Definition of Mutual Fund Trails

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Mutual funds are a popular investment choice, but the terminology of funds can be confusing. Mutual fund trails is not a well known or understood concept.

Identification

  • Mutual funds trails, or trail commissions, are a type of commission paid to the brokers who sell mutual funds.

Function

  • Trail commissions are ongoing commissions paid to the broker on assets held in the mutual funds. Brokers usually receive the commission each quarter for their customers' mutual fund accounts.

Amounts

  • Trail commissions range from 0.25 percent to 1.00 percent annually of the mutual fund balances.

Source

  • The source of mutual fund trails is the 12b-1 fees a fund charges shareholders. The 12b-1 amount can be found in the mutual fund prospectus.

Effects

  • High 12b-1 fees can reduce the overall return from a mutual fund. Trail commissions help pay the broker for ongoing mutual fund advice and assistance.

References

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