Mutual Fund Education Center This section covers mutual fund education designed to help
beginners and professionals alike. There are many aspects of mutual funds an investor should understand before
a mutual fund purchase is made. Not all expenses are reported in the prospectus of load and no-load funds. The
following page lists other costs investors should be aware of and where to find them.
Fees Not Found in the Prospectus
What Fees do Load and No-Load Mutual Funds not have to Report in the Prospectus?
"...One ongoing expense that is not included in the expense ratio is brokerage costs incurred by a fund as
it buys and sells securities. These costs are listed separately in a fund's annual report, sometimes as a percentage
and sometimes as a dollar amount. Some trading costs, however, are not included in this figure. The spread between
the bid and ask prices of over-the-counter stocks, for example, can be thought of as a trading expense, but such
costs are not reported by fund companies. The annual report also includes any interest costs, which a fund will
incur if it borrows money to buy securities."
"All of the expenses that we have mentioned so for can be thought of as coming out of the portfolio's raw
return, skimmed off the top, so to speak..." (MorningStar: Investing 101: Mutual Fund Expenses)
"...In addition, because mutual funds buy and sell securities, they incur brokerage costs. Because these costs
vary and are difficult to predict, they are not included in the fee table in the front of the prospectus. However,
they are included in any computations of a fund's performance that appears in advertising." (ICI Investor
Awareness Series: About Mutual Fund Fees)
Again, when comparing fund returns, always look at the "net" return. This is the bottom line.
