What is a good 12b-1 fee?

A 12b-1 fee is an annual marketing or distribution fee on a mutual fund. It is generally between 0.25% and 0.75% (the maximum allowed) of a fund’s net assets. The fee gets its name from a section of the Investment Company Act of 1940.

Do all funds have 12b-1 fees?

In fact, 30% of mutual funds don’t charge 12b-1 fees, since their managers find them unnecessary or would rather protect the financial interests of their existing investors.

Who gets 12b-1 fees?

salespeople
12b-1 fees are paid to the salespeople who distribute mutual funds and are paid from the fund’s assets.

Are 12b-1 fees bad?

In case you were wondering, higher 12b-1 fees do not improve performance. More on fees and performance later. These fees average around 0.13%, so if you purchase $10,000 of a mutual fund with 12b-1 fees, that translates to $13 per /year. This is a yearly charge which can be distributed to the broker who sold the fund.

What can 12b-1 fees be used to pay for?

Mutual fund investors pay 12b-1 fees to cover the marketing, promotion and service expenses of their investments. The idea is that this money is used both to attract new investors to a particular fund and to compensate the professionals doing the sales work.

Do no-load funds have 12b-1 fees?

What Are No-Load Mutual Funds? Some funds can charge a 12b-1 fee and still call themselves no-load funds. There are many no-load funds available that don’t charge 12b-1 fees when purchased directly from a mutual fund company. They are often referred to as true no-load mutual funds.

What is 12b-1 used for?

A 12b-1 fee pays for a mutual fund’s distribution and marketing costs. It is often used as a commission to brokers for selling the fund. 12b-1 funds take a portion of investment assets held and use them to pay expensive fees and distribution costs.

Is it good or bad that this fund charges no 12b-1 fees?

Bottom line. Some mutual funds charge 12b-1 fees. While they’re relatively low, they still can have a significant impact on your net returns. If you’re looking for your money to grow as much as possible, avoiding 12b-1 fees can improve your investment returns over time.

Can an investment adviser receives 12b-1 fees?

Registered investment advisory firms that are dually registered, i.e., registered as both investment advisers and broker-dealers, can receive 12b-1 fees as part of the brokerage function.

Are 12b-1 fees tax deductible?

Rul. 73-463 and holds that Rule 12b-1 fees are indistinguishable from the stock issuance expenses deductible under Rev. Rul. 73-463.

What are 12b-1 rules?

In 1980, the Securities and Exchange Commission (SEC) adopted Rule 12b-1 under the Investment Company Act of 1940. This rule permits funds to compensate brokers and other financial intermediaries out of fund assets for services they provide shareholders related to the distribution of fund shares.

How are 12b-1 fees calculated?

Mutual fund companies base the 12B-1 fee calculations on the fund’s average annual net assets. To calculate the net assets of a mutual fund, subtract the fund’s current liabilities from the market value of its holdings. A fund’s current liabilities include fund management fees and broker commissions.

What are the fees for a 12b-1 fund?

The 12b-1 fee can be broken down into two distinct charges: the distribution and marketing fee and the service fee. Total 12b-1 fees charged by a fund are limited to 1% annually.

What’s the maximum 12b-1 fee for Class C shares?

Class C shares usually have the greatest likelihood of carrying the maximum 1% 12b-1 fee. The presence of a 12b-1 fee frequently pushes the overall expense ratio on a fund to above 2%.

Where do I find the 12b-1 fee on my 401k?

Find it in a 404 (a) (5) participant fee disclosure. This should be easily-accessible from your 401 (k) provider’s website. Look at your 408 (b) (2) fee disclosure. When looking at either of these documents, just CNRTL+F and search “12b-1” – if you don’t see a column for the 12b-1 fee, you’re not being charged one!

What are the fees for no load mutual funds?

The distribution and marketing piece of the fee is capped at 0.75% annually, while the service fee portion of the fee can be up to 0.25%. Class B and class C shares of broker-sold funds typically have 12b-1 fees, but they may also be charged on no-load mutual fund shares and class A broker-sold shares.