Nothing Comes Free

When shopping for funds, it's good to know what management charges

again is another fee paid to financial professionals the minute you sell your shares. In contrast to traditional back-end sales loads, contingent deferred sales charges usually apply only for the first few years that you own a fund; then they disappear. That’s why these charges are sometimes called short-term redemption fees. They’re designed to discourage investors from bailing out of a fund soon after buying in.

Exchange fees (0.25%-1% of amounts moved). This charge is levied by some mutual funds when you transfer money from one fund to another within the same mutual fund family.

Maintenance fees ($10-$50 annually). Once your balance falls below a certain minimum, many funds will assess you a maintenance fee. Many funds also charge a yearly custodial fee to cover the administrative costs of handling an individual retirement account.

Michelle A. Smith, managing director of the Kansas City, Missouri-based Mutual Fund Education Alliance, says it’s imperative you go over fund expenses the next time you shop for investments. “It’s absolutely necessary if you intend to get the whole picture,” she adds. “Don’t just leap at performance numbers, do some digging.”

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