The National Securities Markets Improvement Act of 1996 sought to largely eliminate Federal and state regulatory overlap. The principal effects include lower registration fees, lower broker-dealer margin fees, and ensuring that a fund’s name is consistent with its objective.
Load funds have a salesforce and the shareholders have to pay a sales charge . If paid at the time of purchase, the fee is a front-end load . If levied when shares are sold, the fee is a back-end load , or contingent deferred sales charge . A no-load fund charges no sales commission.
The Investment Company Industry : Fees
Most mutual funds separate their
charges into a number of categories.
The Investment Company Industry : Fees Source: Wiesenberger Mutual Funds Update , October 1999 Prevalence of Load Charges by Type
Certain expenses such as the management fee are associated with operating a mutual fund. These fees are measured by the fund’s expense ratio , which is the fund’s total expenses expressed as a percentage of the fund’s assets.
Note that within the same fund, there may be several classes of shares with different fee combinations. Their relative merits depend on how long the investor anticipates keeping the investment.
With a mutual fund, return comes from the change in the net asset value , capital gains distributions , and income distributions .
Selecting A Mutual Fund before-load (gross) return change in net asset value capital gains distributions income distributions beginning net asset value + + = after-load (net) return change in net asset value capital gains distributions income distributions beginning net asset value + + - = load fee