Managing mutual fund fees
Thursday, January 12th, 2012Dear Dr. Don, I just inherited $100,000 from my dad’s estate. I would like to invest it in mutual funds, but will I always have to pay an annual fee of 1.25 percent for a management fee? Where do I invest, or can I invest so I’m not paying this out every year?
Dear Sandy, Inheritances often come at a steep price: the loss of a loved one. I’m sorry for your loss. Trying to reduce the drag that fees and expenses have on investment returns is a smart move, and there are ways to manage them when investing in mutual funds.
There are different types of asset management fees. If you’re working with a financial services professional, they may have a compensation model called assets under management, or AUM, in which you pay a percentage fee based on the size of the portfolio. It’s important to realize that your financial services professional needs to be compensated for his or her work, and that there are different compensation models besides AUM, and these models may be more or less expensive than AUM. T