12B-1 Plan

A 12B-1 Plan is another way for mutual funds to charge a fee similar to a loaded fund even though they are classified as a no-load fund. This plan is typically less obvious to find within a fund’s prospectus but investors should know it must be disclosed. Typically the fee runs .25% – 1% of a fund’s total assets and is charged annually.

The advantage of participating in a fund that utilized a 12B-1 Plan is that you avoid the fees associated with a front or back end loaded fund. These funds charge a % fee upfront or % fee when you exit the fund which is more or less a marketing fee. There is no research that suggests a loaded fund yields higher returns then a no-load fund.

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