Mutual Fund Wrap

AAA

DEFINITION of 'Mutual Fund Wrap'

Also known as a mutual fund advisory program or a wrap account, these programs give investors access to a large pool of mutual funds for one annual fee (usually between 0.5\% and 2\%). In other words, that one fee is supposed to "wrap around" all your mutual fund activity, giving you a clear picture of what is paid to your broker or financial advisor. These mutual fund wrap programs are most often offered by full-service brokerage houses to give customers another pricing option besides paying an upfront commission or surrender charges.

INVESTOPEDIA EXPLAINS 'Mutual Fund Wrap'

While mutual fund wrap accounts may seem like a transparent way of managing your mutual fund costs, most investors miss a major facet. In most instances, the wrap fee only covers the services provided by your broker, not the actual management fees of the mutual fund itself. These management expenses can range from just a few basis points to 1-1.5% annually, putting your total combined cost as high as 2-3%.

VIDEO

Loading the player...
RELATED TERMS
  1. Wrap Account

    An account in which a brokerage manages an investor's portfolio ...
  2. Trailer Fee

    A fee that a mutual fund manager pays to a salesperson who sells ...
  3. Wrap Fee

    A comprehensive charge levied by an investment manager or investment ...
  4. Expense Ratio

    A measure of what it costs an investment company to operate a ...
  5. Front-End Load

    A commission or sales charge applied at the time of the initial ...
  6. Dividend

    A distribution of a portion of a company's earnings, decided ...
RELATED FAQS
  1. What is financial double-dipping?

    In the financial industry, double-dipping occurs when a financial professional, such as a broker, places commissioned products ... Read Full Answer >>
  2. What is a wrap account and what are the advantages of using one?

    Wrap accounts, in which brokerage account costs are "wrapped" into a single or fixed fee, are great if you don't have time ... Read Full Answer >>
  3. What mutual funds can be used for investing in the industrial sector?

    The industrial goods sector provides investors access to companies that engage in activities such as aerospace and defense, ... Read Full Answer >>
  4. What is the difference between a custodian bank and a mutual fund custodian?

    Custodian banks and mutual fund custodians, commonly known as mutual fund corporations, perform very similar roles for different ... Read Full Answer >>
  5. How do no-load funds typically perform relative to load funds?

    No-load mutual funds are pooled investments that do not carry an upfront sales charge when purchased or a deferred sales ... Read Full Answer >>
  6. What are the most popular mutual funds that invest primarily in the insurance sector?

    Under the purview of the financial services industry, the insurance sector is an attractive investment option for mutual ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Paying Your Investment Advisor - Fees Or Commissions?

    The way a professional is compensated can affect quality of service. Learn more here.
  2. Mutual Funds & ETFs

    That's A (Mutual Fund) Wrap!

    These advisory programs offer professional supervision and other handy tools for building a diversified portfolio.
  3. Bonds & Fixed Income

    Wrap Accounts: A Gift Of Advice?

    Fee-based accounts were banned in 2007, but a on a practical level, this service remains the same for investors.
  4. Options & Futures

    The Rap On Wrap Fees For Retirement Accounts

    If your retirement account is managed under a wrap fee program, you need to consider whether you should pay the fee out of your retirement account balance or out-of-pocket.
  5. Mutual Funds & ETFs

    Mutual Funds or ETFs: Which is Better?

    Trying to decide between a mutual fund or ETF? Here's what you need to know.
  6. Investing Basics

    Understanding Open-End Funds

    An open-end fund is a type of mutual fund that does not limit the amount of shares it issues, but issues as many shares as investors are willing to buy.
  7. Mutual Funds & ETFs

    Why You May Want To Be (And Stay) In Bonds

    Bonds are complicated, and it’s easy to feel intimidated or confused. Fortunately, you don’t need to be a numbers geek to be an informed investor.
  8. Professionals

    5 Signs That You Have a Lousy 401(k) Plan

    Knowing whether a 401(k) plan is good or not so good is important. This will help participants decide how much to invest and when to demand improvements.
  9. Professionals

    A Look at How the Ultra-Wealthy Invest

    Ultra-wealthy investors are cautious this year as they approach the markets. Many target mutual funds and stocks, but most also diversify their portfolios.
  10. Investing Basics

    What Does Overweight Mean?

    In the investing world, "overweight" refers to an expected stock performance, or a portfolio that is out of balance.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center