Noload Mutual Funds

401(k) expense ratios down — except for bond funds

Plan participants are moving their assets into cheaper mutual funds, selecting no-load options, while expense ratios within the funds themselves are dropping, according to a study by the Investment Company Institute.

More than $3 trillion in 401(k) assets were invested in mutual funds as of the end of 2010, according to the ICI. Of that amount, 81% was in no-load funds, the study showed. While the remainder of the assets were held in mutual funds with loads, those fees generally were waived for plan participants.

Expense ratios, which include fund-operating costs and 12-(b)1 fees, crept downward for plan investors in stock funds, dropping to 0.71% in 2010, from 0.74% in 2009. Money market funds' average expense ratios fell nine basis points to 0.28% last year, based largely on the low-interest-rate environment and fee waivers from fund providers.

Average bond fund expense ratios, however, held steady at 0.56% between 2009 and 2010.

“The drop in the average expense ratio incurred by 401(k) investors in stock mutual funds reflects cost-conscious decision making by plan sponsors and participants, as well as the impact of rising stock values in 2010,” said Sarah Holden, the ICI's senior director of retirement and investor research. Surging stock values last year helped distribute fixed-fund costs over a larger asset base.

In bid to keep costs down, mutual fund shareholders also turned to stock funds with low turnover rates among securities in their portfolios, choosing those with an average rate of 53%. By contrast, the average turnover rate in stock funds chosen by 401(k) participants was even lower, coming in at 43% — which is where it was in 2005.

Since then, turnover in mutual funds chosen by plan participants has generally been on the rise through 2009, when it reached 54%, according to ICI.

No Load Mutual Funds

An increasing number of people are starting to get interested in mutual funds because of the fact that they offer a return with none of the responsibility of managing the money yourself. When you are one in one of these mutual funds you will be able to count on a professional to do all of the managing for you. Typically there is a minimum investment requirement of around $2,000 but you will have to check for yourself because of all mutual funds are not the same with regards to how much they require you put in at first. These mutual funds act as a sort of investment club which will be able to offer you the kind of return you want without risking a lot in the process like with the stock market or commodity futures, though there are some mutual funds that are tied in with these if that is what you want.

With a no load mutual fund you will be able to get the money you invest back at any time with absolutely no penalties, whether you are taking just part of it or all of it. The first thing you will want to do is call the fund company you are interested in getting involved with on their toll-free number and explain that you would like to become an investor in their mutual fund. You will want to tell them what you are interested in specifically, whether it is setting up an IRA or even a joint account with the person you are married to.

Once you speak to the mutual fund representative you will get all of information you need about the funds they have available as well as all of the necessary applications which you will be required to fill out. If you are especially interested in something like stock funds, you will want to let the person you are talking to know in advance so they can talk to you about that. If you find that you encounter any issues with filling out the paper work, it will be important to call them back and explain your problem. It is extremely important to know what you are doing before getting involved with a mutual fund because you’ll want to be clear on everything that you are getting yourself into. Take some time to research and look into the mutual fund which you are considering, because not all of them will give you what you need. You should be able to find out everything you need from their website.

After you are convinced that a certain mutual fund is what you want to invest your money in, you will need to send them a check with at least the minimum required deposit as per their instructions. By sending a total of $5,000 to a mutual stock fund and it ended up closing at $10 per share, you will own exactly 500 shares. It is important to know how a mutual fund calculates the NAV or net asset value. They simply use the net value of the fund’s investment assets as well as the number of shares to come up with the individual value of each share. After you start investing in this type of fund it will become second nature.

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