CostThe cost of securing the necessary expert help in getting a mutual fund started and keeping it running is now within reach of nearly any fee advisor or investment manager who wants to start their own fund.
Initial setup cost for a mutual fund through our service is approximately $20,000 to $25,000. This includes legal fees, prospectus and SAI development, SEC filings, contracts for service providers, 500 investor packages (prospectus, application, return envelopes) and web page development. Setup costs typically run between $75,000 to $100,000, and up for other service providers.
The annual costs of running a mutual fund primarily consist of bank custody fees, legal services, annual auditing fees, transfer agent and accounting fees, fund administration fees, trustee fees, state registrations and printing/mailing cost. Below is a typical list of the annual operating costs for running a mutual fund with $10 million in assets through our services group.
A $10 million fund with a total operating expense ratio of 1.5% generates $150,000 per year in revenue netting approximately $24,993 in revenue after expenses. As the fund grows, the net income to the advisor dramatically increases as a percentage of operating cost increases at a much lower rate. Actual expenses and net income are for example purposes only.
Mutual funds require minimum investments of anywhere from $1,000 to $5,000, unlike stocks and ETFs where the minimum investment is one share. Mutual funds trade only once a day after the markets close.
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Although there are mutual funds with no minimums, most retail mutual funds do require a minimum initial investment of between $500 to $5,000, with institutional class funds and hedge funds requiring minimums of at least $1 million or more.
Mutual funds are good options for both beginners and more experienced investors alike. Both types of investors will benefit from the diversification benefits of mutual funds, and experienced investors can find funds that target specific areas they think are poised for growth.
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Introduction: My name is Maia Crooks Jr, I am a homely, joyous, shiny, successful, hilarious, thoughtful, joyous person who loves writing and wants to share my knowledge and understanding with you.
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