5 Ways Funds Charge Too Much

Here's how mutual funds manage to charge outrageous fees -- and how you can avoid them.

While investors, regulators and politicians have been gnashing their teeth over the misdeeds of assorted financial institutions and the shortcomings of some of their products and services, they’ve pretty much ignored mutual funds. But letting funds off scot-free is a mistake. In particular, fund sponsors, many of them large firms with billions of dollars under management, charge investors far too much -- and do so even when returns stink.

For the overwhelming majority of funds, expenses ratios -- all annual costs as a percentage of assets -- are ridiculously high. For diversified domestic stock funds, for example, the average annual expense ratio is 1.31%.

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Steven Goldberg
Contributing Columnist, Kiplinger.com
Steve has been writing for Kiplinger's for more than 25 years. As an associate editor and then senior associate editor, he covered mutual funds for Kiplinger's Personal Finance magazine from 1994-2006. He also authored a book, But Which Mutual Funds? In 2006 he joined with Jerry Tweddell, one of his best sources on investing, to form Tweddell Goldberg Investment Management to manage money for individual investors. Steve continues to write a regular column for Kiplinger.com and enjoys hearing investing questions from readers. You can contact Steve at 301.650.6567 or sgoldberg@kiplinger.com.