Mutual funds generally are not considered short-term investments. A mutual fund or brokerage firm may also charge additional fees, including fees for redeeming shares within the first year or 18 months of ownership. These fees can vary, and generally are outlined in the fund's prospectus and brokerage firm's fee schedule.
For example, some mutual fund companies impose mandatory holding periods on purchases of fund shares to discourage market timing, short-term trading, or other frequent exchangers of mutual fund shares. Because frequent trading negatively affects remaining fund shareholders by increasing the transaction costs to the fund, some mutual fund companies charge an additional fee, commonly known as a short-term redemption fee, on the redemption of mutual fund shares that are not held for the required holding period.Common fees include:
- Short-term redemption fee
- Exchange fee
- Transaction fee
- Annual account maintenance fee
Check the fee table in a mutual fund's prospectus and the commission schedule to review the fees and expenses of the mutual fund you have selected. It's important to review a mutual fund's share class structure and expenses along with your investment objectives, time horizon and risk tolerance when determining if a fund will meet your financial needs.
In addition to ongoing costs of owning mutual fund shares, some funds also charge a sales charge. To learn more about sales charges associated with buying and selling mutual funds refer to our articles "Buying Mutual Funds" and "Selling Mutual Funds."
As with any other investment, owning mutual funds may subject you to certain taxes. See our article on 'Mutual Fund Taxes' to learn more.
Mutual funds available without transaction fees may change at any time without notice. Therefore, any mutual funds purchased without a transaction fee may be subject to a transaction fee for subsequent purchases or upon liquidation.