Mutual funds fees illustration

Here is an illustration of how mutual funds fees can affect your investment in a mutual fund. Consider a hypothetical investment. Imagine a mutual fund investor making a lump sum investment of $1,000 in a 5% load mutual fund that has a 12b-1 fee of 1%, redemption fee of 5% and service charge of 1%. Also assume that this mutual fund investor sells this mutual fund after one year with no change in its price.

Cost of your initial investment (5% of $1,000)	$50
Redemption charge (5% of $950)	$47.5
12b-1 fee (1% of $1,000)	$10
Management and customer service fee (1% of $1,000)	$10
TOTAL CHARGES for this Mutual fund	$117.50
Amount the mutual fund investor receives at redemption	$882.50
Percent of loss on your investment	11.75%

An investment of $1,000 for one year in this hypothetical mutual fund has charges of $117.50. Compare this to a no load mutual fund (a mutual fund with no front end load or back end load or 12b-1 fee). For a no load mutual fund, investors will only be charged the $10 management and service fees. Although, there is no real evidence that no load mutual funds outperform load mutual funds, your mutual fund research will show that having all your initial investment working for your in the stock market often lead to a higher rate of return.