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One notable component of the expense ratio of U.S. funds is the "12b-1 fee", which represents expenses used for advertising and promotion of the fund. 12b-1 fees are paid by the fund out of mutual fund assets and are generally limited to a maximum of 1.00% per year (.75% distribution and .25% shareholder servicing) under FINRA Rules. [7]
A mutual fund expense ratio is the percentage of your fund investment that a fund company deducts annually to cover various expenses. Services covered by the expense ratio typically include the ...
An expense ratio is the cost of owning a mutual fund or ETF. Think of the expense ratio as the management fee paid to the fund company for the benefit of owning the fund.
Generally, unlike future performance, expenses are predictable. Funds with high expense ratios tend to continue to have high expense ratios. An investor can examine a fund's "Financial Highlights" which is contained in both the periodic financial reports and the fund's prospectus, and determine a fund's expense ratio over the last five years (if the fund has five years of history).
The total expense ratio (TER) is a measure of the total cost of a fund to an investor. Total costs may include various fees (purchase, redemption, auditing) and other expenses. The TER, calculated by dividing the total annual cost by the fund's total assets averaged over that year, is denoted as a percentage. It will normally vary somewhat from ...
What is an expense ratio? And how does it affect your investment portfolio? Learn more about the effect of costs vs funds with investment accounts in this article.
A mutual fund is a pooled collection of investment funds. When a person buys shares in a mutual fund, money is combined with other investors' capital. A professional manager purchases stocks, bonds...
The fund's board reviews the management fee annually. Fund shareholders must vote on any proposed increase, but the fund manager or sponsor can agree to waive some or all of the management fees in order to lower the fund's expense ratio. Index funds generally charge a lower management fee than actively-managed funds.
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