News Summary: Study measures fund trading costs

AP News
Posted: Mar 14, 2013 6:24 PM

BIG EXPENSE: A study of mutual fund expenses by three university professors focuses on costs from trades that fund managers make. They concluded that trading costs typically take a bigger bite out of investment returns than the operations costs reflected in a fund's expense ratio.

COST BREAKDOWN: Trading costs can include brokerage commissions as well as the impact that a fund's trade of a large block of shares can have on that stock's price. Typically, that impact hurts a fund's performance.

HIDDEN COST: Unlike expense ratios, fund trading costs are hard to quantify, aren't disclosed and remain largely invisible.