Costs Of Mutual Fund Investing
Mutual funds offer many benefits to you as an investor – professional management, investment diversification, easy access to your money and convenience. For most investors, mutual funds provide all of this at a fraction of the cost of creating a portfolio of individual investments.
Every mutual fund has certain costs associated with it. In reviewing funds for inclusion in your portfolio, you should consider these costs as part of your decision making process.
Management Expense Ratio (MER)
The MER represents a fund's total annual fees and expenses including investment management, distribution, marketing and unitholder record keeping divided by its average assets for that year.
Sales Commission (Load)
Certain mutual fund companies pay advisors a commission for their service either when you buy a fund (front-end load) or when you sell a fund (back-end load).
No-Load
A no-load mutual fund does not charge a front-end or a back-end load. You can buy, redeem or switch units of a fund without paying a commission.
Front-end Load
When you choose the front-end load option, you and your advisor negotiate the percentage to be charged, which generally ranges from zero to five per cent of the amount you invest. Mutual fund companies deduct the sales charge from the amount you invest and pay it to your dealer.
Back-end Load
With a back-end load or deferred sales charge, you do not pay a commission when you initially purchase mutual fund units. If you redeem your units prior to the prescribed holding period (generally six years), you will pay a commission which typically starts at five percent of the amount you invest and declines every year that you remain invested in the fund.
Short-Term Trading Fees
If you switch or redeem a mutual fund within a short period of time
after purchase, a fee may be incurred. The short-term trading or early
redemption fee applies only to the amount redeemed or switched from
the mutual fund.
A fee of two per cent may be charged if a mutual fund (excluding
money market funds) is redeemed or switched within seven days of purchase.
A one per cent fee may apply if you invest in a fund for more than
seven days, but less than 30 days (effective June 13, 2005).
Any fees charged will be paid directly to the mutual fund, and are
designed to deter excessive trading and offset its associated costs
for existing unitholders.
Please review:
To learn more about individual RBC Funds and
how they can address your investment objectives,
access our Mutual Fund Updates.
If you are ready to invest now, contact your
advisor or explore the investment options
available to
invest with RBC Financial Group.
To learn more about mutual funds see below:
