The mutual fund industry has succeeded tremendously. And although the vast number of funds in the industry has complicated the purchasing decision, mutual funds remain a first rate opportunity to build wealth. However, our objective is to build wealth and beat inflation over time. We already indicated that our after tax return is important. If mutual funds are our investment vehicle of choice, then we must also consider the impact of mutual fund fees and expenses on investment return.
Mutual funds come in load and no-load form.
No load funds do not have sales commissions, while load funds do. There is no indication that the presence or absence of a load is indicative of fund performance. However, the author has a fundamental aversion to paying sales commissions when there are so many fine no load funds on the market. The next category of cost to mutual fund investors is the fees and expenses charged by the fund manager which include costs to manage the portfolio and to analyze current and potential investments, 12b-1 fees for advertising expenses, and other operating costs. Again, high or low costs do not necessarily indicate a certain level of performance.