• Characteristics of Various Types of Securities
• The Ins and Outs of Income Trusts
• The Prospectus – Being Informed
• Understanding Mutual Fund Fees
• Stock Options
• Offshore Investments Sold Through Internet Can Wash Your Savings Away

The mutual fund industry has experienced tremendous growth in the last decade. For many investors, mutual funds offer distinct advantages over traditional investment and savings vehicles, offering potentially greater returns, professional management and diversification.

Despite stringent guidelines for mutual fund information disclosure, however, many investors still think of mutual funds as “no fee” investments. In fact, mutual fund fees can significantly impact your investment returns.

There are three basic categories of mutual fund fees:

• Management fees
• Sales fees
• Special fees

Management fees are expressed as a percentage of the fund’s total value. Marketing, sales, administration, legal, accounting, reporting and portfolio management costs are charged directly to the fund and reduce the value of your investment.

Values range according to the cost of managing each fund, but a maximum must be specified in the simplified prospectus of the fund. While 1-5% may seem like a small price to pay, remember that a fee increase of just 1% (from 1-2%) on a $10,000 investment earning 8% annually can reduce the value of the investment by more than $5,000 over 20 years.

Sales fees are somewhat flexible, in that you have a choice of the type of sales charges you pay. Front load fees are charged against your initial investment as a percentage, and paid to the mutual fund dealer. You may be able to negotiate these fees.

Deferred charges, also called back-end load fees or redemption fees, are deducted from your investment if you cash in before a certain time period. These fees decline each year that you hold the investment. Deferred sales charges are paid to the mutual fund management company and some companies allow you to cash in up to 10% of your investment annually without paying these fees. Funds without front load or deferred charges are known as no load funds and their distribution costs are included.

Special fees may be applied to your fund account, or billed directly. The following list contains examples of special fees:

• Annual trustee fees
• Initial account set-up fees
• Short-term trading fees, if you make withdrawals within 90 days of the initial investment
• Transfer fees for switching between funds
• Processing fees for closing accounts
• Advisory fees
• Special account management and reporting fees

Before investing in a mutual fund, it is important to read the prospectus, which includes a description of all fees associated with the fund, in plain language. Compare fund holdings and objectives with other mutual funds of a similar asset mix to make sure you are getting the best return on your investment.

There is a wide variety of mutual funds with different fees and objectives; make sure of the available resources to make an informed investment decision.