Different Charges Associated With Mutual Fund Investment
You have to pay fees for all type of mutual funds, some charge you more some less. Here are few fees that you must ask before you invest in mutual fund.
The expense ratio
This is a fee that is there in each and every mutual fund. To run the mutual fund they need money and the cost of operation of different funds are different. Whatever the cost of operation is every mutual fund will charge you the expense ratio, be in the name of operating expense or management fee. Before the share is determined this fee is deducted from the total assets of the fund. The index or passive funds have lower operating expense compared to the active ones. Even this fees will be more for international funds compared to the domestic funds. Again small cap funds will charge you higher than the long cap funds. Different companies will charge you different expense ratio even though they are similar type of mutual fund.
Commission or sales charge
It is the upfront fees that you pay for buying the shares. When you buy any share you have to pay a commission on the shares purchased and that is known as sales charge. There are few mutual funds that are under the category of ‘no-load’ which means that you do not have to bear the commission when you buy your share. Get no risk no fee quotes at https://www.medisupps.com/medicare-supplement-plans-2020/
This is a type of fees that you need to pay while you sell the shares. While buying ‘B share’ mutual fund you do not have to worry about redemption fees but when you sell them you have to pay a back end load and that is known as Redemption fees. However, you have to bear this charge only when you do not keep the shares for the time according to the schedule.
Short Term Trading Fees
Mutual funds are actually long term investments but there are few investors who try to trade in short term. In order to stop them from doing so such charges are imposed on certain funds. It will discourage the investors in selling in and out some of their funds in short term duration. You have to bear the charges when you have purchased a share and then sell it off within 30 to 90 days of the purchase. As a senior if you are planning to invest in mutual fund then ask about these fees before you invest. Nowadays most of the charges are reduced so that investors get better return.