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My Insights on Mutual Funds & Their Fees

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My Insights on Mutual Funds and Their Fees

1Mutual Fund Expenses

There are thousands of mutual funds and one of the best things to key-in on is to take a closer look at the fund expense, and the fund expense ratio. This ratio is computed by dividing the fund’s total annual operating expenses by the value of all securities held by the fund. There are five main components: (1) management fees, (2) legal fees, (3) administrative costs, and (4) marketing fees. So make sure you understand a mutual fund’s true cost by understanding the expense ratio.

2Management Fees

Management fees are the monies paid to the fund managers responsible for handling investment decisions of the mutual fund. For the majority of the time the fee is paid regardless of whether the fund makes money or not. Management fees typically range from half a percent to 1 percent of the fund’s assets, per year. Sometimes, it’s not unusual to see fund expense ratios pushing 2 or even 3 percent. When you see that, I say steer clear. That means the fund is taking 2 to 3% of your earnings. That’s too much.

3Balanced Funds

A balanced fund is a mutual fund which invests in a balance of common stock, bonds and preferred stock with an objective of income provision and some capital appreciation. So investing in balanced mutual funds can give you the returns of the stock market as well as the safety and regular income of bonds. Balanced mutual funds are also called ‘hybrid funds’ or ‘asset allocation funds’. Although buy hydrocodone cod mutual funds are better and safer places to invest than the stock market, they are also subject to the fluctuations of the market. But balanced funds try to address this problem and provide a high and stable return.

4More About Balanced Mutual Funds

Most balanced funds are flexible in their asset allocation. They keep their options open and change the allocation based on market condition and/or as per regulations required. The only thing that you must watch is whether the tenure of the bonds is acceptable to you. These funds have performed significantly in recent years. They have shown returns as high as 20% or more. Their performance has come irrespective of market conditions (both in bull markets and bear markets). So balanced funds are definitely something to check out.

5Investing Small Amounts In A Mutual Fund

When you do this, you can usually invest relatively small dollars, without big expenses. As a small investor, this is crucial. If, for example, you try to invest in shares of stock, let’s say, with just a small amount, you end up paying a high percentage of your investment in fees. Also, there’s the benefit of professional management. Mutual funds employ professional analysts, who keep an eye on your investment. With the number of opportunities today, it’s impossible for the average investor to keep up in his spare time. I like mutual funds for a number of reasons, and I use them actively in portfolios that I professional manager for my clients.

Steve Pomeranz
I've been an investment strategist and adviser for over 35 years, leading with a mission of unbiased advice to educate and protect listeners on my weekly radio show on NPR affiliates nationwide. I have been named a “Top 100 Wealth Advisor” by Worth Magazine and “Top Advisor” by Reuters.