Best Guide to Mutual Funds
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12B-1 Service Fee

The 12B-1 fee is a mutual fund service fee levied on investors in the fund. The collected monies are used expressly to cover the costs of marketing campaigns, distribution fees, and the services of advertising agencies and media. Essentially then, when investors pay the 12B-1 fee they are bearing the cost of the fund's activities to sell itself to other investors. (Distribution fees are those fees paid out as compensation to brokers and other financial entities that sell shares in the fund.)

Additionally, 12B-1 fees are sometimes used to cover a portion of the cost of shareholder services such as maintaining a help line or other venues for responding to questions from investors.

Normally the 12B-1 fee is one of the fees taken together to form the fund's expense ratio which is the percentage of the fund's assets used expressly for the purpose of administering the business of the mutual fund.

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