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SEC Introduces New “Mutual Fund
Cost Calculator”

Internet-Based Tool Will Help Investors Comparison Shop and Save Money

Washington, D.C., April 6, 1999 – Securities and Exchange Commission Chairman Arthur Levitt today unveiled the "Mutual Fund Cost Calculator," a new Internet-based tool developed by the SEC that enables investors to easily compare fund costs and assess their impact.

The mutual fund "Cost Calculator," available for free on the SEC web site,, takes the math and the mystery out of questions like: "Am I better off buying a no- load fund with yearly expenses of 1.75%, or a fund with a front-end sales charge of 3.5% and yearly expenses of 0.90%?"

The Cost Calculator's estimate of mutual fund ownership costs includes sales charges (loads) and annual operating expenses paid by investors, as well as "foregone earnings" – money that could have been earned had those fees been invested instead.

"Each and every investor should know what he or she is paying for a mutual fund – plainly, simply, and in dollars and cents," said SEC Chairman Arthur Levitt. "Only when investors know what they're paying can they shop for a fund that best matches their investment objectives."

SEC research suggests that most of the nation's 77 million mutual fund investors don't know how much they're paying for their funds – or that higher fund costs can reduce eventual returns by thousands of dollars. Even a one percent annual fee will reduce an ending account balance by 18 percent on an investment held 20 years.

"A one percent difference in mutual fund costs may seem insignificant at first, but over time it can really add up," said Nancy M. Smith, Director of the SEC Office of Investor Education and Assistance. "You can save tens of thousands of dollars by using the Cost Calculator to comparison shop before you invest in a mutual fund."

For example, an investor who uses the Cost Calculator will find that $10,000 invested in a no-load mutual fund that returns 8% a year with a one percent annual fee will be worth $38,122 after 20 years. By comparison, the same amount invested in a similar fund that provides the same annual return over the same period but charges two percent annual fees will be worth $31,117. The $7,005 difference represents more than 2/3rds of the original investment.

"Simply put, if two funds have equal performance, the one that charges lower fees will provide increasingly higher returns the longer you own it," said Erik Sirri, Director of the SEC office that designed the on-line calculator, the Office of Economic Analysis.

A 1996 survey conducted by the SEC and the Comptroller of the Currency found that fewer than one in five fund investors could give any estimate of expenses for their largest mutual fund, and that fewer than one in six fund investors understood that higher expenses can lead to lower returns.

The SEC reminds investors, however, that fees are not the only consideration when choosing a fund. After reading the fund's prospectus and annual report, investors should also assess:

  • the number of years needed to reach an investment goal,

  • the types of stocks, bonds, or other securities that the fund buys,

  • the risk of the fund,

  • the fit between the fund and other investments held by the investor (diversification),

  • the fund company or portfolio manager who runs the fund,

  • the fund's track record or performance over time, and

  • the types of services offered by the fund company.
According to the Investment Company Institute, the average ownership cost of a stock load fund was 2.11% of an individual's investment in 1997, compared to an 0.89% average ownership cost for a no-load fund.

For more information about mutual funds and costs, visit the Financial Facts Tool Kit on the SEC web site at


The SEC is a member of the Facts on Saving and Investing Campaign, a national partnership that seeks to motivate Americans to "Get the Facts" they need to achieve financial security. The campaign will organize a series of events across the country during the week of April 25 - May 1, 1999, to help Americans learn how to save and invest wisely and avoid costly mistakes. For more information, visit .

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