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Mutual Fund Hidden Expenses - They Can Rob You

Mutual funds are required by law to publish their annual expenses, marketing fees and sales charges. But one potentially very large expense that they don't tell you about is the brokerage commissions that funds pay when stocks are bought and sold. For funds that frequently buy and sell stocks, these trading costs can substantially reduce your total return.

The following example is taken from, Hidden Expenses, an article in Forbes magazine, January 31, 2005. Dreyfus Founders Passport Fund - A (FPSAX), an international fund, has annual expenses of $2.45, which are very high. Then you add brokerage commissions of $4.84 and the total expenses jump to an incredible $7.29. This means that you are charged $7.29 for every $100 you have in the fund. By comparison the Vanguard 500 Index (VFINX) charges you $0.18 per $100.

Moreover, FPSAX charges a one-time sales charge 5.25% to simply buy the fund. And for all of these charges and fees investors have received a paltry five-year annual return of -3.8% This fund is nothing but a gigantic rip off.

For many more examples of how hidden expenses can rob you see Hidden Expenses at the Forbes web site.

Updated on February 24, 2005