Most investors think that the fund’s expense ratio (ER), listed in the prospectus and annual reports, is their true cost of fund ownership. Wrong. There are actually three more layers of expenses beyond the ER, which merely comprises the fund’s advisory fees (what the managers get paid) and administrative expenses. The next layer of fees are the commissions paid on transactions. These are not included in the ER, but since 1996 the SEC has required that they be reported to shareholders. However, they are presented in such an obscure manner that, unless you have an accounting degree, it is
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