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How much are my various investment funds costing me?

Various Schwab accounts.

Oct 29, 2013 by Jim from Saint Paul, MN in  |  Flag
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4 votes
Rich Winer Level 20

Jim, In order to answer that question, we would need to know exactly what you own in your various Schwab accounts.

Mutual fund and ETF (Exchange Traded Fund) fees and expenses can be found in the prospectus for each fund. Other fees to which you might be subjected are brokerage firm commissions, transaction fees and short term redemption fees. If you work with a financial advisor, he or she may charge a management fee.

While investment costs will affect your net returns, I believe that the quality of advice you receive from a financial advisor, the quality of mutual fund management and whether your investments are appropriate and meet your needs and expectations are equally (if not more) important.

Comment   |  Flag   |  Oct 29, 2013 from Woodland Hills, CA

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Jim -

Rich nails many points in his answer.

Another (often substantial) fee you won't see for mutual funds is revenue sharing. The only place you are likely to find this information is in the SAI (Statement of Additional Information) for a fund. Most funds pay for "shelf space" at various broker/dealers. This is much akin to Tide paying Wal-Mart for space to sell their products. Unfortunately, this fee is not transparent, and is ultimately paid by you, the investor. There is a reason some funds appear in "no transaction fee" marketplaces, and others do not. Those funds that are usually not found in the marketplaces (most notably DFA and Vanguard) refuse to pay for shelf space. In my opinion, not paying for shelf space is a great thing. On the surface, it seems like you are paying more for a fund with a transaction fee. However, if you have a minimally substantial position in a fund that is revenue sharing, you are paying much more in the long run. I hope this helps.

Brian Pinkston, CFA, CFP® Financial Advisor Anchorage, AK

Comment   |  Flag   |  Oct 29, 2013 from Anchorage, AK

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Jim the best way to figure it out, is to go to www.morningstar.com and enter the ticker symbol. MorningStart will tell you exactly what it cost, as well if fund has any loads or 12b-1 fees. In my experience with Schwab you typically, only have to worry about expense ratios. Schwab is a discount brokerage company. best of luck Sincerely Michael

Comment   |  Flag   |  Oct 30, 2013 from Farmington, CT

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It varies. Not such an easy answer with Schwab. Assuming it is not in a 401(k).... Every fund has an internal operating expense. In addition to that, there could be a 12(b)1 fee or a management fee. On the Schwab brokerage platform, I believe they have 'preferred' funds. Funds that are not 'preferred' have a sort of access fee. If there are 'A' shares there is typically an initial load fee. I honestly have not been on the Schwab platform in a while, but it is pretty easy to look them up on their website.

If the funds are inside a 401(k), the situation is slightly different. The fund lineup will likely be all 'preferred' funds, and if you have 'A' shares, there is a very good likelihood that the initial load fee will be waived. There could still be an administrative fee or an asset charge. The best way to know your fees in a 401(k) is to call the plan administrator, or possibly HR, and get a copy of the 404(a)5 disclosure statement. they are required to provide it, and it will show all fees.

Comment   |  Flag   |  Oct 30, 2013 from Delray Beach, FL

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Jim,

You have been provided many great responses on how to track down the costs. Once you track them down if you want to know how much on average you are paying you can figure out the weighted average expenses by taking the expense number for a fund and multiplying that number by what percentage of your assets in your portfolio it makes up. Once you do that for every fund you just add the numbers together to give you your weighted average expense ratio, which will truly tell you how much you are paying for the management of your funds.

Here is an example:

Fund A - Expenses .70, Portfolio Percentage 25% Fund B - Expenses .35, Portfolio Percentage 25% Fund C - Expenses .55, Portfolio Percentage 25% Fund D - Expenses 1.15, Portfolio Percentage 25%

Fund A - .7 X .25 = .175 Fund B - .35 X .25 = .0875 Fund C - .55 X .25 = .1375 Fund D - 1.15 X .25 = .2875

Weighted Average = .175+.0875+.1375+.2875 = .6875

In this case .6875 is the weighted average expense of your whole portfolio.

