Mutual fund fees

As with all products and services, different companies charge different prices for what they offer. Mutual funds are no exception, and you should evaluate the fees that various funds charge before choosing among them. The more you pay in fees, the more the fund must earn for you to realize a strong return. Fees can range from a low of 0.10% to a high of 8.5% of the assets you have in the fund. You can find most of the information on what the fees are and how they are paid in the fund's prospectus, on the fund company's website or from your investment adviser.

Expense ratio. You pay a percentage of your account's value for management and operating expenses. Since this is a recurring rather than a one-time fee, it's especially important in evaluating a fund's cost.

Transaction fees. You pay your share of the commissions and other expenses the fund has in buying and selling investments. Some funds trade frequently while others, such as index funds, trade only when the securities in the index change.

Sales charges. You may pay a percentage of the amount you invest when you buy shares in a fund or you may pay sales charges if you sell within a certain time period after you purchase your shares. Other funds, called no-load funds, do not have sales charges.

If you pay sales charges when you buy, those shares are usually known as Class A shares. If you pay when you sell, those shares are usually known as Class B shares. There are often other classes of shares as well, indicated by different letters.

Redemption charges. You may have to pay a fee if you sell shares within a specific period of time after purchase to prevent a practice known as market timing.

Marketing fees, called 12b-1 fees. You may be charged fees to cover marketing and advertising expenses and sometimes to pay bonuses to professionals managing the fund if results exceed certain performance targets.

Exchange fees. You may pay a fee to move money from one fund to another within a group of funds offered by the same investment company.