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Mutual Funds - Commission & Redemption Fees

Commission
Investment experts have speculated that brokerage commissions can add as much as 0.15% to a fund's annual expenses. However, these costs are not included in a fund's expense ratio. They seem to fit the definition of an operating expense but, as of today, are not so considered.

SEE: Paying Your Investment Advisor - Fees Or Commissions?

Redemption Fee
Designed to discourage market timers, an increasing number of mutual funds are charging a flat fee, usually 1%, on withdrawals (shares redeemed) made within a certain time frame. Generally, redemption fees are in effect for one year or less following the date of the investor's initial purchase. If you are an investor (in for the long term), as opposed to a speculator (in and out for the short term), this type of fee will have no effect on your fund investment.

Also remember that a mutual fund is a business and seeks to return a legitimate profit to its owners. The fund business is a very profitable one. As such, investors should seek out those funds that run a lean operation and align their interests with those of investors for a win-win relationship.

How To Measure Performance
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RELATED FAQS
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  3. Do mutual funds invest only in stocks?

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  4. Why are mutual funds not FDIC-insured?

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