Fees have become one of the most controversial topics in the mutual fund industry.
Critics say that some funds have quietly added fees--such as so-called "12b-1 fees" and deferred sales charges--that are not readily apparent from reading the funds' prospectuses.
Here is a brief guide to mutual fund fees:
Management fees. All funds charge these, typically between 0.5% and 1.25% per year, depending on the nature of the fund.
Loads. These up-front, one-time sales charges can go as high as 8.5% of your investment. That means that for each $1,000 you invest, you will pay as much as $85 off the top, leaving only $915 actually working for you. So-called low-load funds usually charge between 2% and 4%. The nation's largest fund, Fidelity Magellan, charges a 3% load.
12b-1 fees. These fees, named after the federal rule that created them, cover advertising and marketing expenses, and typically range up to 1.25% per year. Because they are charged annually, they cut into your annual yield.