Fund Expenses and Fees

Q: Do the fund rankings reflect the expenses charged by each fund? For example, when I look at a fund's year-to-date performance, is that return actually diminished by hidden expenses?

A: We get a fair number of questions related to expenses and fees, so this is a good opportunity to review the details. First of all, when you see mutual fund performance data published in SMI or anywhere else, the returns have nearly always been adjusted already to reflect the fund's normal expense ratio. That's because mutual funds pay their expenses a tiny bit every day, which is reflected in the fund's daily "net asset value." When you look at the performance of funds on our Recommended Funds  page, or in the "Fund Performance Rankings"  report, those returns are after expenses have already been taken out. And since our momentum rankings use that performance data, they automatically factor in the varying expenses paid by all the funds. That's one reason we don't make a particularly big deal about expense ratios—they're already reflected in the rankings.

A second type of cost, however, is not reflected in performance data—the fees you pay for buying or selling a fund. This includes both transaction fees to your broker, and any redemption fees charged by the fund. The impact of these costs vary widely depending on which broker you use and how you implement the Upgrading strategy. When you look at Upgrading's past performance, then, the regular fees charged by the funds are already reflected in the published results, but any transaction or redemption fees that might have been paid are not.

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