Best Mutual Funds Explained
All you need to know about mutual funds, including the risks, rewards and terms  

Best Mutual Funds - Operating Expenses

best mutual fundsAs you may be starting to realise, there are an array of charges and costs associated with mutual fund investing, which makes finding the best mutual funds that much harder. Not only do we have to consider our investing strategy which we will look at shortly, but also the likely returns once we have deducted all the possible costs and charges. Please remember that much of this information will be contained in the prospectus, so this is always your starting point when considering a mutual fund.

So having looked at shareholder fees, let's look at operating expenses which are simply the fees charged by the fund for maintaining your account, for which of course they charge !

Best Mutual Funds - 12b-1 fees

What on earth are they you might ask - In simple terms they are a fee charged by the fund which in theory is supposed to be used for marketing and advertising the fund. In practice this is one of the most abused charges in the mutual fund industry, and has been the subject of intense review by the regulatory authorities.

The problem is that the fees are obscured under a veil of secrecy and are never revealed in full. In my view they are simply a way for funds to charge you higher fees which will do nothing for the return on your investment. Many funds no longer charge them, so I would suggest you find funds that are free of a 12-b1 fee - it's as simple as that! Why pay for something that you don't have to, and which will ultimately reduce your return. So in simple terms, one of the ways to find the best mutual funds is to look for those with no 12b-1 fees! Why pay for the fund to advertise itself - do you enjoy the ads so much that you are willing to pay for more - can you imagine any other business where the client or customers pays the company to advertise its own products - NO - so lo0k for funds with no 12-b1 fees - end of story.

Best Mutual Funds - Management Fees

In simple terms the management fees you pay are for the expertise of the fund manager in investing your hard earned cash, along with expenses for maintaining and administering the funds.  The management fee structures vary from fund to fund, but generally these are between 0.5% and 1% of the mutual funds assets under management. As with many of the other fees and expenses you will find details of the proposed charges in the prospectus document, so please read them carefully. If you feel that the charges are high ( and in comparison to some hedge funds they are actually quite reasonable ) then look for another fund  offering lower charges, but always consider all the costs together such as loads etc. so that you have an overall picture.

Best Mutual Funds - Other Expenses

How many more I hear you say! - I know, this is the last group which is really a catch all for those not included elsewhere, which seems hard to believe I know, but there we are. This group usually includes such items as legal costs and accountancy services.

Having considered all the expense and costs, it would be nice if we had some way of comparing all this information with the performance of the fund itself. Well we do and it's called the expense ratio. Now many mutual fund investors become fixated on the expense ration when it comes to researching the best mutual funds. I will leave you to draw your own conclusion once I have explained the basics on the next page.

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