Are mutual fund performance numbers reported net of fees (operating expenses and 12b-1)?

Mutual Funds
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May 2017
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Operating expenses (record keeping, accounting, custodial, etc.) and 12b-1 fees (marketing and advertising) are included within the fund and thus reported net of those fees. But brokerage fees and especially loads (sales charges/commissions) are not included. That said, there are too many low cost, no load mutual funds that can replicate or at least are very similar to loaded funds that there is no reason to pay a load - front end A share, back end B share, or any other share with a load - that you should avoid. And many funds will have different classes of funds and will report the various returns after consideration of the loads and/or different fee structures. You will be able to see the difference in their returns. So if you plan on using mutual funds, choose wisely.

Another alternative is an Exchange Traded Fund or ETF. Think of this as a "hybrid" mutual fund where you can get immediate diversification, low cost structure, but also trades during the day. This is in contrast with a mutual fund where you can only buy or sell at the end of the day Net Asset Value or NAV.  ETFs simply provide you more flexibility and are growing in popularity. Just like a mutual fund though, you must do your research and see how and what the underlying investments are within the ETF (or mutual fund).

If you are passively investing in low cost, indexed funds either will work just fine. If you are more active, then ETFs are normally a better choice.

Hope this helps and best of luck, Dan Stewart CFA®

May 2017
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