Investor Services

Mutual funds also provide an array of investor services such as record keeping, tax information, check-writing privileges, and so forth. In effect, they take care of numerous details and send you a statement covering the funds' performance and the information you need to prepare your tax return with regard to this fund.

These services, in total, are quite valuable to many investors. The ability to write a check against your money market fund as it continues to earn interest is valuable . The right to add modest amounts to your account from time to time is a useful feature. If you wish, most funds will automatically draft your checking account, thereby allowing you to invest on a regular basis without action on your part. Mutual funds keep you well informed about the details of your account, and you can typically access your accounts via the Internet and know on a daily basis where your investments stand.

Lipper, a global company offering information and analysis to fund companies and media organizations, released a summary of a new study in early 2002 involving fund services. [6] The study stated that investors expect a wide range of services from their fund family, including a good Web site, helpful telephone representatives available day and night, and personalized statements. The study looked at shareholder- servicing expense data across fund families. For the average shareholder with $10,000 invested in a fund, the cost of these services was $28 in 2001.

[6] This information was available in February 2002 on the Lipper Web site (www.lipperweb.com) under the "What's New" section.

Insights

An easy way to remember the annual expenses for mutual funds is to remember the 0.5 percent rule. As a rough approximation , the three major categories of mutual funds ”money market funds, bond funds, and equity or stock funds ”have expense ratios that are 0.5 percent higher than each other, starting with money market funds. These averages are illustrated in Figure 3-2:

Figure 3-2. A Useful Rule of Thumb: Approximate Average Annual Expense Ratios by Category of Mutual Funds.

graphics/03fig02.gif

  • Money market funds have average expense ratios of approximately 0.50 percent.

  • Bond mutual funds have average expense ratios of approximately 1.0 percent.

  • Stock mutual funds have average expense ratios of approximately 1.5 percent.

Of course, these are only averages; some funds will be higher and some lower.



Mutual Funds(c) Your Money, Your Choice... Take Control Now and Build Wealth Wisely 2002
Mutual Funds(c) Your Money, Your Choice... Take Control Now and Build Wealth Wisely 2002
ISBN: N/A
EAN: N/A
Year: 2004
Pages: 94

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