What is a 12b-1 fee?

    Published: 06-16-2009
    Views: 11,110
    Financial planner David Marotta describes the basics of a mutual fund including what a 12b-1 fee is.

    David John Marotta

    David John Marotta is the President of Marotta Wealth Management, a fee-only financial planning and asset management firm in Charlottesville, Virginia. He is an oft-quoted writer and speaker on financial matters and his weekly financial column can be found at www.eMarotta.com

    Host: What is a 12b-1 fee?

    David Morotta: A 12b-1 fee was named after the section of the securities in exchange commissions, rulings that allow these kinds of fees. A 12b-1fee is intended to pay the advertising for a fund and there are two ways you can have advertising. If you have normal advertising 12b-1 fees of no load mutual funds have to be under 0.

    25%, many of them are zero but some of them are as high as 0.

    25%.

    On a loaded fund this may include the sales charge in which case the advertising is considered 12b-1 fees plus all the salesman s time and everything else. Then the 12b-1 fee might be as high as 1% or so percent. So, we think it is best to invest in things with a low expense as possible. This helps your money double quicker and so we invest only in no load mutual funds.