Mutual fund investors should always take note of what investing fees they're being charged, particularly in this tough investing climate.
Transactions: The costs associated with an individual investor's transactions and account are listed in a fee table, located near the front of a fund's prospectus, under the heading "Shareholder Fees."
* Sales loads: A fee charged to compensate the brokers. The Securities and Exchange Commission does not limit sales load charges, but the Financial Industry Regulatory Authority, a nongovernmental securities company regulator, does not permit mutual fund sales loads to exceed 8.5%.
* Redemption fee: A fee some funds charge when shares are redeemed. It is typically used to defray costs associated with the redemption and is paid directly to the fund, not to a broker. The SEC limits it to 2%.
* Exchange fee: Charged to transfer from one fund to another within the same group.
* Account fee: Some funds charge for maintenance, especially on accounts below a certain dollar amount.
* Purchase fee: Charged to purchase shares. It is paid to the fund, not to a broker, and is typically imposed to defray costs associated with the purchase.
Recurring fees: Fund-wide operating expenses are taken out of the fund assets and are identified in the fee table in the fund's prospectus under the heading "Annual Fund Operating Expenses."
* Management fees: Paid out of fund assets to the investment advisor for managing the investment portfolio, and administrative fees payable to the investment advisor that are not included in the "Other Expenses" category.
* Distribution or service fee (also called 12b-1 fees): Paid out of fund assets to cover distribution expenses and sometimes shareholder service expenses. They may also be used to pay for marketing and selling fund shares. The SEC does not limit 12b-1 fees but FINRA says marketing and distribution expenses cannot exceed 0.75% of a fund's average net assets per year.
* Other expenses: Includes expenses not included in above categories. They include shareholder service expenses not included in the 12b-1 fees, custodial expenses, legal expenses, accounting expenses, transfer agent expenses and other administrative expenses.
More information on fees can be found on the SEC's website; visit www.sec.gov/answers/mffees.htm.