Similarly, the fund may offer an NAV option wherein a wrap fee is imposed on that asset by the securities firm. If this weren't confusing enough already, it is also possible that a combination of the above might be utilized. Without knowledge of the individual's expected holding period and other factors, it is impossible to determine which alternative is preferable. For example, if an investor expects to hold an individual fund, or at least one of the funds managed by that same management company, for a long period of time, an initial sales charge may be the preferable option. However, a short holding period will usually make the annual fee method preferable.
Investors can avoid commissions associated with redemptions by going directly to the mutual fund.
Obviously, that amount can be higher if a sales commission option with higher annual fees is selected. To analyze specific funds, one should review the prospectus and a prior annual report. It is wise to select a mutual fund that is part of a family of funds. As your objectives change, you can, for a nominal fee without incurring a new sales charge, switch among the funds in the family whose objectives most closely meet yours. When contemplating changes, you should always consider the options that are available within the same family of funds.