Using this option requires that you first authorize it on your application form. Most mutual fund companies do allow this option. However, many of them waive this requirement if you agree to an automatic investment plan that withdraws from your bank account until you have reached the required minimum. Mutual funds charge fees for the costs of running the fund. A fund's prospectus lists all the fees charged by the fund, though some are hidden.
Sales charges are the fees for purchasing or redeeming shares of a mutual fund.
By law, sales charges may not exceed 8.5 percent of the amount invested. In trading stock for your fund, the manager incurs brokerage and related costs. These expenses are passed on to the investors. Actively traded funds experience higher expenses, which will reduce their returns. They may also charge exchange fees if you transfer money from one fund to another within the same fund family.