Anyone know how these Mutual Fund Insituations (not people investing in FUNDS) makes money? I want to know whats the benefit of these fund companies.... Do they share only part of the profit? Who gets the entry loads and exit loads the MF company or the banks who sell the funds? Also, one more tihng how is their NAV calculated? They publish that manually based on the funds assets? Or is that also based on Demand like Shares? I guess its like.... say if the funds networrth (value of the investments they made in equities) is $ 1 mn. and say they have 100,000 units then one units is worth $10 and suppose they invest that 1 mn. in some shares and which gave 100% Returns... so their networth is now 2 million.. so the NAV becomes 20 dollar... Is this how their business and marketing works?
Mutual funds make money from taking a fee from the returns of the fund called a management expense ratio (MER). This is between 1.5-2 for most funds, meaning if the $100,000 portfolio gains 10% in one year and the MER is 2, the firm operating the mutual fund gets approximately $2000 and the fund would be worth around $108,000 ($100,000 + $10,000 - $2000). Some funds also have load fees which are either paid upon purchase or sale of fund units. For example you might have to pay a 1% premium to purchase a certain fund - these fees also go to the institution.
I just want to know whether they take part of the profits... I mean say some 20% something like that......
Mutual funds have a few different type of fees that generate income for the fund. As far as the brokers that sell them are concerned.. there is a sales charge that is charged on mutual funds. Please PM me if you would like more information. The NASD restricts me from commenting about securities related products in an open forum.
I already told you - yes, most institutions take 1-2% off the return of the fund each year. This is how they profit from operating mutual funds...