WHAT IS THE TYPICAL RANGE FOR EXPENSE RATIOS?
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While the numbers are small, the range is
proportionately quite large: Mutual fund expense ratios generally
range from less than 0.3 percent to 2 percent or more.
Different funds have different objectives and
strategies that can affect a fund's expense ratio. The expense
ratio for the average stock fund is less than 1.5 percent. Mutual
funds that invest globally, purchase the stocks of emerging
companies, or follow an aggressive growth strategy tend to have
expense ratios toward the high end of the range. Funds that invest
primarily for large institutions or that are based on a particular
market index tend to have low expense ratios.
Many other factors contribute to the differences in
fees. For example, 12b-1 fees alone can range from 0.25 percent to
a maximum of 1 percent. And mutual funds that need to reach a wide
marketplace often will promote their funds through a variety of
means, from printed brochures to Web sites and online
As more investors have become aware of the impact of
expense ratios and more alert to their size, some funds
occasionally have placed a cap on their expense ratios for a
period, particularly when they are aiming to attract additional
Investment choices are as unique as the individuals
who make them. But increasing your knowledge of expense ratios and
other factors can help you make the right investment decisions for
Now, we arrive at the crux of the matter: How
does the expense ratio affect a fund's bottom line?