With all of the talk about changing mutual fund providers in the current mutual fund scrutiny, one of the key elements in the decision-making process will be the costs involved in changing providers. For those who do not know, the SEC provides a Mutual Fund Cost Calculator at its website. Here is what the SEC has to say about the calculator:
The Mutual Fund Cost Calculator enables investors to easily estimate and compare the costs of owning mutual funds. . . Mutual fund costs take a big chunk out of any investor’s return. That’s why it’s important for investors to know what costs they are paying, and which cost structure is best for them. By using the Cost Calculator investors will find answers quickly to questions like this: Which is better, a no-load fund with yearly expenses of 1.75% , or a fund with a front-end sales charge of 3.5% with yearly expenses of 0.90%?
The SEC states at its website that “costs aren’t the only thing that should be considered when investing in a mutual fund” (an understatement after recent mutual fund scandals) and that the investor should consider the following in deciding whether or not to invest in a certain mutual fund:
- the number of years needed to reach an investment goal,
- the type of stocks, bonds, or other securities that the fund buys,
- the risk of the fund,
- the fit between the fund and the investor’s portfolio (diversification),
- the fund company or portfolio manager who runs the fund,
- the fund’s track record or performance over time, and
- the types of services offered by the fund company.
(The SEC should update its website to include another consideration, i.e. that of the fund company’s status in the current mutual fund investigations.)
The Office of Investor Education and Assistance publishes the “Online Publications for Investors” which provides information regarding the following aspects of mutual fund investing:
- Breakpoints
- Index Funds
- Information Available to Investment Company Shareholders
- Invest Wisely: An Introduction to Mutual Funds
- Mutual Fund Classes
- Mutual Fund Fees and Expenses
- Mutual Fund Investing: Look at More Than a Fund’s Past Performance
- Mutual Fund Prospectus, Tips for Reading One
- Mutual Fund Cost Calculator
In addition, the SEC provides additional information entitled “Publications on Mutual Funds, Fees, and 401(k)s.”
Finally, regarding the mutual fund industry problems in general, Newsday.com is reporting today: “Outflows Cause Concern For Mutual Fund Investors.” Also, the Seattle Times reports: “When employer makes 401(k) changes, doing nothing can cost you.” The latter article notes that “[s]ome companies, such as drug maker Merck, of Whitehouse Station, N.J., are eliminating certain equity investments and then transferring participants’ balances into money-market accounts” and this “puts the onus on participants to reallocate the investments or risk not having them keep up with inflation.”