Niggling fund charges called 12b-1 fees are really loads in disguise. They are taken out of funds’ asset values each year to pay the person who sold the fund (or to compensate discount brokers that offer the fund without transaction charges). But the fees are usually only 0.25 to 0.75 percentage point per year, so many investors pay little attention. Reforms promised by the Securities and Exchange Commission have yet to materialize.
We use funds with 12b-1 fees of up to 0.25% in our Kiplinger 25 list of top mutual funds because those fees buy shelf space in no-transaction-fee fund supermarkets.
Long-term investors in particular may be better off paying transaction fees and investing in funds that don’t charge 12b-1 fees. And if you invest in a fund directly, it’s well worth the effort to avoid 12b-1 fees; you can find the information in the expense section of the prospectus.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Redemption fees. A true no-load fund won’t charge you when you buy or sell shares, right? Wrong. Nearly 30% of all no-load U.S. stock funds charge a redemption fee -- between 0.1% and 2% -- if you sell shares too soon after buying them. Funds’ exit-fee periods vary between one day and one year, but the average is 65 days. You’ll find redemption fees listed in the prospectus.
Annual fees. Some brokerages and fund companies charge $20 or more per year for an IRA if you don’t meet the minimum balance requirement—Vanguard, for one, charges a $20 annual fee if your IRA is less than $10,000. Look for companies with no annual maintenance or minimum-balance fees, including E-Trade, Fidelity, Charles Schwab and TD Ameritrade.
Inactivity fees. If you’re a buy-and-hold investor, you’re better off with a broker that doesn’t charge these fees, which range from about $10 to $35. E-Trade, Fidelity, Schwab, TD Ameritrade and Vanguard don’t nick buy-and-holders.
-
Visa Is the Worst Dow Stock Wednesday. Here's WhyVisa stock is down sharply Wednesday after the credit card company came up short of revenue expectations for its fiscal Q3.
-
Another Analyst Moves to the Sidelines on Tesla Stock After EarningsTesla stock is spiraling Wednesday after the EV maker's big earnings miss and Wall Street has been quick to weigh in. Here's what you need to know.
-
Medicare Basics: 11 Things You Need to KnowMedicare There's Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare — and much more.
-
Six of the Worst Assets to Inheritinheritance Leaving these assets to your loved ones may be more trouble than it’s worth. Here's how to avoid adding to their grief after you're gone.
-
403(b) Contribution Limits for 2024retirement plans Teachers and nonprofit workers can contribute more to a 403(b) retirement plan in 2024 than they could in 2023.
-
SEP IRA Contribution Limits for 2024SEP IRA A good option for small business owners, SEP IRAs allow individual annual contributions of as much as $69,000 a year.
-
Roth IRA Contribution Limits for 2024Roth IRAs Roth IRA contribution limits have gone up for 2024. Here's what you need to know.
-
SIMPLE IRA Contribution Limits for 2024simple IRA The SIMPLE IRA contribution limit increased by $500 for 2024 and workers at small businesses can contribute up to $16,000 or $19,500 if 50 or over.
-
457 Contribution Limits for 2024retirement plans State and local government workers can contribute more to their 457 plans in 2024 than in 2023.
-
Roth 401(k) Contribution Limits for 2024retirement plans The Roth 401(k) contribution limit for 2024 is increasing, and workers who are 50 and older can save even more.
