they charge a small advisory fee and a large commission on any gains.

Another fee charged by investment companies is a load fee. When investment companies want to trade, they use brokers, who have to be paid commission. The investment company passes this cost onto the investor by charging a load fee which is used to pay the brokers. There are two types of load fees: front-end load and back-end load. Front-end load is charged when a purchase is made for the investor's portfolio. Back-end load is charged when a sale is made from the investor's portfolio.

There are many other fees and expenses charged by investments. However, the decision to charge those fees depends on the investment company. The prospectus for a particular investment will usually contain all the information an investor needs to know about the fees for that particular investment option. Also, an investor should ask the representative to highlight all of the included expenses that can be applied, such as early withdrawal or additional investment fees.

To learn more about how you can reduce your mutual fund investment fees, read Stop Paying High Mutual Fund Fees.

This question was answered by Chizoba Morah.

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