Are 12b-1 fees sales charges?
Are 12b-1 fees sales charges?
Morningstar, Inc. defines expense ratio as, “the percentage of a fund’s assets paid for operating expenses and management fees, including 12b-1, administrative fees, and all other asset-based costs incurred by the fund, except brokerage costs. Sales charges are not included in the expense ratio.
What is 12b-1 fee?
So-called “12b-1 fees” are fees paid out of mutual fund or ETF assets to cover the costs of distribution – marketing and selling mutual fund shares – and sometimes to cover the costs of providing shareholder services. 12b-1 fees get their name from the SEC rule that authorizes a fund to charge them.
How are fund fees calculated?
Multiply the total fee percentage by the amount you invested in the fund to determine your mutual fund fees. For example, if you invested $50,000, the shareholder fees are 5.75 percent and the total annual fund operating expenses is 1.17 percent, multiply $50,000 by 6.92 percent.
Who gets 12b-1 fees?
12b-1 fees are paid to the salespeople who distribute mutual funds and are paid from the fund’s assets.
Are 12b-1 fees included in expense ratio?
A 12b-1 fee is an annual marketing or distribution fee on a mutual fund. The 12b-1 fee is considered to be an operational expense and, as such, is included in a fund’s expense ratio. It is generally between 0.25% and 0.75% (the maximum allowed) of a fund’s net assets.
What is contingent deferred sales charge?
A contingent deferred sales charge (CDSC) is a fee, sales charge or load, which mutual fund investors pay when selling Class-B fund shares within a specified number of years from the original purchase date. This fee is also known as a “back-end load” or “sales charge.”.
What is 12b-1 mutual fund?
A 12b-1 fund is a type of mutual fund that charges its holders a 12b-1 fee. A 12b-1 fee is a fee used to pay for a mutual fund’s distribution costs. It is often used as a commission to brokers for selling the fund; 12b-1 funds take a portion of investment assets held and use them to pay expensive fees and distribution costs.
What is the average mutual fund expense?
The average expense ratio for actively managed mutual funds is between 0.5% and 1.0% and typically goes no higher than 2.5%, although some fund ratios have gone higher. For passive index funds, the typical ratio is approximately 0.2%. Expenses can vary significantly between different types of funds.