The right fund at the right price

Finding investments with high returns at low prices

Before you place your hard-earned dollars in a mutual fund, find out if you’re getting your money’s worth. First, you should know the difference between a load fund-one with an up-front sales charge that typically ranges from 4% to 8%-and no loads that are purchased directly from the fund company.

Why should this matter? Sales charges reduce the amount of money you initially invest. Moreover, there is no correlation between sales charges and fund performance. "Why would you even consider purchasing a higher priced product when you can get the same thing at a lower cost?" asks Sheldon Jacobs, publisher of the Irvington, New York-based No-Load Fund Investor newsletter (www.sheldonjacobs.com).

Still, nothing comes free in life-including no loads. In addition to front-end or back-end sales fees, they all charge operating expenses, which include:

  • Management fees: The figure-usually 0.5% to 1% of the fund’s annual assets-a company pays an advisor to manage a portfolio.
  • 12(b)1 fees: The expense that fund companies pass on to investors to pay for marketing and advertising costs. (A fund can’t charge over 25 basis points-or 0.25%-a year and still be considered a no-load fund.)
  • Redemption fees: Designed to prevent heavy turnover, the charge is levied when you redeem your shares.
  • Maintenance fees: If your balance falls below a certain minimum, many funds will charge you for maintaining the fund-usually $10 to $50 annually.

So, how do you know if you are, indeed, getting the most out of your investment? "The best way to check how much it is going to cost you [to invest] is to look at a fund’s expense ratio," says Michelle A. Smith, managing director of the Mutual Fund Education Alliance, a Kansas City, Missouri-based trade group. "[It] is an indication of how high or low a fund’s fees are." According to the fund tracker Morningstar Inc. in Chicago, the average U.S. stock fund has an expense ratio-the percentage deducted each year for costs-of about 1.42%, which means you pay $14.20 per $1,000 invested.

To review the funds with the lowest expense ratios and best returns (as of the end of the first quarter of 1999), see the charts on this page.

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ACROSS THE WEB
Top 10 Funds With Lowest Expense Ratios (ranked by 1-year annualized returns)
   

Total Return*

     

Fund Name

Category

1-yr

3-yr

5-yr

Expense Ratio

Min. Initial Purchase

Phone Number

Janus Mercury

LG

58.41

33.01

19.90

0.97