12B-1 Plan

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DEFINITION of '12B-1 Plan'

A no-load mutual fund that is allowed to use fund assets to pay for its distribution costs. The 12B-1 plan mutual fund is an alternative to paying the sales fees encountered in loaded funds. By charging an annual percentage based on the current value of the investment on an annual basis, investors avoid paying a front-end or back-end load when purchasing or redeeming the fund.

BREAKING DOWN '12B-1 Plan'

The government typically restricts 12B-1 fees to 1% of the current value of the investment on an annual basis, but they generally fall somewhere between 0.25-1%. This fee must be voted on by the mutual fund's directors, and must be disclosed in the mutual fund prospectus. Because this fee is a little less obvious (not an upfront charge like the 12B-1 fee), investors should read mutual fund documentation thoroughly to understand the fees they are paying.

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RELATED FAQS
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    Wash trading, the intentional practice of manipulating a stock's activity level to deceive other investors, is not a legal ... Read Full Answer >>
  3. What action is the SEC likely to take on 12b-1 fees?

    The Securities and Exchange Commission (SEC) may take action to impose greater regulation on how 12b-1 fees are used, or ... Read Full Answer >>
  4. What is considered a reasonable 12b-1 fee?

    A reasonable 12b-1 fee is generally considered to be 0.25% of the assets of the mutual fund. The maximum amount allowed for ... Read Full Answer >>
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    There are a number of mutual funds that give exposure to the retail sector. Three of the most popular funds are the Fidelity ... Read Full Answer >>
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