Mutual Fund Prices VS ETF Fees

When you look at mutual fund prices and ETF fees and compare them to their performance in the stock market there is really only one thing to ask, why aren’t more people switching to ETF?

As I recently wrote in Should You Invest in Mutual Funds investing in ETFs tends to work out best for most people.

This becomes even more obvious when you look at the prices that most funds charge. Every fund works a little differently, but here are some of the fees that Mutual Funds will charge.

1. Sales Load

Many funds will charge their investors to either buy or sell their Fund, or both. This is like starting out with a huge loss. If the fund charges a 6% sales load up front and you invest $10,000 into it you lose $600 automatically.

So, you have to make 6% in the first year to be back to where you started from.

2. Transaction Costs

Funds also charge for transaction costs. If they are constantly buying and selling securities this can get pretty big.

3. Distribution Fee

This fee is taken out to pay any brokers and advisors that the fund may use.

4. Management Fees

These are small fees that you pay to have your money managed by the professionals. This fee is taken out whether the management made or lost money by the way.

ETF Fees

ETFs on the other hand are much less expensive. Where as a mutual fund may charge 2% a year with other fees an ETF may only charge between .3% - .9% a year. Saving you a lot of money, and in most cases making a higher return while doing it.

After all the Mutual Fund Fees being examined it is pretty obvious that it is only worth it if you can find one that is making a decent return such as a 20%+ return every year. Why pay for mediocre work after all?

When you look at the ETF verses Mutual Fund fees the ETFs win hands down.

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