One thing that consistently annoys me is the difficulty in finding the annual expense for any given group of funds. I wanted to talk about comparing fees for mutual funds and ETFs.
Comparing Mutual Fund Fees
Mutual funds are the worst as they like to:
- Promote different share classes – I am convinced that A-, B-, C-, etc., share classes of mutual funds exist simply to complicate comparison shopping by investors. Mutual fund companies that sell loaded versions of their funds are the worst – as are funds that have 12b-1 fees on some share classes but not others.
- Obscure the costs of the fund – Mutual funds can pack additional fees by charging purchase fees (which go to the fund company), contingent deferred sales load, and the infamous “other expenses.”
There are a few companies out there dedicated to comparing and rating mutual funds and their managers. Morningstar is one of the best known, but a subscription costs nearly $200 a year. Go for the free option at MarketWatch, which will let you compare up to 4 funds for free.
My favorite tool is Yahoo’s free mutual fund screener. You can sort by fees including front-end loads and total annual expense ratios.
What if you want to compare exchange-traded funds? No problem! The ETF community is all about saving money, and there are great free tools available to examine ETFs. Personally, I like ETFs because the fee is plainly-stated as an all-in expense ratio. Unlike mutual funds, there is an on-going fee war in ETFs that is pushing down costs to a ridiculously low level. I’m not sure how these companies even make money.
Anyway, if you want to compare ETFs, check out ETFdb. I like to use their ETF screener to select funds based on the asset allocation, management type, and then annual expense. You can then do sort funds again by expenses to see how they line up. Work your way down the list to find a fund that works for you.
Hey, check that out – ETFdb even points you to brokers where you can trade the fund commission-free. How’s that for saving you money?