Questions related to ETF: What is front load and Total expense ratio?

Question

Hi,

I am using the yahoo screen fund utility to find funds to invest in.

There are several entries on the form that I dont understand.

What is "Front load" and "Total expense ratio" ?

http://screen.yahoo.com/funds.html

Answer 1

The fund charges a percentage of assets to manage mutual funds or ETF's known as expense ratio.  Reported historical returns are after that expense ratio is deducted.  So if 2 funds invest in essentially the same index, the one with lower fees might have a better return.  Some managed funds will do better than the index, but most do worse.

If the funds are in different markets, one may have higher expense ratio, but also better overall returns.  So when comparing expense ratios, also compare the market and historical returns (not that history is any guaranty of future returns).

"Front end load" is a term that applies to mutual funds representing the commission of person/company selling it to you.  There are plenty of no-load mutual funds available that charge no fee to buy or sell (unless you sell before minimum holding period).

ETF's do have a (usually lower) expense ratio, but no load.  They are traded like stocks with normal stock trading commission.