When we open the public fund rate table, we can see that there are many types of fees, such as subscription fees, subscription fees, redemption fees, management fees, custody fees, etc., so how are these fees charged? How to use different rates Choose a fund ? Today, I will give you a detailed introduction to the related expenses of public funds.
01
Overview of Fund Fees
Fund fees can be divided into two categories: transaction fees and operating fees:
Transaction fees include subscription fees, subscription fees, redemption fees, etc., and refer to the fees incurred by investors in the process of fund sales.
Operating expenses include fund management fees , custody fees, sales and service fees, etc., which refer to the expenses incurred during the operation of the fund and are deducted from the fund assets.
02
Fund transaction fee
- Subscription fee
The handling fee paid for purchasing new funds during the issuance and raising period is the subscription fee. The handling fee paid for the purchase of old funds during the duration is the subscription fee. Therefore, the difference between the subscription fee and the subscription fee is whether the fund is established or not. The purchase before the establishment of the fund is called the subscription fee; after the establishment of the fund, no subscription fee is charged, that is, the subscription fee.
Front-end charges refer to the charging method for paying subscription fees when purchasing funds . One of its advantages is that it can discount the subscription amount, which is beneficial to individual investors and institutional investors with a large amount of funds to reduce investment costs
The back- end fee refers to the charging method in which the subscription fee is not paid when the fund is purchased, and only the handling fee is paid when the fund is redeemed.
- Redemption fee
Redemption fees are fees that investors need to pay when selling fund products . The level of fund redemption fees is closely related to the holding time. The longer the fund is held, the lower the redemption fee; many funds (A shares) do not charge a redemption fee after one year; and hold within a week after redemption, there is a punitive redemption fee. Redemption fees will be halved regardless of which share is held for more than a week. It is also a measure to encourage investors to hold the fund for the long term.
Transaction fees are part of the fees paid by investors, and are also the main rates that investors need to pay attention to, such as how subscription fees and redemption fees are generally set. A-shares charge subscription fees and redemption fees, but no sales service fees; C shares charge sales service fees and redemption fees, but no subscription fees.
From the perspective of rate setting, A shares are more suitable for long-term holding; if it is short-term holding, C shares are more suitable. But over time, the size of C shares has generally shrunk substantially. Therefore, which shares are more suitable to hold depends on the length of investment time and the setting of the rate.
03
Fund operating expenses
Operating expenses include fund management fees, custody fees, sales and service fees, etc. , Fund management fee refers to the management remuneration paid to the fund manager , which is withdrawn from the net value of the fund , accrued on a daily basis, and paid on a monthly basis. The fund company shall issue a fund management fee transfer instruction to the fund custodian , and after being reviewed by the fund custodian, make a lump sum payment from the fund property to the fund manager.
- Custody fee
Fund custody fees refer to the fees charged by the fund custodian for the custody and disposal of fund assets. Generally, fund custodians are banks or securities companies. Custody fee is usually withdrawn at a certain percentage of the net asset value of the fund, calculated on a daily basis, and paid on a monthly basis
It is important to note that the management fee and escrow fee are different from the redemption fee described above. Redemption fees are deducted from the investor’s fund, while management and custody fees are paid from the fund’s assets and do not need to be charged to investors separately
- Sales service fee
Simply understand that the sales service fee is the service fee that the fund product needs to collect. To better understand these charges, we need to group fund shares
When buying funds, we often find that the same fund is divided into different aC shares. In fact, their investment objects and operation methods are the same, but they are divided according to different charging methods.
There is no sales service fee for Class A shares, but a subscription fee. The subscription fee for Class A shares is the above-mentioned front-end subscription fee, which is charged upon purchase by investors. The higher the subscription amount, the lower the fee. Generally enjoy platform preferential rates
There is no subscription fee for Class C shares, but the sales service fee is calculated on a daily basis. The longer the stock is held, the higher the fee. Also, it’s worth noting that common Class C shares held for more than 30 days will have redemption fees waived
Management fees, custody fees and sales and service fees are drawn from the fund’s assets on a daily basis. That is to say, the net value of the fund on the previous trading day that we see every day is the net value after deducting these three expenses, and investors do not need to pay any more. Therefore, when buying and selling funds, we can ignore these three fees
04
Fund’s opaque fees
Also, there are some rates that we can’t see
- Dividend tax
The fund doesn’t pay taxes when it pays us dividends , but when it gets dividends from its own stock, it does. Index funds that have been established for a long time also hold stocks for a long time and will have certain advantages in terms of dividend tax
- Stamp duty
For the purchase of foreign exchange funds , no tax is currently required, which is also a kind of preference for funds. But you need to pay stamp duty when buying shares
- Trading Commission
This part of the fee is mainly because individual investors must buy and sell stocks when they apply for redemption of funds . That said, fees for frequently traded funds can be very high. The trading commission of most index funds is 0.1%-0.4% per year, and the trading commission of many active funds exceeds 1%.