Think you know exactly how much your mutual funds are costing you each year? Think again. The unfortunate truth is that many funds come packed with hidden mutual fund fees, fees that most consumers have no idea exist.
But you want to be an educated consumer, right? If that’s the case, you’ll take the extra time to compare mutual fund fees and find the hidden costs of your funds. And depending on how high these costs are, you might even move your dollars to funds that don’t have quite so many of these secret fees.
Mutual funds come with many upfront fees, fees that are freely advertised by your fund company. These include management and redemption fees. There’s nothing too mysterious about these fees.
But then there are the fees that are rather mysterious, the brokerage fees. Simply put, these are fees that investors are charged when their fund managers buy and sell securities. These fees are not included in the expense ratio that funds distribute to their investors.
This seems a bit fishy, but it’s how mutual funds have long conducted business. It does make it difficult, though, for those consumers who don’t just settle for expert stock picks like to shop around to make sure that they are investing their money in mutual funds that charge the least amount of operating and management fees.
As one of these conscientious investors, how to you determine these costs? How do you make sure that you’re not paying too much in fees to your mutual fund?
You’ll have to read a document called the Statement of Additional Information. All mutual funds are required to have one of these. It lists the transaction costs – all of them – that funds have charged in prior years. You might be surprised at how much some of these funds charge.
Finding this statement can take a bit of hunting. You can visit your mutual fund’s Web site and poke around. It might be listed there. But if you’d like to avoid the frustration of a possibly fruitless search, call your mutual fund’s customer service line. The person on the other end of the line should be able to tell you how to get a copy of your fund’s Statement of Additional Information.
No one likes to pay the operating fees that mutual funds charge. They’re a fact of life, though. What you don’t want, though, is to be paying hidden fees that you don’t even know about. These fees can add up to some hefty dollar amounts over the years.
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