12B-1 Fee

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What is a '12B-1 Fee'

A 12B-1 fee is an annual marketing or distribution fee on a mutual fund. The 12b-1 fee is considered an operational expense and, as such, is included in a fund's expense ratio. It is generally between 0.25-1% (the maximum allowed) of a fund's net assets. The fee gets its name from a section in the Investment Company Act of 1940.

BREAKING DOWN '12B-1 Fee'

Back in the early days of the mutual fund business, the 12b-1 fee was thought to help investors. It was believed that by marketing a mutual fund, its assets would increase and management could lower expenses because of economies of scale. This has yet to be proved. With mutual fund assets passing the $10 trillion mark and growing steadily, critics of this fee, which today is mainly used to reward intermediaries for selling a fund's shares, are seriously questioning the justification for using it. As a commission paid to salespersons, it is currently believed to do nothing to enhance the performance of a fund.

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    Learn what is generally considered to be a reasonable 12b-1 fee, what these fees are charged for and how these fees are regulated. Read Answer >>
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  5. When an investor reads that a mutual fund charges 12(b)-1 fees ...

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