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Understanding the Costs Involved in Mutual Fund Investments Bob is debating purchasing a mutual fund, but he has some questions for his financial advisor, Cho.
Understanding the Costs Involved in Mutual Fund Investments Bob is debating purchasing a mutual fund, but he has some questions for his financial advisor, Cho. The following table presents information on four different open-end mutual funds that Bob and Cho are discussing. Use the information in the table to answer the questions that follow. BOB: After some research, I've narrowed it down to these four funds, but can you explain to me the relationship between 12 b-1 fees and fund performance? CHO: Generally, funds that charge 12b1 fees, such as MinT p, outperform funds that do not charge these fees. BOB: What about front-end load fees? For example, suppose BRRT has a front-end load fee of 6%, when do I pay this fee? CHO: If you purchase 100 shares of this fund at the NAV, you will pay a commission of pay in front-end fees. , but when you sell these shares you will BOB: It sounds like these fees could start to add up. What's the most I can expect to pay in fees? CHO: If a fund charges a 4\% front-end load and a 4\% 12-b1 fee, then it can charge a maximum of only % in back-end load charges without violating the cap. BOB: Thanks! This was really helpful. So it sounds like you'd recommend looking for funds whenever possible
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