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March 19, 2026 • 17 minutes
Investing plays a massive role in growing and preserving your wealth over the course of your lifetime. Along with defining your investment philosophy and selecting appropriate investments, it’s essential to understand the various expenses you may come across, as every expense you incur will diminish the growth on your investment earnings.
What are mutual fund and ETF fees? They’re the costs charged to investors for owning, managing, and in some cases buying or selling a fund or an exchange-traded fund (ETF). They include expense ratios, sales loads, 12b-1 marketing fees, platform costs, and advisory charges. Some are disclosed clearly in a fund’s prospectus. Others are bundled inside the expense ratio and never appear as a separate line item on your statement.
Below, we’ll explore the common fees associated with actively managed and passive funds as well as ETFs — the expenses to watch out for with each type of investment.
We’ll also discuss how your investment platform can have an impact on the costs.
The most common fees on mutual funds and ETFs fall into three categories: trading costs, platform fees, and advisory charges — costs that apply regardless of whether you own actively managed or passive funds.
Whether you are self-managing your investments through a platform like Vanguard or seeking guidance from a robo-advisor or financial advisor, it’s important to be mindful of the more common kinds of investment expenses and fees.
Below are the relatively well understood fees that are typically associated with investing in mutual funds and ETFs.
When you are investing on your own, there are some additional administrative costs you’d benefit from understanding before trading your investments.
These include expenses such as:
When you invest with a custodian like Vanguard or Fidelity, you’ll want to be aware of any additional expenses, like transaction costs and account maintenance fees, even if minor.
Transaction costs will vary depending on where you do your investing, what you invest in, and how often securities are bought and sold. Account maintenance fees may be waived as well depending on the minimum requirements.
For example, Fidelity charges no account fee while Vanguard may charge a $25 annual fee for certain accounts. This fee can often be waived by enrolling in e-delivery or by maintaining $5,000,000 in qualifying Vanguard assets.
It’s important to do your research when choosing a custodian as a DIY investor. Most major custodians (Fidelity, Vanguard, Schwab) now offer $0 commissions for online trades of U.S. stocks and ETFs, though mutual fund transaction fees may still apply in certain cases.
NOTE: If your primary investing is through your employer’s 401(k) plan, you’ll want to understand the fees involved through this platform as well.
ProbaProbably the biggest fee anyone pays when investing in mutual funds and ETFs are advisor fees. The amount you pay will depend on the type of advisor you use, how much money you are investing, and the type of fee structure the advisor charges.
Here is a quick summary:
RoboAdvisor Fees: If you are a DIYer but also prefer some additional investment guidance, you may be utilizing a robo-advisor. A robo-advisor is an automated online platform that provides algorithm-driven investment management services with minimal human interaction.
Most robo-advisors charge lower fees than traditional financial advisors because they invest your money in pre-established portfolios made up primarily of low-cost funds. NerdWallet maintains a list of the best robo-advisors based on certain criteria.
Advisor Fees: Meanwhile, if you prefer a completely hands-off investment approach and work with a financial advisor to manage your money, you’ll need to account for their fees as well. For the majority of advisors managing money today, an AUM (Assets Under Management) fee is still prevalent.
NOTE: If you work with an advisor under an AUM arrangement, you’ll want to factor in these costs when entering in your rates of returns for your investment accounts within the Boldin Planner.
It is also possible to work with an advisor who is fee-only, meaning they are compensated directly by the client through transparent fees for agreed-upon services (rather than commissions). Boldin offers fee-only advice from a CERTIFIED FINANCIAL PLANNER™ professional. Services include investment guidance. Book a FREE discovery session.
Actively managed mutual funds carry fees that passive funds typically don’t — including management fees, 12b-1 marketing charges, and administrative expenses that together make up the expense ratio.
An actively-managed mutual fund is managed by professional fund managers who are utilizing their deep expertise and research to hand-select stocks, bonds or other holdings for the fund. They actively trade the holdings in the fund and their ultimate goal is to outperform a specific benchmark or market index.
Active managers are looking to beat the market through targeted investing, timing the market and any number of strategies that seek higher than average returns.
Pros and cons of an actively managed fund: As with any investment, there are pros and cons. Here are some of the downsides:
Let’s explore the fees:
The expense ratio is the total annual operating cost of a fund, expressed as a percentage of assets under management. It’s automatically deducted from the fund’s gross return each year — and it covers management fees, any 12b-1 fee, and other administrative costs.
The management and marketing of actively-managed mutual funds result in expenses and costs that are often passed on to you as the investor. These annual ongoing fees can include management fees, 12b-1 or distribution (and/or service) fees, and other administrative and operational expenses.
