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Costs Investment Fund
Financial - Investing
Thursday, 14 August 2008 15:12

Investment funds like mutual funds and ETF's usually provide the yearly (management) costs in their reports. Research has shown that these costs are an important factor in the capital gains that investors achieve through the years. Therefore it is good to check the hidden costs a fund charges before investing in it.

When a fund trades its assets this also costs money. However costs related to trading of fund assets are usually not reported as yearly costs. But with this calculator you can estimate the total costs of an investment fund, including these trading costs. These trading costs consist of the trade commission plus the spread. The spread is the difference between the bid and the ask price.

Usage fund cost calculator

  • Enter the the Total Expense Ratio into the first field. The Total Expense Ratio includes all direct (management) costs of the fund expressed as a yearly percentage.
  • Enter the percentage of the fund assets that is (typically) traded each year. This is the Turn Over Ratio. Not every fund publishes this figure but the better funds do.
  • Finally click Compute.
  • The third field is the Trading Costs Factor. This factor is used to estimate the trading costs based on the Turn Over Ratio. This estimates takes the trading costs as the product of the Turn Over Ratio and the Trading Costs Factor. At the moment of writing this page a value of 0.008 is a reasonable value for most stock funds.
  • The result appearing below the Compute button is an estimate of the total costs of the investment fund expressed as a yearly percentage of its assets. So this estimate includes the effect of the Total Expense Ratio and the effect of trading by the fund.
Total Expense Ratio (%/year): 
Turn over ratio (%/year):
Trading Costs Factor:
Estimate total costs (%/year):