Don't Be Fooled by No-Transaction-Fee Funds

The little bit of money you save by investing in a "free" fund is usually more than eaten up by higher fund expense ratios.

Mutual funds charge investors way too much. A $1 billion fund that charges 1% a year — a typical expense ratio — generates $10 million worth of fees. Much of that is pure profit for the fund sponsor.

But fund companies aren't the only ones to blame for outrageously high fees. Also contributing are online brokerages, which generally charge funds 0.40% a year to participate in their no-transaction-fee (NTF) programs.

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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.