These fees make up the expense ratio, which represents the total percentage of a fund’s assets. In the investment world, the expense ratio is also referred to as annual fund operating expenses. Each year, the fee is automatically taken from the fund’s gross return and transferred directly to the fund manager.
It’s essential to understand the components of an expense ratio because doing so provides a clearer picture of the fees you’ll incur when investing in an actively-managed mutual fund.
Management fee: Part of the expense ratio of your investment may include a management fee, which covers the salary of a portfolio manager and their staff to buy and sell the investments within the fund.
This fee will vary depending on the size of the fund and the strategy it pursues.
12b-1 fee: If you are invested in an actively-managed mutual fund, you may be paying what’s called a 12b-1 fee. Although, not all mutual funds have 12b-1 fees.
A 12b-1 fee is essentially the fee you are charged for someone selling you a mutual fund. 12b-1 fees are considered operational expenses and are included in the overall expense ratio for the investment fund. The fee is used to cover the expense of advertising, marketing, and distribution.
A 12b-1 fee can be as high as 1% annually for a mutual fund.
Other expenses associated with managed funds: Along with the management fee and 12b-1 fee, there may be “other expenses” as part of the expense ratio. Generally, these aren’t as transparent when looking up the expense ratio for an investment you may be researching.
Other expenses may include:
A sales load is a commission charged when you buy or sell a mutual fund. A-share funds charge it upfront at purchase; B-share funds charged it at sale (a structure largely phased out across the industry); C-share funds carry no front- or back-end load but typically come with a higher annual 12b-1 fee.
There are many actively-managed mutual funds that are sold with a sales load. These are fees that can be charged to you either at the time of purchase or at the time of redemption (or sale) of your mutual fund.
Load funds with varying sales charges are usually differentiated by their share classes:
index funds and ETFs carry expense ratios and sometimes additional trading-related costs, though these fees are typically far lower than those on actively managed funds.
Investments that are part of a passive management investment philosophy would include index funds and ETFs.
Where active managers are looking to beat the market, passive investors are just focused on trying to capture the returns of the market while keeping costs low.
But there are still fees associated with these investments.
An index fund is a type of mutual fund that buys and holds the securities in a specific market index rather than actively selecting individual holdings — designed to match market returns rather than outperform them.
Index funds simply buy and hold the stocks (or bonds) in all or part of a specific market you are looking to capture as part of your investment. For example, by buying a share in a “total market” index fund, you acquire an ownership share in all the major businesses in the economy.
Index funds eliminate the guess-work (and increased anxiety levels) of trying to predict which individual stocks, bonds or mutual funds will beat the market. They are instead designed to keep pace with market returns.
An ETF (exchange-traded fund) is an investment fund made up of pooled securities that trades on a stock exchange like a share of stock — unlike a mutual fund, which prices once per day at market close.
Like mutual funds, ETFs are investment funds made up of pools of securities. But unlike mutual funds, ETFs are bought and sold on stock market exchanges just like stocks. Since ETFs are traded on the exchange like stocks, they can be bought and sold at any time. You don’t have to wait for the market to close.
While there are some actively-managed ETFs, most are designed to track market indexes, just like index funds.
ETFs are often more tax-efficient than mutual funds. This tax efficiency is largely due to the ETF “in-kind redemption” mechanism, which helps reduce realized capital gains inside the fund.
NOTE: When you are adding your investment accounts into the Boldin Planner, you should be thinking about the mix of stocks, bonds and cash in each account in order to enter an appropriate rate of return assumption.
Index funds and ETFs carry expense ratios that are significantly lower than those on actively managed funds — averaging 0.05% and 0.14% respectively in 2024, according to the Investment Company Institute’s “Trends in the Expenses and Fees of Funds, 2024” report.
Both index funds and passively-managed ETFs have low expense ratios due to the lack of a fund manager, often avoiding a lot of the fees making up the expense ratio of an actively-managed mutual fund, like a 12b-1 fee and other expenses.
NOTE: ETFs can have costs that aren’t captured in the expense ratio, such as bid-ask spreads (the difference between the price you can buy and sell at) and trading at a premium or discount to net asset value (NAV). These costs are usually small for widely traded ETFs but can matter more for less liquid funds.
Yes — no-load funds charge no commission at purchase or sale. The majority of index funds, ETFs, and many actively managed funds are sold without a sales load, meaning the full amount of your investment goes to work on day one.
With no-load funds, you do not pay a commission to buy or sell shares. Instead, you as the investor are doing the research and filling out the forms to purchase the fund. So, if you’re looking to purchase $20,000 worth of a no-load mutual fund, all $20,000 will be invested into the fund.
The majority of index funds, ETFs, and even some actively-managed funds don’t charge a load.
