Mutual Fund Fees Take a Bite Out of Investor Savings
The stock market has been volatile, food and gas costs are rising, and a lot of people are starting to pay closer attention to how much they pay for a variety of things. That includes fees charged by mutual fund companies.
More investors seem to be moving into funds with lower fees. In 2007, nearly 60 percent of the net new investments in mutual funds to index funds and exchange-traded funds, or ETFs, Those products usually carry lower costs than funds which are actively managed.
Regulators have been starting to take some action to control fees paid by investors. They are pushing to modify so-called 12b-1 fees, which are paid to mutual fund brokers and other middlemen in the investment process.
The Securities and Exchange Commission is trying to help investors evaluate and compare fees charged by mutual funds. It proposed a rule last year that would allow mutual fund firms to send investors a short "summary" prospectus outlining key fund information. Fee information would be near the top of the document, and it would include information on any discounts available.
Although the usually carry higher than average fees, foreign funds are becoming popular, especially with investors worried about the U.S. economy. $16.4 billion was taken out of U.S. stock mutual funds and ETFs in the first five months of this year, while $22.1 billion was added to global offerings.
Fee reduction programs instituted by some investment firms will be expiring, putting more fee pressure on mutual fund investors. MFS Investment Management says its fee reductions will expire in February. Those offered by Janus Capital are due to run out in mid-2009.
– By Ed Coury, senior editor and Midwest bureau chief for the Wall Street Journal Radio Network, Dow Jones & Co., and a reporter for WWJ Newsradio 950
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