Layered Fees

  

Categories: Trading, Banking

It's not just the commission. It's the fee for getting into the investment fund itself. And then the reimbursement of expenses to the broker who took his own jet to close the deal. Fee after fee after fee. They're layered like hair in the '80s, and they add up.

Caveat Emptor.

Related or Semi-related Video

Finance: What is a redemption charge?8 Views

00:00

Finance allah shmoop what is a redemption charge All right

00:07

well when you redeem shares of a mutual fund in

00:11

a deferred commission purchase structure there's a charge like you're

00:15

not paying your commission upfront you pay it later Remember

00:18

that most mutual funds are sold as a shares meaning

00:22

that the commission of the fund you're buying is paid

00:25

up front That is if you've invested ten grand on

00:28

a three percent up front commission structure while when you

00:32

step up on the swimming pool starting blocks and the

00:35

money is actively starting to be invested your actually starting

00:39

the race with ninety seven percent of that ten grand

00:43

or ninety seven hundred bucks with three hundred dollars having

00:46

gone to the broker for the pleasure of selling you

00:49

that fund but some mutual funds are sold as b

00:52

shares where there is essentially an exit fee or rather

00:56

where there is a charge when you redeem the fund

00:59

either because you just want to sell it or you

01:01

die in your estate liquidates it or martians kidnap you

01:05

and force you at martian gunpoint to call in a

01:08

sell order right Well in many cases redemption fees are

01:11

waived if you hold the mutual fund some extended period

01:15

of time like a year a few years five years

01:18

something like that If you hold the fund an extended

01:20

period the annual management fee paid to the people buying

01:23

and selling securities on your behalf can then cover the

01:26

broker's commission So the money managers aren't actually losing money

01:30

in the form of that three hundred dollar commission paid

01:32

you a broker who sold you ten grand of fund

01:35

only to have you three weeks later dump it and

01:37

move on to another funds Well there are other benefits

01:39

and having this system set up because it encourages mohr

01:42

careful selection of mutual funds and longer duration in holding

01:47

them And yes the obvious marriage and dating allegories apply

01:51

here But we just won't go So when you hop

01:54

in bed with a given mutual fund read the fine

01:56

print because well all kinds of hidden feed germs exist

01:59

in bedrooms airport bathrooms and glass elevators Well all around 00:02:02.98 --> [endTime] the world

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