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Fees are one of the least looked at areas when individual investors compare the different funds to invest in.  Consider the following example:

Difference of SloppyJoe and SmartSmith’s value of the portfolio: $342,207.67

This simple example is actually a very realistic scenario for many of the people who have invested for some time.  SloppyJoe and SmartSmith both invested at the same time, and both were able to find a fund that is able to maintain an 8% return on their money.  The only difference was that SloppyJoe didn’t realize that the fund he picked charges 2% instead of the 0.5% expense fee that SmartSmith was able to find.  Don’t be SloppyJoe!  Here are three types of fees that are common in the funds for you to consider!

Expense Ratio

This is probably the most visible of the three types of fees and the one that most are familiar with.  Basically, this is the percentage of money that will be taken away from the total asset of the funds per year.  This covers money like the salary for the fund manager, marketing expenses of the fund, administrative fees etc.

Load

This is nothing more than a charge for buying and selling funds.  There are many funds that make you pay a fee up front if you purchase the fund and ask you to pay a fee if you decide to sell the fund.  Of course, there are also many no-load funds, which mean that you do not have to pay a fee to buy or sell the funds.  For most of us buying funds that are not in our 401k plan, we are usually charged commission fees from our broker.  Just realize that this “load” is anything over the commission fees that you have to pay.

Maintenance Fees

Many institutions charge a fee to maintain your account unless you balance is over a certain limit.  Remember to read the Ts & Cs of your account, since this is almost standard practice.  If you have $1000 in your account, the $20 per year is a huge expense to pay.

Whenever you are investing in a new fund, remember to read the prospectus (information about the fund) to fully understand its fee structure unless you want to end up like SloppyJoe!