Every mutual fund investment company has costs associated with running their business and making your investments. For funds that don't actively manage their investments on a daily basis (typically buy and hold), total fees and expenses can be less than 1%. Funds that hire managers to actively manage their investments (lots of buying and selling), and use brokers to sell their shares , will have much higher fees and expenses. Professional managers cost money, and brokers that provide personalized advice and service deserve to get paid. They get paid through the use of fees which are charged one of two ways. Some investment advisors sell "load" funds which are loaded with a fee that is deducted from your investment. Other advisors charge a flat rate, perhaps 1% - 3% of your total investment portfolio. If you need the advice, the fees may well be worth it. If you can figure out your own investment choices, there are plenty of funds to choose from that charge few fees and expenses, such as Vanguard.

For employer-sponsored retirement plans, the fees may be charged differently and may be less, but there are still fees associated with the plan. Our purpose here is to explain the fees that are often associated with mutual funds with the understanding that they may not apply to the funds you choose.

Mutual funds are typically sold as either Class A, Class B or Class C shares.

• Class A shares usually charge an up-front sales charge. That means if you have $1,000 to invest but pay a front-end load of 5%, your actual investment is $950. You'll pay other charges and fees while you own the shares, but they tend to be lower than the other share classes. Class A shares are typically for long-term investors or those with a large sum to invest because investment companies may offer discounts for large purchases.
• Class B shares usually don't have a sales charge when you buy them, but the ongoing expenses and fees -- which may decline over time -- could be higher than Class A shares. Also, if you sell your shares in the first six years or so, you'll pay a percentage to sell them. Class B shares are typically purchased by investors who may not have a lot of money to invest but plan to leave it alone for many years.
• Class C shares usually don't charge a percentage when you buy or sell, but the annual fees and expenses are much higher and do not go down over time. You may also pay a percentage if you sell in the first year. Class C shares are typically for investors who may not hold their shares for a long time