Mutual Fund Expense Calculator


All mutual funds that you find out there have fees, some charge more than others and what you have to understand is that the cost involved with the purchase of a mutual fund is not as straightforward as you’d opt it to be, like in the case with the purchase of stock.

For instance, to buy shares of stock, all you need is to pay a broker the commission agreed. For mutual funds, it poses a different scenario. This mutual fund expense calculator can help you analyze the costs associated with buying shares in a mutual fund.

The fees and the expenses are an important consideration that you need to make when selecting mutual funds. This is so because the charges may lower your return. Before the actual purchase, many investors find it useful to first compare the fees and the expenses involved before investing.

Mutual funds just like the shares of stock will involve the broker’s fees but given their nature; that they are professionally managed, this calls in for other expenses. The fees that are involved in the purchase of the mutual funds vary accordingly across a wide spectrum of the mutual funds. They are the stronghold and the biggest setback for a mutual fund.

Calculate Your Mutual Funds Fees

Sometimes, you will find that these fees are obscured with some complex language and therefore, many are the times that an average investor pays for things he/she doesn’t know of. Some of the fees known to an investor include the management fees, distribution etc.

Interestingly, mutual funds charge an annual load averaging 1.25% and some hidden costs 12b1 which cover the marketing costs and together, that would average to a cost of 1.5% a year. These may seem like a lot less, but assuming you compound the percentage over 20-year period, that could guzzle about 1/3 of your portfolio.

The Expense Ratio

With most funds, the ongoing expenses are often summarized by the expense ratio. Sometimes the expense ratio is referred to as the management expense ratio (MER). What normally happens is that the expenses in the mutual funds are paid out of the fund asset and not billed to the investor directly.

However, that’s not all, by reducing the returns that the investor would have been received on the asset, the investors still pay, but indirectly.

Types of Fees and Charges

There are 2 main types of mutual funds and fees according to the SEC:

Shareholders fees – these include all the charges that are imposed on buying, selling or even exchanging the mutual funds. These could be the front or the back-end sales loads or even the redemption fees as well, other expenses.

perating costs – mainly, these will stem out of the management of your account. Typically, under the operating costs, you’ll find such expenses as management and distribution fees.

In spite of not all of them appear in the funds calculator above – we’ve summarized all the fees associated with mutual funds:

Front-end sales load

A sales load represents the fees or commission for the broker usually charged when the investor makes the purchase. The front-end loads are the most common which usually means that you pay the fee when you purchase the fund. These usually vary between 5% and 8.5%

Assuming that you invest $2000 in a mutual fund with a 5% front-end sales load, $100 will pay the sales charge while $1,900 will be invested in the fund.

Back-end sales load

These are also known as the deferred sales charges are paid upon selling the fund’s shares. Typically, they can get very complicated. The arrangements are that you sell the charges are paid if you sell within a certain stipulated time frame.

A typical example of such a load structure is a 6% back-end load that decreases to 0% in the 7th year. This, therefore, means that if you sell within the first year, you get 6% and 5% in the 2nd etc.

Redemption Fees

These are charged on a mutual fund when the investors sell their funds shares. This can be in addition to the back-end load and usually, regulators consider this as a separate fee. It is purposed to discourage traders from the short-term investment.

Other shareholders fees

These may include fees such as account fee, the purchase fee or the exchange fee. Some of the funds impose an account fee that is aimed for the maintenance of your account. Most of the mutual funds will charge you an exchange fee assuming that an investor makes a transfer of shares from a fund to another.

Purchase fees

Like the redemption fee, it is usually a charge which is paid on the up-front basis by the investor to the fund itself and is aimed to cover for the cost of acquiring funds shares.

Management fees

Also known as hiring costs and usually ranges between 0.5% and 2% of the assets on average. This may sound minimal but it might interest you to know that it is responsible for producing mutual funds managers who happen to be top earners in the country. The fees are paid regardless of the performance by a manager.

Distribution Fees

These are also known as the marketing 12b-1 fees and are charged to cover for the distribution, the service or even the marketing costs. Usually, they start from 0.25% and reach to a maximum of 1% of the fund’s net assets.

Benefits of Mutual Funds Investing

By using our mutual fund expense calculator you can learn your fees which is associated with one of the disadvantages of mutual fund investment. However, there are so many benefits of investing in mutual funds, these are the most important advantages of mutual funds investing:

Investing in mutual funds is quite easy

Comparing investing in mutual funds to stocks and bonds, mutual funds are a way ahead in terms of simplicity.

Once you have the investment objective in mind which includes the number of years you want to invest and the risk you are willing to take, you can then choose the fund to invest in, very simple.

Mutual funds are professionally managed

One of the main attracting factors to mutual funds investment is the fact that they are professionally managed. Rather than just researching, and making countless analysis, you can leave that bit to the managers. Professional management is the core that determines the success of the funds. The mutual funds are a diversified investment

One major rule in finance is to build a strong diversified portfolio which goes a long way in helping you manage the risk. Mutual funds can help you manage this as they invest in hundreds or even thousands of assets.

Mutual funds are affordable

Not only fund accessible, they are also accessible. The initial investment that you make could be as low as $100. Assuming that you are investing on your own, making an investment with $100 q=could be insignificant and with that, you cannot build a diversified portfolio.