In the first of this two-part series on various fund fees, we looked at load and no-load fund fees. Here are some other types of fees that could impact your investment and are worth investigating before you make your final investment decision

Purchase fee
A purchase fee is very similar to a front-load fee in the sense that it is also charged when the investor enters the fund, however, unlike a front-load fee, the purchase fee goes to the fund and not to a broker.

Redemption fee
A redemption fee is a fee that is charged when investors exit a fund. This fee punishes investors for exiting the fund early (before a specific length of time). The redemption fee may be charged for exiting the fund within 30 days after entry, or up to one year and longer. After the designated minimum holding period elapses, investors are not charged for exiting the fund. Unlike a backend-load fee, the redemption fee is paid to the mutual fund and not to the broker.

Management fee
A management fee is charged by the fund’s management, advisors and analysts for professionally managing the assets of the fund. Management fees vary from fund to fund, but they are typically based on the percentage of assets under management (0.5% of total assets under management) and not management’s performance.

Aggressive funds that require lots of active trading tend to have higher management fees than more passively-run funds, like Index funds.

12b-1 fee
The 12b-1 fee is an annual fee deducted from the fund’s total assets to cover expenses incurred in the marketing and advertising of the fund. Proponents of this fee argue that by marketing the fund, assets increase therefore lowering expenses, thanks to economies of scale. The 12b-1 fee is named after the Securities Exchange Commission (SEC) rule that allows mutual funds to charge this fee.

Account fee
Certain mutual funds charge an account fee to cover costs incurred in maintaining the investors account. This fee may only be charged on accounts that fall below a specified amount.

Transfer fee
Certain mutual funds charge a fee if you request to transfer your money from one fund to another fund within the fund family. This fee may be a fixed amount or a percentage of the amount transferred.

Expense ratio
The expense ratio is a measurement of the total costs associated with operating a fund for a year, expressed as a percentage of the fund’s net assets. An expense ratio of 2% means that each year, 2% of the fund’s assets are used to cover its expenses. Expense ratios are made up of management fees, 12b-1 fees, and other administrative costs (such as account and transfer fees). The lower the expense ratio, the lower the impact of fees on your investment.

In closing
Unlike returns, expenses are predictive. Funds with high expense ratios tend to have high expenses ratios going forward. Even though fees may significantly eat into your returns, choosing the right mutual fund for your investment involves more than just picking the one that has the lowest fees. Make sure you consider your current asset allocation, risk profile, investment objectives, tax situation and so on, before you invest.