Let’s Talk About Mutual Fund Fees

In this article I am going to focus on mutual fund fees. Mutual funds take up a lot of shelf space in the investment world. If you have a retirement account, a savings account, or a cash account it is likely you are invested in a mutual fund.

No matter where or what or with whom you invest, there are going to be fees involved.

I wish there was something funny I could say about fees. In writing this article, I found myself going down a rabbit hole. Are fees too big? Are fees too small? (no) How do I know what fees I am paying? Do I have any control over fees?

I want to make the world of fees less complicated and accessible. So, I have gone up and down the rabbit hole a few times to do the work for you. I have called brokerage firms and asked about fees to buy certain mutual funds. Most of the responses put me back in the hole. I don’t want you to waste your time only to fall into the same hole.
The fee debate looms large in the investment world. My personal gripe is that I believe many investors unwittingly pay too much in fees. When I am working with a friend and I see “fee abuse” I would like to reach out and throttle someone. No one wants to feel ripped off or taken advantage of – especially with their investments.

The “methodology” of finding and knowing what fees are, is the same concept you would apply to comparing prices. You do have control over the price you are going to pay for something. I’m not saying that mutual funds have “flash sales.” Mutual fund shares do have different fees for different shares. Knowing this will help you avoid investing in high cost funds.

Unfortunately, there is not a single, all-encompassing fee. Fees are “layered” Like phyllo dough (pronounced fee-low). These are the broad categories for fees:

• Fees that are charged by a mutual fund company
• Fees you pay an advisor (if you use an advisor)
• Fees in the form of transaction costs

The reason there isn’t one easy fee is that the entire investment industry has been disaggregated. Everybody is trying to get a piece of your money. And leave it up to you to figure it out.
Keep the following in mind:

• High fees do impact the return on your investments.
• The language of fees is not intuitive. It’s weird.
• An advisor should be able to give you the exact percentage you are paying in “advisory fees.” This is a fee based on the amount of money the advisor “manages” for you.
• Apart from transaction fees, there are many choices for low cost mutual funds. We need to learn about fees, so you can easily determine how much you are paying.

Fees in mutual funds can vary enormously. I am not going to say that there are “hidden” fees, but as you will see, knowing what to look for can and should impact any investment decision you make. That is why learning how to find fees is so important.

In the video below, I am using a screen shot of a “product profile.” The product profile is a document like a “dossier” for a mutual fund. The purpose of the product profile is to be able to find information quickly. All mutual fund companies have a version of a product profile for their funds.

   How to Find Mutual Fund Fees – Part 1

In this second video I show you what front end loads, back end loads and 12b-1 fees are. You don’t need to remember the terminology once you know where to find the fees.

   How to Find Mutual Fund Fees – Part 2

Knowing what the ticker symbol is will make your life easier. The term “ticker symbol” is a holdover from the time stocks were traded on ticker tape, and the machine that produced the ticker tape made a ticking sound. No, really. The term “symbol” refers to the unique combination of letters and numbers that identify an individual security.

In my first article I suggested pulling together your statements. Now I want you to look at your statement again and see if you can find the ticker symbol for a mutual fund holding. Once you find it, enter the symbol into any browser. You should see the name of the fund appear. Once you click on the name, look for the “profile” or “product profile” and find the fees.

If you need help, shoot me an email with the ticker symbol and I will look it up. I am always curious to know what funds individuals are invested in, and how much they are paying.
teri.frisch@themodesteconomist.com

The product profiles shown in the videos are for informational purposes only. The products shown are not a recommendation to buy or sell any securities. By watching the videos, you agree to our Terms of Use and Disclaimer policy.

 

This website is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation for any security, nor does it constitute an offer to provide investment advisory or other services by The Modest Economist LLC.