When you buy an open-end mutual fund, did you know that you are paying a ‘stealth fee’? There are two types of open-end mutual funds, load funds and no-load funds. The load is a fee you pay for the honor of buying the fund. It includes commissions to the person who sold you the fund (even if it is the fund company) and advertising costs (12b-1 fees). The load can be charged up front or can be charged over a number of years. So a non-load fund usually is a better deal, since you don’t pay these fees. There are also management costs and fees that are charged to the mutual fund over the course of the year that you never see. These costs and fees are absorbed into the daily price of the fund (The Net Asset Value, or NAV). Basically if the fund has a Net Asset Value of $10 per share, it will actually be shown as $9.90 per share because of these expenses. You will never find out how much these costs are on your brokerage statement; you have to actively look for them in publications or on Yahoo Finance or another site that tracks mutual funds. That is why I call them ‘stealth fees’, because they are cloaked. On average all mutual-funds have these fees; they average about 1% a year, but can be much lower (Index Funds for instance) or higher (Emerging Markets and Overseas Funds). Just make sure you know what these ‘stealth fees’ are before you invest in a mutual fund. Tomorrow I will go into what an open-end vs a closed-end mutual fund is.