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New Rule for Funds of Funds Fees

You can bring diversity to a portfolio by investing in mutual funds that invest in other funds. However, these types of mutual funds can also bring on added expenses. Some investors can be in for a surprise with a new rule that requires these funds of funds to calculate their cost from the underlying funds.

Prior to this new rule the only expenses that had to be listed where those at the top or the funds of funds. The new rule will be started this year and as a result the expense ratios may jump for investors. According to many advocates, this new rule will make an important transparency layer while managers of these funds of funds claim the rule is only going to make their mutual funds look more expensive then they are in reality.

However, the Mutual Fund Directors Forum stats that this new rule will help investors have a better understanding of the actual costs when they invest in these funds of funds. At the those who oppose this new rule claims it will hurt these funds of funds by making the expense ratio seem unreasonably high. These individuals claim the net asset value already reflects the fees of the funds of funds.
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