The actual expense paid by mutual fund investors. The after reimbursement expense ratio is calculated by subtracting any reimbursements made to the fund by the management and contractual fee waivers from the gross expense ratio.Also known as the "net expense ratio". Management will often reimburse the fund for indirect expenses, such as any dividends paid for short positions in stock.Sometimes the expense ratio will be voluntarily limited by the managers through a fee waiver to keep the fund's pricing competitive. Fee waivers allow the fund to set a maximum level on the amount charged to shareholders. When a fund adopts an expense limit, it is referred to as a capped fund.
1. The person or company responsible for making investments on behalf of, and/or providing advice to, investors. 2. In the context of the mutual fund business, an advisor, also known as an investment advisor, is an organization employed by an investment company to manage a particular fund's portfolio. A fund's advisor assigns a manager(s) to make the day-to-day decisions involved in the purchase and sale of a fund's securities according to stated strategies and investment objectives. 1. It's a good idea to choose an advisor carefully according to his or her professional credentials, experience and expertise. Fees and services provided are also important considerations. 2. A fund's advisor has the primary responsibility for the investment performance of the fund. This responsibility may be shared with another investment advisory firm, with each advisor focusing on different asset types in a portfolio. Advisors receive an annual management fee, which is computed as a percentage of a fund's assets under management. The fee makes up a large portion of a fund's operating expenses. For fund investors, judging the quality of a mutual fund's portfolio management is one of the most important considerations for investing in a fund.
The fee that is paid to a financial advisor for recommending a load mutual fund based on the needs and time-frame of an investor. Fees differ according to the class of mutual fund shares, and are paid to the advisor for recommending a fund that suits an investor's time and goals. Depending on the share class, advisor's can either receive a one-time fee up-front or an annual fee as long as the investor holds the asset. The fee that an investor pays on A shares is upfront, starting at around 4-5% and decreases as more is invested. An investor with a large amount to invest over the long-term would be best suited with A shares. An investor with the same time-frame, but less to invest might do better in B shares. C shares are best for those investing for the short-term. Note that 12b-1 fees, the fees paid to a mutual fund's management, are higher for B and C shares, and lower for A shares. When choosing a class of shares, an investor should consider first how long they can invest. The advisor will get paid either way for directing you into the investment.Also, investors who already have a fund picked out should pick a no-load fund, sidestepping the extra fees. The load goes to pay for the advice of the advisor. If that advice is not needed, don't pay the price for it.
An academic study conducted by researchers from Yale in 2006. The active-share study examined the proportion of stock holdings in a mutual fund's composition that was different from the composition found in its benchmark. The greater the difference between the asset composition of the fund and its benchmark, the greater the active share. According to the active-share study, there was a positive correlation between a fund's active-share value and the fund's performance against its benchmark. For example, a mutual fund with an active-share percentage of 75% indicates that 75% of its assets differed from its index, while the remaining 25% mirrored the index.The study found that funds with a higher active-share value would tend to be more consistent in generating high returns against their benchmark indexes, which implies that more actively managed funds have more skilled managers.
A rule created by the Financial Industry Regulatory Authority (FINRA) to protect individual investors from conflicts of interest that may arise when brokerage firms and mutual funds collaborate. The main violation the rule is designed to prevent is an arrangement between a brokerage firm and a mutual fund wherein the brokerage firm directs its clients to the mutual fund company (generating sales) and the mutual fund, in turn, sends its trades through the brokerage firm (generating commissions). Brokerage firms and mutual funds can be fined by FINRA (formerly the NASD) if there is proof that they have violated anti-reciprocal rules.
The percentage rate at which a mutual fund or exchange-traded fund replaces its investment holdings on an annual basis. Turnover is meant to adjust for the inflows and outflows of cash and report on the level of trading activity in the fund. Annual turnover is a good way to inspect the average time horizon a fund employs. Higher turnover levels will generally add to the expense ratio of a fund and could increase capital gains distributions. Benchmark funds like the S&P 500-matching SPDRs have very low turnover, usually less than 10% per year. On the other end of the spectrum, some funds employ highly active trading strategies that push annual turnover past 100% per year (100% is a full turnover of the portfolio).
An association of American life insurance carriers based in Washington D.C. The American Council of Life Insurance deals with legislation on all levels of government that pertains to the treatment of life insurance. The council also promotes the life insurance industry to the public through various means of advertising and communication. Watch: Life Insurance The council acts as a spigot for the stream of information pertaining to life insurance that reaches the public. Both stock and mutual life carriers are members of the council as they have a full understanding of the industry and the array of available products.
The percentage of an investor's initial cash or capital outlay that actually goes toward the final investment. This amount is net of any fees that may be incurred upon initial investment and is effectively the amount that is exposed to the investment. For example, if a mutual fund carries a 4% front-end load, only 96% of an investor's initial investment will actually be placed into the fund itself, with the rest going to the investment company. The higher the fees, the lower the overall allocation rate will be for the investor.Management companies, pension managers and the like all charge some percentage fee for their services. More choices usually means higher allocation rates for investors, but buyers must always beware of exorbitantly high load fees or upfront costs for any investment. Stock and bond index funds remain one of, if not the highest, allocation rate vehicles available to investors who do not wish to actively manage their own portfolios.
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