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An exchange fee is a fee charged by some mutual fund companies when an investor transfers shares from one fund within the same fund group to another fund within that same group. This fee can vary depending on the mutual fund company and can be found in the fund’s prospectus or other documents that cover the company’s fees and charges.
The decision of whether to charge an exchange fee is at the discretion of the mutual fund company that manages the fund group. Information about fees can be found in the fund’s prospectus and other documents that cover the company’s brokerage services, commission and fee schedule.
How to know if a mutual fund charges an exchange fee
To determine if a mutual fund charges an exchange fee, review its prospectus and search for information on exchange fees. You can typically find a fee table or language related to “exchange privileges,” which refer to the ability to exchange shares between funds within the same fund group. It’s worth noting that many large mutual fund companies don’t charge exchange fees, but there may be restrictions on how frequently you can exchange funds. For example, Vanguard limits your purchases or exchanges into a fund account for 30 calendar days after you’ve redeemed or exchanged out of 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, dividends and capital gain distribution information and of course, fees. The prospectus may have a separate section for fees, or you may find a fee table within the fund summary section.
The fees associated with a mutual fund will vary depending on the fund. For instance, Fidelity’s Blue Chip Value Fund (FBCVX) doesn’t charge a transaction fee, but its management fee is 0.63 percent, and other expenses total 0.13 percent, according to its November 2022 prospectus. The fund does not have a distribution or service (12b-1) fee, or shareholder fees.
In addition to these fees, some mutual funds may charge a sales fee if they are a “load” fund.