The fees and expenses charged for investments vary. The fees usually depend on the type of investment and the investment company with which you are investing. Typical fees and expenses charged by investments include but are not limited to: administrative expenses, advisory fees, and load fees (front-end and back-end).
Administrative expenses are fees charged for daily administrative functions that the investment manager needs to do. Some of those administrative functions include recordkeeping and investment maintenance. Some investment companies might charge a fixed fee or a percentage of the assets (money) in your investment portfolio.

Another fee charged by investment companies is advisory fee. Some investment companies charge this fee when they help an investor design a portfolio or for giving investors financial advice about their investment alternatives. Advisory fees are standard business practice which compensate the money manager for his/her services. Unlike mutual funds and professional portfolio managers who will charge approximately 1-3% annually of the total assets under their management, hedge funds can often use a structure where they charge a small advisory fee and a large commission on any gains.

Another fee charged by investment companies is a load fee. When investment companies want to trade, they use brokers, who have to be paid commission. The investment company passes this cost onto the investor by charging a load fee which is used to pay the brokers. There are two types of load fees: front-end load and back-end load. Front-end load is charged when a purchase is made for the investor's portfolio. Back-end load is charged when a sale is made from the investor's portfolio.

There are many other fees and expenses charged by investments. However, the decision to charge those fees depends on the investment company. The prospectus for a particular investment will usually contain all the information an investor needs to know about the fees for that particular investment option. Also, an investor should ask the representative to highlight all of the included expenses that can be applied, such as early withdrawal or additional investment fees.

To learn more about how you can reduce your mutual fund investment fees, read Stop Paying High Mutual Fund Fees.

This question was answered by Chizoba Morah.

  1. What are typical trust fund management fees?

    Learn about trust fund management fees, such as the annual management fee, annual expense ratio, brokerage commissions and ... Read Answer >>
  2. What kinds of fees are involved in futures trading?

    Learn what the various costs are that are charged by brokerage firms and trading exchanges to individual futures trading ... Read Answer >>
  3. Why do mutual fund companies charge management fees?

    Learn why mutual funds charge their investors management fees, which include the cost of hiring investment advisors and various ... Read Answer >>
Related Articles
  1. Investing

    8 Investing Fees That You Should Never Pay

    In investment management and financial planning there are a plethora of fees that are unnecessary.
  2. Investing

    Are Fees Depleting Your Retirement Savings?  

    Each retirement account will have a fee associated with it. The key is to lower these fees as much as possible to maximize your return.
  3. Financial Advisor

    How Mutual Fund Companies Make Money

    Read about the many different kinds of fees and sales charges mutual fund companies can use to generate revenue from those who invest in their shares.
  4. Managing Wealth

    How To Optimize Your Portfolio and Reduce Fees

    Investment fees aren't avoidable altogether, but there are strategies investors can employ to keep those fees at bay and reduce the impact on returns.
  5. Investing

    Selling Mutual Funds: What Happens When You Liquidate?

    Learn about the hidden costs that can be triggered when you redeem mutual fund shares. Even no-load funds have fees and expenses you may not know about.
  6. Investing

    Investors: Your Fees Are Probably Too High

    The lower your fees, the higher your returns. Here's how to find out if you're paying too much for your investments.
  7. Financial Advisor

    Are Fees Eating Up Your Nest Egg?

    You may not be able to avoid all fees associated with retirement planning, but you should know what you’re being charged for. Here's a list of common fees.
  8. Personal Finance

    Do You Know How Your Financial Advisor Is Paid?

    It is important to understand how your financial planner is compensated.
  9. Retirement

    401(k) Fees You Need To Know

    Many workers are largely unaware of the various fees that their plans charge them, or what the fees are for.
  10. Retirement

    How a 1% Annual Fee Can Ruin Your Nest Egg

    What kind of impact does an annual 1% fee have on your portfolio? The answer may surprise you.
  1. Exit Fee

    An exit fee is a fee charged to investors when they redeem shares ...
  2. Advisor Fee

    An advisor fee is a fee paid by investors for professional advisory ...
  3. Service Shares

    Mutual fund units that charge service fees to their shareholders. ...
  4. Service Charge

    A service charge is a type of fee collected to pay for services ...
  5. Performance Fee

    A performance fee is a payment made to an investment manager ...
  6. Level Load

    An annual charge deducted from an investor's mutual fund assets ...
Hot Definitions
  1. Entrepreneur

    An Entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture. ...
  2. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  3. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  4. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  5. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  6. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
Trading Center