question about fund expenses

[simple girl]

Hi all,

When evaluating mutual funds, I've always made sure that they are no-load and have low expense ratios. A friend of mine recently asked me about management fees. Basically, a fund in his 401K has an exp ratio of 0.81 and a management fee of 0.61. Is this management fee part of the expense ratio, or should the two be added together to assess the full expenses of the fund? Hope this isn't too basic of a question!

Thanks!

 

[brewer12345]

Management fee is part of the expense ratio. Ideally, the expense ratio should be an all-in figure, inclusive of management fees, commissions, etc. It misses out on some stuff that can be hard to measure (bid-ask spread, etc.), but for index and low turnover funds it is usually pretty close.

 

[mickeyd]

I've always made sure that they are no-load and have low expense ratios. A friend of mine recently asked me about management fees. Basically, a fund in his 401K has an exp ratio of 0.81 and a management fee of 0.61. Is this management fee part of the expense ratio,

I'm curious about the two parts of the above statement that IU have italicized. How are you so aware of the low expenses if you do not know how they are calculated? Have you read the prospectus that you received? Under the section entitled "Annual Fund Operating Expenses" it should clearly indicate mgt. fees, 12b-1 fees and other expenses and a total of the fund's expenses.