Mutual Funds Management Fees

Mutual funds, like other funds, are administered by a manager.  A manager eases many difficulties for the fund’s investors, but this comes at a price.  Managers typically charge between 0.5% and 1% of the mutual fund’s assets; this is known as the management fee.   This is a substantial fee, considering the immense wealth invested in most mutual funds.  Although this expense cuts a big chunk from the mutual fund, it pales in comparison to what many hedge fund managers charge.

Best Mutual Funds

Yahoo Finance tracks the best mutual funds based on specific areas, but also on overall performance. The following is the top performing mutual funds over 5 years based on percentage rate of returns:

1. BlackRock Latin America I: 50.98%
2. BlackRock Latin America A: 50.59%
3. T. Rowe Price Latin America: 50.19%
4. BlackRock Latin America C: 49.43%
5. BlackRock Latin America B: 49.42%
6. Fidelity Latin America: 48.95%
7. Fidelity Advisor Latin America I: 48.44%
8. Fidelity Advisor Latin America A: 47.98%
9. Fidelity Advisor Latin America T: 47.61%
10. Fidelity Advisor Latin America B: 46.91%

Index Funds

What is an index fund?

An index fund is a type of mutual fund that invests in line with a particular index—like the S&P 500 or the Russell 2000. The major attraction is that index funds are often managed by a computer. This reduces the high operating expenses that actively managed funds charge. Operating costs cut into investment returns and index funds offer a convenient alternative that curbs these fees. Index funds also tend to make fewer trades than active funds, further reducing expenses. Research suggests that index funds have outperform regular mutual funds in the long-run, so more financial advisors advocate for including at least one index fund in a portfolio. Another advantage is that index funds do not make the same mistakes as actively managed funds often make. An index fund follows the index without reacting to the market too aggressively or too passively, as active managers often do. Disadvantages are that index funds are not immune to a bubble in the market and could therefore suffer with the market; similarly, when the market is declining index funds will follow that, whereas actively managed funds try to predict and compensate against the market declines.

Mutual Fund Managers

A mutual fund is usually administered by a portfolio manager with researchers assisting the manager on the best investments for the fund. The typical profile of a fund manager is a experienced financial expert with strong academic and professional credentials.

Qualifications and Training
Managers rely on academic training in statistics and finance, usually acquired through graduate business programs at elite schools. Another qualification many fund managers possess is the Chartered Financial Analyst’s degree, or CFA. In addition, fund managers often have many years of working experience in the financial market, as an analyst, broker or professional trader.
Role
A fund manager is usually assisted by a research team, together they rigorously analyze possible investments. Mutual funds allow investors to make well-informed purchases with a research team considering all details of a company before making the investment. The expert financial team evaluates the business strategy, annual performance, compares the company to competitors and investigates further than many investors would before purchasing. This eliminates the hassle for the mutual fund’s investors, and because the fund is a collection of many people’s money the manager is able to select many investments, diversifying the fund’s portfolio. The manager decides when to buy and sell the investments. This similarly relieves the investors of having to monitor investments and trade through often costly brokers.

Mutual Funds

Mutual funds account for an estimated total global combined assets of $26 trillion. So obviously mutual funds are important, but you may be wondering what is a mutual fund?

A mutual fund is a collective investment where a fund manager will invest money from multiple investors. The fund manager selects which securities to invest the money in, hoping for the best returns on the investments. Investors in mutual funds purchase shares in that fund, so the overall performance of the fund directly effects the investors. If a mutual fund does poorly the investor’s shares will decrease in value, and conversely if the fund does well, the investor is rewarded with a higher return on his initial investment. Mutual funds are considered a relatively safer investment compared to stocks and alternative investments.

For those who prefer a video, here is a good explanation of mutual funds: