Before you invest, take the time to understand all the investment fees associated with your investment. Any investment advisor worth working with should be willing to explain, in plain English, all the various types of investment fees that you will pay. If you don't work with an advisor, you'll still pay fees. You'll have to do through the prospectus and financial institution websites and documents to see what those fees are. You have a right to know what you are paying, and how someone is being compensated for recommending an investment to you.
It costs money to put together a mutual fund. The expense ratio is not deducted from your account, rather the investment return you receive is already net of the fees.
Think about a mutual fund like a big batch of cookie dough; operating expenses get pinched out of the dough each year. The value of each share is slightly less because the fees were already taken out.
You can't compare expenses in all types of funds equally. Some types of funds, like international funds, or small cap funds, will have higher expenses than a large cap fund or bond fund.
It is best to look at expenses in terms of your entire portfolio of mutual funds. You can build a great portfolio of index funds and pay no more than. Investment management fees are charged as a percentage of the total assets managed.
It is typical for smaller accounts to pay higher fees as much as 1. Additional services might include comprehensive financial planning, tax planning, estate planning, budgeting assistance, etc. If you are investing small amounts of money, these fees add up quickly. In addition to the ongoing operating expenses and "A share" mutual fund charges a front-end load, or commission.
A back-end load is charged at the time you sell your fund. This fee usually decreases for each successive year you own the fund. Variable annuities and index annuities often have hefty surrender charges.
This is because these products often pay large commissions up front to the folks selling them. If you cash out of the product early the insurance company has to have a way to get back the commissions they already paid. If you own the product long enough the insurance company recoups its marketing costs over time.
Thus the surrender fee decreases over time. Many firms will also charge an account closing fee if you terminate the account. Most of the time if you are working with a financial advisor that charges a percentage of assets these annual account fees are waived. Updated August 22,More...