Load Fees on Mutual Funds

I’d like to share with you about load fees on mutual funds. So mutual funds have a sales charge or commission for the different shares that you purchase. And fees are going to vary depending on the different providers along with how there might be a percentage or a flat fee that you pay. It’s going to vary, but those should be then ultimately disclosed in a prospectus that you would want to review prior to investing in those different mutual funds. So you may see within mutual funds, A shares, B share, C shares. So I want to share with you just what that means. So A shares or class A shares are traditionally going to be a front end load type of structure where they’re going to charge you based on the amount that’s invested, which may be upwards of say 4%-5% type of commission or sales charge. Now then there’s 12B1 fees. And these are the annual fees which may be let’s say are around .25% per year. And then on the back end or back load, there may be no cost to sell. So that’s your typical A share. Then you move on to class B shares. So there’s not going to be a front end load with class B shares. With 12B1 costs though, they might be a little bit higher, maybe closer to 1% a year. And then back load, there may be a reduction as time moves along. So perhaps in year one to sell, maybe it’s a 5% cost. And then year 2 is 4%, 3%, 2%, 1% type of idea. Class C shares meanwhile, there’s no front end load. The 12B1 ongoing annual fees maybe let’s say are 1% per year. And then there’s no back load or no transaction cost to sell. Now this might be used because it’s lower cost, it might be used for more short-term transactions. But the funds themselves might keep a higher amount in cash for liquidity. So there’s multiple moving parts within these different types of funds. Now something we’ve witnessed over time is a lot of Investment Managers and Fund Managers out there have shifted away from mutual funds as you start to see the different types of costs that are involved with them. So a lot of Managers that are more actively managing may have shifted more to Exchange Traded Funds or ETFs. They’re typically going to have lower expense ratios, but they vary again, just like mutual funds. Different funds will have their costs and they’ll be reported within the prospectus. But they’re going to more easily be traded throughout the day just like a stock would be versus mutual funds which would sell at the close of business. So again, I encourage you what’s in your portfolio? And do you know what those costs look like? If not, we welcome you to give us a call to help evaluate that.