Things You'll Need:
- Computer with an Internet connection or a telephone
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Step 1
These days only about 5 percent of 12b-1 fees are used to market mutual funds while nearly two thirds of them go straight to brokers and middlemen. That means a chunk of your hard earned earnings are going into someone else’s pocket. The first step is to figure out how much your fund is charging in 12b-1 fees.
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Step 2
Head straight for your mutual fund’s prospectus and start reading. Your mutual fund company will mail the prospectus to you or you can download it from their website. Mutual fund companies are required to reveal 12b-1 fees. It is considered an operational expense, so it is “hidden” in a fund's expense ratio. It shouldn’t be hard to find now that you know what to look for. If you can’t find them in the prospectus then call the mutual fund company and ask where to find them.
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Step 3
Now that you know how much your mutual fund charges in 12b-1 fees, how much is too much? It is usually between 0.25 and 1 percent of a fund's net assets. One percent is the maximum allowed by law. Obviously, lower is better. You need to evaluate how much you are paying in 12b-1 fees compared to other fees. If you are paying a load or commission to buy the fund, then don’t tolerate high 12b-1 fees. It is like being charged twice.
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Step 4
You should be especially aware of 12b-1 fees on “no load” funds. You may think you aren’t paying any fees to invest when in reality the fee siphons away more money over the long run than if you had paid a load up front. A mutual fund is allowed to call itself “no load” even if it charges up to 0.25 percent in 12b-1 fees per year. Look for funds called 100% no load or true no load funds. They don’t charge the fee.
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Step 5
Another option is to use a quote service. A simple search of the Internet will hook you up with several free services. They will tell you all sorts of things about individual mutual funds including how much they charge in 12b-1 fees.
