How Mutual Fund Companies Make Money

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As the popular saying goes that “There is no free lunch in life”. And if you are thinking that the mutual fund companies are helping you in making money without any self-interest, then you are absolutely wrong.

Fund companies basically charge endless fees to investors for their services. Sales charge fees are given on the purchasing of mutual fund shares by any investor, out of that a large portion goes to the advisors and brokers who actually sold the fund. Scroll down and see how mutual fund companies make money:

  1. Front-end Load: It is actually gets decreased from the account of investor, even before buying of shares. Like if you are buying shares of Rs. 2,000, 1,900 rupees will be invested and the broker will get 100 rupees profit.
  2. Back-end Load: It is taken when all the shares are being sold. It generally starts from high and then decrease and decreases over time, and finally drops to zero after 10 years.
  3. A good no. of investors even charge distribution fees, which is even known as “12b-1 fees”. This distribution fees are charged from shareholders to take care of the costs associated with marketing the fund and even offering shareholder services.

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