Comment   |  Flag   |  Oct 30, 2013 from St. Louis, MO

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Jim,

The first thing you need to do is segregate all your portfolio investments into the following buckets:

EQUITY FIXED INCOME PRIVATE EQUITY HEDGE FUNDS REAL ASSETS

The next thing you should do is qualify the investment structure, which could be any of the following:

INDIVIDUAL STOCKS INDIVIDUAL BONDS MUTUAL FUNDS EXCHANGE TRADED FUNDS SEPARATELY MANAGED ACCOUNTS UNIFIED MANAGED ACCOUNTS PRIVATE PARTNERSHIPS

Further, you need to then peel the onion on a Total Cost basis, as follows:

UNDERLYING EXPENSE RATIOS TRADING & CUSTODY COSTS ADVISORY FEES, IF ANY ETC.

Once you have done the above, you will be in a better position to compare it the average/median Total Costs across the investment types.

If you just own Mutual Funds, a good website is www.personalfund.com, where you can put your Mutual Fund Ticker and it will kick out the TOTAL COST. It is very important to understand the TOTAL COST of your investment vs. just the underlying EXPENSE RATIO.

Hope that helps.

Prateek Mehrotra, CFA, CAIA (920) 785-6010 www.EndowmentWM.com

Comment   |  Flag   |  Oct 30, 2013 from Appleton, WI

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Hi Jim,

In addition to the good advice you have already received on this topic I thought it might be helpful to discuss the concept of “share class” as it relates to mutual funds. I am making the assumption that by “investment funds” you mean mutual funds.

As you can see from the other posts many different types of fees can be associated with the purchase and ownership of a mutual fund. In general an investor may incur costs to buy or sell the fund. And all investors pay an ongoing daily fee to the fund provider for the various fund operations. Knowing how much you are paying for a fund is critical because the cost reduces the investment return that you earn on the fund.

Ideally when you are trying to determine fund fees you will have the fund’s 5 digit ticker symbol. As Andrew and Prateek point out a quick way to learn the various costs of a fund is by entering the ticker symbol at morningstar.com or personalfund.com

However the ticker symbol is not always readily available. Sometimes you only have the fund name. In this case it’s helpful to understand the fund’s share class because this will give you a clue as to whether the fund has front end charges, back end charges and if the ongoing fees are high or low. Every mutual fund has at least one share class. Many mutual funds have multiple share classes. The share class is listed at the end of the fund name. For example, the JPMorgan Core Bond Fund has the following share classes: A, A Load Waived, B, C, R2, R5, R6, Select. The annual expense ratios for these share classes range from 0.39% for the R6 to 1.47% for the A and the B. The A has a front end charge and the B a back end charge. The R6 has no front end or back end charge. So you can clearly see how important it is to know which share class you are buying when you purchase a mutual fund.

Visit http://en.wikipedia.org/wiki/Mutual_fund#Share_classes for a good primer on the main types of share classes.

The main reason the fees vary by share class is because the more expensive share classes pay the broker-dealer who sold you the fund a high fee while the lower cost share classes may not share any fees with the broker-dealer at all.

Hope this helps.

Comment   |  Flag   |  Nov 03, 2013 from Woodbridge, VA

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Jim - Great question. There are three things that you need to look at to determine that a fund is costing you. You will need to look at the management fee, the 12b-1 fee and if there is a load (front or back end). The simplest way to get this information is go to morningstar.com and search each of your funds by its name or ticker symbol. Morningstar provide the information for all three sets of fees. You will have to do a little math to determine the dollar amount you pay each year but you will be able to figure out if you are in high or low cost funds just from visiting this site. I hope this helps.

Comment   |  Flag   |  Oct 30, 2013 from Leawood, KS

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