A mutual fund is a pool of money that is invested by a professional investment manager on behalf of a large group of people. The profits and losses made from the investments are shared by the whole group.
Understanding mutual fund sales charges
When you buy a mutual fund, you may pay a fee (or commission) to the investment professional. The commission is also known as a sales charge or load. There are two basic types of sales charges, but both are calculated as a percentage of your original purchase amount.
Understanding management expense ratios
When you invest in a mutual fund, you and everyone else invested in it help pay for the administration and expertise to manage that fund. You don’t pay these fees and expenses directly, however they do reduce your overall rate of return. These fees are collected at the fund level and are expressed as a percentage of total fund assets, and this number is known as the management expense ratio (MER).