Are Mutual Fund Returns Net of Fees?

When you purchase shares in a mutual fund, you buy an investment advisory service, according to Forbes. The fund's investment managers make buying decisions for you, placing your money in whatever investment the mutual fund specializes in. You pay for that expertise. If you pay fees in advance, returns don't reflect fees. If you pay later, the returns reflect the fees the fund takes out.

Net Asset Value

At the end of each business day, mutual funds calculate their net asset value. This figure represents the total value of all investments held by the company, minus all of the company's liabilities. For example, a fund may determine that after expenses, it has net asset value of $100 million.

Share Price

Mutual funds calculate their share price by dividing the net asset value by the number of shares outstanding. For example, a fund with a net asset value of $100 million that has 10 million shares outstanding has a share price of $10. In this example, you arrive at this figure by dividing 100 million by 10 million. The result is 10.

No-Load Funds

A no-load fund does not charge you a fee upfront when you purchase shares. All of the fees count as expenses when the mutual fund calculates its net asset value, because the fund takes fees out of assets. Because your share price comes from the net asset value, the fee expense is already figured in. For example, if you bought shares at $10 and the share price rises to $12, that is an after-fee price because no-load funds count fees as expenses before they calculate the share price.

Load Funds

A load for a mutual fund is an upfront fee you pay. Think of it as a sales commission. Because you have already paid your fees, the fund does not have to take those fees out of assets. Therefore, when it figures its net asset value each day, it does not count fees as expenses. Your share price reflects the actual net asset value of the fund with no hidden fees.

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About the Author

Kevin Johnston writes for Ameriprise Financial, the Rutgers University MBA Program and Evan Carmichael. He has written about business, marketing, finance, sales and investing for publications such as "The New York Daily News," "Business Age" and "Nation's Business." He is an instructional designer with credits for companies such as ADP, Standard and Poor's and Bank of America.

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