All mutual funds have fees and expenses. These costs reduce the return on your investment, particularly over the long term. 

Before you invest in a mutual fund, you should decide if the fund's fee structure is acceptable. You can find the fund’s fees and expenses in the fund’s prospectus. 

Common Categories of Expenses

Shareholder fees: Include any commissions paid to brokers when shares are bought or sold. Commissions are often described as "front-end loads" (sales charges when you buy) or "back-end loads" (sales charges when you sell). No-load funds, as the name implies, do not have front-end or back-end sales charges. 

Annual operating expenses: Are the costs associated with managing and operating a fund. These include services provided by a fund manager, record keeping, printing and mailing. 

Both the shareholder fees and the annual operating expenses are shown in the fee table in the fund's prospectus. You may obtain a prospectus by requesting one from the mutual fund company or your financial advisor.

How Is a Mutual Fund Taxed?

Mutual funds must distribute all of their income and capital gains to shareholders every year. Therefore, shareholders of a mutual fund must pay income taxes on any distributed dividends and capital gains. Each fund provides an IRS Form 1099 to shareholders annually that summarize the fund's dividends and distributions. When a shareholder sells shares of a fund, the shareholder will realize either a taxable gain or a loss.