# 10 – Soft-dollar costs of

For mutual fund investors, the reason is so small you could have your money pool, hire professional management to achieve diversity in itself is almost impossible for small investors. It is reasonable to assume that this is a few millions or even billions of dollars, there are economies of scale of the street needs, its shares trading in the most competitive prices. But, as we will see, not only invested enterprises do not have access to the most competitive price, good pay, more than any individual can be through your discount broker.

What is a soft-dollar expenditures?

Hard-dollar costs of management fees from the fund manager. These costs include the salaries of fund managers, analysts, and customer service staff (yes, I dinged when you call the 800 line), printing costs and all other countries need to literature, and all other office costs associated with running the fund. Interestingly, such as profit and Exchange Commission, the actual expenditure not included in the hard-dollar bill, will only show a slight decline, almost imperceptible decline in annual rate of return. The high friction in these areas may be involved in the course of the year has a significant cost, if you think the operation of billions of dollars of mutual fund shares of thousands of dollars.

Recognizing that enterprises have ignored the U.S. dollar decline in the cost of the difficulties of fund managers are conducive to increasing the bottom line of a dollar, sales arrangents and fund managers to provide daily necessities, the cost is higher than the market in the exchange flow of orders. For example, the seller's brokers offer investment research service (its value is in doubt), Bloomberg terminal, office space, including two junior analysts or exchange order flow of funds to, say, 5 cents per share, compared with the normal of each Unit 2 cents. That party to sell fat Athletes Commission, the fund manager's "things" that would otherwise be paid to its management committee. Everyone is happy. . . In addition to the shareholders who foot the bill, and most do not know this from happening, unless you read the prospectus' deep small print.

Why do you have to be careful

The Wall Street Journal investigation of this approach, and decided in 2002, 12 billion U.S. dollars is the arrangement of "soft dollars, of which 6 yuan for U.S. dollars. This is 700 million yuan, is unnecessary, from the sales side of signs. In addition, the Wall Street Journal emphasizes that a previous 5 cents per share, live in several different companies. This is for every 1000 shares of 50. However, we believe that anyone can open a discount brokerage account and pay no more than a similar performance 10 U.S. dollars. For these transactions the compensation wholesale price is about 1 yuan shopping efforts, as a multi-billion dollar fund of the Acting Executive of the implementation services.

Investment Company Institute (Defense Association, mutual fund management companies), said the practice of shaking hands, shareholder value, has been everything to pay anyway.大概. However, these costs should be out of management fees. This approach can be overshadowed by individuals and their advisers to be used to compare the two funds hidden costs. The only reason to hide the true costs to hide the fact that the administrator misappropriated investors, more money, their fiduciary duties to allow. Not to mention the cause of such an arrangement is called bribery.

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