Most investors know to check the expense ratio when looking for a mutual fund, but most are unaware of the hidden cost and fees that eventually eat away any profit gained by trading. How much does the hidden brokerage costs and fees cost the average investor? In the US mutual funds pay 1.31% on average of the total of all assets each year to the fund manager and other operating costs. The problem becomes the unreported costs that are a part of the trading process. These cost are not in the advertisements and can easily make a bargain price go up two to three times what was originally stated.

The complexity of these trading cost is the main reason cited for not reporting them. it seems that a lot of mutual fund companies are in disagreement about how to actually calculate these cost and therefore each mutual funds brokerage costs and fees are very different. This is an aspect of the mutual fund trading process that none of the companies are to keen on going public with.

This is considered a trade secret and most fund managers are of a mind the less the investors know about this the better for them. the trade commission looks into the high brokerage cost and fees every year or two but they still have made little headway in getting anything done about the problem.

If the so-called “experts” cannot agree on what is what how does the simple lay man ever expect to understand the inner workings of the mutual fund trading market. Expenses are the most important things an investor can look at to gage the performance of a mutual fund. If the fund has a very high percentage of mutual fund brokerage cost and fees the overall impact is a negative for an investor.

What are these mysterious brokerage cost and fees?

1. Brokerage commission
2. Bid-ask spreads
3. Opportunity costs
4. Market impact costs

These are four things that are never even discussed with you by any mutual fund manager. And these are where the mutual fund will loose its value for you, the investor. The fund manager gets paid his commission off the top. If you make a profit is not a real issue for them since it doesn’t affect his/her purse strings.

The problem is the SEC doesn’t make commission reporting as a part of the mutual fund expense a priority. This means they are not required by law to disclose this information. Commissions make up less than half of the total costs but it is an important cost. The other three components aren’t discussed because they are even harder to explain. they are consider a part of the price of doing business.

If this makes you as an investor uneasy you can continue to educate yourself on the four components you now know are a part of the hidden brokerage cost and fees so you will be better able to calculate the worth of a potential mutual fund investment.

Author Bio: Next, find out more about mutual fund brokerage costs and fees in the best specialized website available on such delicate topic.

Category: Finances
Keywords: mutual fund brokerage costs and fees