Have you heard of 12b-1 fees before? If you invest in mutual funds, I hope you have. You’ll find these fees on a fund prospectus or a website like Morningstar. In this week’s video, Tim shares the basics on 12b-1 fees.

12b-1 fees draw their name from the section of the Investment Company Act of 1940 which gave them life. If a mutual fund has 12b-1 fees, they are paid by all fund holders as part of the expense ratio. They are supposed to cover the annual costs associated with marketing the fund, including distribution. The fees typically range anywhere from 0.25%-1%, and funds with expense ratios lower than 0.25% are deemed no-load.

It is absolutely critical to understand the costs associated with any type of investment.

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