A switching fee is a fee charged by some mutual funds when an investor transfers shares from one fund within the same fund group to another fund within that same group. This fee may vary depending on the mutual fund and can be found in the fund’s prospectus or other documents describing the company’s fees and expenses.
The decision whether or not to charge an exchange fee is left to the investment fund that manages the fund group. Fee information can be found in the fund’s prospectus and other documents relating to the company’s brokerage services, commissions and fees.
How do you know if an investment fund charges exchange fees?
To determine whether a mutual fund charges exchange fees, consult the prospectus and look for information about exchange fees. You can usually find a table of fees or language related to “exchange rights,” which refer to the ability to exchange shares between funds within the same fund group. It’s worth noting that many major mutual funds don’t charge exchange fees, but there may be restrictions on how often you can exchange money. For example, Vanguard limits your purchases or exchanges into a fund account for 30 calendar days after you redeem or exchange your money from that fund account.
Other possible mutual fund fees
When it comes to mutual fund fees, your first stop for information should be the fund’s prospectus. This SEC-mandated document typically contains investment-related details, such as investment strategies and objectives, fund management, dividend and capital gains distribution information, and of course, fees. The prospectus may contain a separate section for fees, or you can find a fee table in the fund overview.
The costs associated with an investment fund vary depending on the fund. For example, Fidelity’s Blue Chip Value Fund (FBCVX) charges no transaction fees, but management fees are 0.63 percent and other fees total 0.13 percent, according to its November 2023 prospectus. The fund has no distribution fees. or service fee (12b-1), nor shareholder fees.
In addition to these charges, some mutual funds may charge a sales charge if they are a ‘load fund’.
