E*TRADE<\/a>. These are often the most expensive type of funds because the broker adds a commission to the initial investment.<\/p>\n\n\n\nMutual Funds Fees Explained<\/h3>\n\n\n\n
Many investors are concerned over the fees that Mutual Funds charge their investors. At first glance, the fee structure of these funds can seem complicated and opaque. But once you understand the terminology that fund managers use it becomes clearer.<\/p>\n\n\n\n
We\u2019re here to explain how Mutual Fund fees work, and what you can expect to pay for your Mutual Fund shares.<\/p>\n\n\n\n
Firstly, it\u2019s important to understand where the Mutual Fund fees are paid from. Most often, the operating expenses for the fund are paid out of the capital investment. If the fund was profitable in that year, the fee will be deducted from the dividends before being paid to the investors.<\/p>\n\n\n\n
If the fund did not make a profit, the operating fees will come out of the assets of the fund. This unfortunately means that the dollar amount invested in the fund will decrease. The operating fees are typically between 0.5% and 1.25% of the total investment each year.<\/p>\n\n\n\n
Shareholders with Regular Mutual Funds will have to pay either a front-end or back-end Sales Load. A Sales Load is a commission paid to the broker or consultant who sold those shares.<\/p>\n\n\n\n
Front-end sales loads are paid when the fund shares are purchased by the shareholder. Back-end sales loads are paid when the shareholder sells their shares. Fund managers should only charge a sales load once.<\/p>\n\n\n\n
Direct fund shareholders have to pay purchase fees. These are similar to sales loads but are paid directly to the mutual fund rather than to a broker.<\/p>\n\n\n\n
Mutual funds have all sorts of different fees that they may hold their shareholders accountable to. Before investing in a fund, check out their prospectus which will detail exactly what shareholders are charged for and where that money goes.<\/p>\n\n\n\n
How To Pick A Mutual Fund Broker?<\/h3>\n\n\n\n
Brokers that offer Mutual Funds are diverse in what they offer their shareholders and the fees they charge. We\u2019ll go over some of the most important aspects to consider before investing with a broker. <\/p>\n\n\n\n
To find out about how a particular mutual fund operates, check out its prospectus. This is a published description of the fund made by the provider.<\/p>\n\n\n\n
Expense Ratios<\/h3>\n\n\n\n
Expense ratios describe the annual cost of maintaining the investment by the shareholder. Funds charge a percentage of shareholders\u2019 investments every year. These charges are normally between 0.5% and 1.25% of the investment.<\/p>\n\n\n\n
Shareholders should also consider if their fund has a sales load. This means that a percentage of the investment is paid to the investment broker as a once-off payment.<\/p>\n\n\n\n
Full-Service Vs. Discount Mutual Fund Brokers<\/h3>\n\n\n\n
Full-service brokers invest money on their client\u2019s behalf. They provide their clients with services like wealth management and financial advice. Full-service brokers charge more in commission to pay for the expert advice.<\/p>\n\n\n\n
Discount mutual brokers may have some of the facilities of full-service brokers. They charge less in service fees because they offer fewer options to their clients. Discount brokers often trade automatically and follow the stock market index.<\/p>\n\n\n\n
Investors might be tempted to go with Discount brokers because of the lower charges, but this is not necessarily the right decision. Full-service brokers are more pricey, but shareholders get more out of the deal. <\/p>\n\n\n\n
Consider both options carefully before committing to a broker.<\/p>\n\n\n\n
Mutual Fund Type<\/h3>\n\n\n\n
There are different types of mutual funds available to potential investors. The type of fund determines where it is invested as well as the way dividends are paid out.<\/p>\n\n\n\n
For example, Money Market funds are short-term investments that are involved with Forex markets and government bonds. These funds are better for people looking to keep their money invested for a short time, such as planning for a vacation.<\/p>\n\n\n\n
Balanced funds are medium-term mutual funds that invest in both stocks and money markets. The goal is to protect investors against fluctuations in entire markets.<\/p>\n\n\n\n
There are hundreds of more options available to shareholders, each one of them catering to a specific shareholder need.<\/p>\n\n\n\n
Active Vs. Passive Funds<\/h3>\n\n\n\n
One of the most contentious issues in mutual fund investing today is the discussion around active and passively invested mutual funds.<\/p>\n\n\n\n
Active funds employ traders to buy and sell shares for the fund. By employing experts funds aim to outperform the stock markets and give their shareholders a better return on investment.<\/p>\n\n\n\n
Passive funds simply follow the market index. These funds follow the trends of entire stock markets such as the S&P 500 or JSE. Passively invested funds will mimic the performance of the stock market as a whole.<\/p>\n\n\n\n
Passively invested funds are cheaper than active ones. They do not employ traders who need to be paid so their shareholders save money. Actively traded funds are capable of outperforming passive ones, but this is a very rare occurrence.<\/p>\n\n\n\n
FAQ<\/h2>\n\n\n\n
\n
\n
Should You Buy Mutual Funds Through a Broker?<\/strong><\/strong><\/h3>\n\n\n
Brokers often get an unfair reputation in trading circles. While you certainly don\u2019t need a broker to buy shares in Mutual Funds, there are some advantages to it. If your broker is honest and above-board, they can help you choose from the thousands of options the fund that is best for you. If you\u2019re financially savvy enough, you probably don\u2019t need a broker to help you out.<\/p>\n\n<\/div>\n<\/div>\n
\n
What is a Blue Chip Fund?<\/strong><\/strong><\/h3>\n\n\n
Blue Chip Funds are widely considered to be the best possible funds to invest with. It is a term used to describe funds that are invested with the most robust and high-performance stocks like Alphabet and Amazon. Blue Chip funds are desirable because they have shares of these stocks which means they tend to have a higher return. They are also able to survive market stresses because they have more valuable stocks.<\/p>\n\n<\/div>\n<\/div>\n
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Do Mutual Fund Brokers Get Paid?<\/strong><\/strong><\/h3>\n\n\n
In short, yes. Fund brokers have to get paid, so direct funds are cheaper to purchase.<\/p>\n\n<\/div>\n<\/div>\n
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Are Mutual Funds Safe?<\/strong><\/strong><\/h3>\n\n\n
Yes. In terms of long-term investing, mutual funds are by far the safest for most investors. By and large, mutual funds tend to outperform most other forms of investment because they are so diverse. Passively managed funds tend to be safer than actively managed ones because they follow market indices. But that doesn\u2019t mean that there are no risks involved.<\/p>\n\n<\/div>\n<\/div>\n
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What are the Top 5 Mutual Funds?<\/strong><\/strong><\/h3>\n\n\n
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