A Useful New Rule On Mutual Fund Expenses
Theres been a volley of proposals and rules coming out of the U.S. Securities and Exchange Commission in response to trading and market timing scandals. While most have some element of overkill, the rules that make the most sense are those adopted recently that require mutual funds to disclose enhanced information on expenses, portfolio investments and performance.
To anyone who has ever slogged through a mutual fund prospectus or report, the rule that will prove most useful is one aimed at furthering transparency. Under the new rule, mutual funds will have to disclose expenses borne by shareholders in terms of costs in dollars associated with a $1,000 investment, based on the funds actual expenses for the reporting period.
Funds will also have to disclose the cost in dollars associated with a $1,000 investment, based on the funds actual expense ratio for the period and an assumed return of 5%.