Originally Posted by FinanceDude
NO ONE really KNOWS what the trading costs are, because mutual fund companies ARE NOT required under SEC law to report them. I think WE ALL would be surprised at the true "costs" of mutual funds..............
FinanceDude, commissions are available if you do some digging. A fund's Statement of Additional Information (SAI) shows the commissions a fund (ie. its shareholders) pays in commissions. I'm not sure if it's required by the SEC, but I think it is and most fund's SAIs are available at the fund family's website.
I recently did an analysis of that information for the Vanguard Total Stock Market Index fund and two other random funds to see what I found.
Vanguard Total Stock Market paid brokerage commissions of $6,715,000 during fiscal year ending 12/31/2005 per its SAI. Per the annual report for 2005, TSM had beginning assets of $57,014,134,000 and year-end assets of $65,419,573,000 giving an average asset balance of $61,216,854,000. $6,715,000/$61,216,854,000=.00011 or about 1 basis point (.01%). Thus, a $100,000 investment involves commissions of about $11.
Compare w/ AMRMX, American Mutual Fund, for the year ended October 31, 2005, had average net assests of $15,065,976,000 and paid commissions of $5,738,000 for commisions as percentage of net assets of .0381% or 3.8 basis points. VTSMX shareholders pay less than a third of the brokerage commisions.
T. Rowe Price Science & Technology (PRSCX): fiscal year ended 10/31/2005 brokerage commissions totaled $8,350,000. Assets for year ending 12/21/04=$3,905,000,000. Assets for the year ending 12/31/05=$3,220,000,000/ Average assets = $3,562,000,000/$8,350,000 commissions. Commissions paid by the fund equal .23% (23 basis points) percent of average assets.
The information and calculations aren't perfect, but I found them useful. I'd rather pay 1 basis point in commissions than 10 or 20, that's for sure. Another factor in addition to speads and taxes, etc. that impact returns.