Introduces New Mutual Fund
|FOR IMMEDIATE RELEASE
Tool Will Help Investors Comparison Shop and Save Money
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, http://www.sec.gov, 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.
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
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.
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:
number of years needed to reach an investment goal,
types of stocks, bonds, or other securities that the fund buys,
risk of the fund,
fit between the fund and other investments held by the investor
fund company or portfolio manager who runs the fund,
fund's track record or performance over time, and
types of services offered by the fund company.
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
For more information about mutual funds and costs, visit the Financial
Facts Tool Kit on the SEC web site at http://www.sec.gov/consumer/toolkit.htm.
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
Last update: 04/06/1999