Understanding Mutual Fund Fees: What to Expect & What's Reasonable

Dealing with mutual fund fees is part of the process of investing in mutual funds. Many investors do not know how the fees that they pay stack up against the competition. Here are a few things to consider about reasonable mutual fund fees and what you should be paying as an investor.

Load Fees

One of the types of fees that you could pay when investing in mutual funds is a load fee. This is the same thing as saying you are paying commission to a broker for selling you shares. Some mutual funds have a front-end load fee and others have a back-end fee. A typical front end load fee will run between 5 and 7%. A back-end load fee will usually be around 6 or 7% if you sell your shares within a year. It will usually go down about 1% for every year you hold onto the shares.

Expense Ratio

The expense ratio is the amount of money that you pay on an ongoing basis every year. The average expense ratio runs about 1.5% of the total value of your holdings. Expense ratios include the money that is paid to the fund manager, as well as administration and advertising costs.