Every mutual fund and ETF publishes a prospectus that itemizes the expense ratio, sales load structure, 12b-1 fee, and all other charges. Reading that document — or using Morningstar or FINRA’s Fund Analyzer as a cross-check — is the clearest way to know exactly what you’re paying before you invest.
If you are invested in a mutual fund or an ETF — either actively or passively managed — you will have access to your fund’s prospectus.
Along with outlining the strategy and what it is invested in, a fund’s prospectus includes a full breakdown of the fees and expenses you can expect to pay. You will generally find the prospectus by visiting the fund’s website or calling the mutual fund directly.
In addition to your investment’s prospectus, there are other resources to determine the expenses of the funds you are invested in, like Morningstar or FINRA’s Fund Analyzer.
By way of example, let’s take a look at an actively-managed mutual fund, index fund, and an ETF to gain further insight into these different types of expenses.
DISCLOSURE: These are not investment recommendations.
This is an actively-managed mutual fund from American Funds with a sales load. Below is a page from the prospectus outlining expenses of the fund for the A share class:
Given it’s an A share class, you can see there is a 5.75% maximum sales charge (load) imposed on purchases. This sales charge will vary depending on the initial amount you invest. For example, if you invest $10,000, the initial charge will be 5.75% (or $575). Meanwhile, if you invest $50,000, the initial charge will be 4.5% (or $2,250).
The total annual fund operating expenses, or expense ratio, is 0.57%, which is made up of the 0.23% management fee, 0.25% 12b-1 fee, and 0.09% in other administrative expenses. That means it only takes 0.32% to run the mutual fund (pay staff, office space & equipment, and more). The other 0.25% goes to paying for ads and marketing the mutual fund to investors.
VTSAX is a popular index fund that is also considered a no-load fund. Below is a snapshot of expenses from its summary prospectus:
As you can see, there is no sales load and the total expense ratio is only 0.04%. The only shareholder fee consists of an account service fee of $25 per year, with specifications.
This fund is an ETF. The expenses page from the summary prospectus shows the following:
As you can see, this fund represents the lowest expense ratio (i.e. total annual fund operating expenses) out of the three examples, at only 0.03%.
While conducting your research on funds, be sure to review the prospectus as you can gain a lot of valuable information that will play a role in your investment decisions.
Expenses are one of the key drivers of the success of your financial plan — and understanding them, at the fund level, the platform level, and the advisor level, gives you real leverage to improve your long-term outcomes.
Being mindful of not only your investment costs but also your day-to-day living expenses is essential for establishing a strong foundation for financial success in the future. Take advantage of the Boldin Planner today to ensure you’re accounting for all of your expenses as part of your retirement plan.
Understanding the layers of fees — from expense ratios and sales loads to platform and advisory costs — isn’t just about saving pennies. It’s about clear-eyed choices and maximizing your retirement trajectory. Use the Boldin Planner to layer in real-world fee scenarios so you can see how expenses affect your long-term growth. That clarity turns cost awareness into a meaningful planning advantage.
Mutual fund and ETF fees reduce net investment returns every year, and because that reduction applies to a growing base, the drag compounds over time. A 0.25% difference in expense ratio on a $500,000 portfolio held for 25 years can add up to tens of thousands of dollars in lost growth. Every dollar paid in annual fees is a dollar that never earns a return. The Boldin Retirement Planner lets you model exactly how fee drag affects your specific portfolio over your retirement timeline.
The fees investors most often miss are 12b-1 fees (marketing charges bundled inside the expense ratio), front-end and back-end sales loads on actively managed funds, account maintenance fees at certain custodians, and advisor AUM charges that compound against returns year after year. The fund’s full prospectus is the most reliable source for surfacing costs that don’t appear as separate line items.
ETFs are often cheaper than comparable mutual funds, but not always. They typically carry lower expense ratios and may be more tax-efficient, but trading costs — including bid-ask spreads and any platform transaction fees — can offset that advantage for investors who trade frequently. For long-term, buy-and-hold investors, broad-market ETFs are generally among the lowest-cost options available.
Advisory AUM fees — often 0.5% to 1% or more annually — reduce your net return by that percentage every year. On a $1 million portfolio with a 1% advisory fee, that’s $10,000 per year before accounting for the compounding drag on the amount that fee removes from the portfolio. Over a 20-year retirement, that figure can be substantial.
Start with the fund’s prospectus to see its costs — it itemizes the expense ratio and its components, any sales load structure, 12b-1 fees, and all account-level charges. For a cross-check or side-by-side comparison, Morningstar and FINRA’s Fund Analyzer both surface fee data across funds.
Updated March 19, 2026.
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