A 12b-1 fee is charged by mutual funds to cover marketing and distribution costs, not for trading costs, issuing shares, management compensation, or penalties for early selling. It's included in the fund's expense ratio and impacts overall investment returns.
A 12b-1 fee is a fee charged by a mutual fund specifically to cover marketing costs which may include the costs of distributing the fund, advertising, and compensating brokers and others who sell the fund shares. Essentially, these fees are used by the mutual fund to promote the fund to potential investors and are included in the fund's expense ratio.
When investing in mutual funds, it's important for investors to consider all the associated fees and expenses as these can impact the overall returns. The 12b-1 fee is just one of many potential fees that can be charged by a mutual fund. Investors should always read the fund's prospectus to understand the fees charged and how they are used.
the 12b-1 fee is not associated with trading costs, the issuance of shares, management compensation, or penalties for selling shares within a specific period. Instead, its sole purpose is the financing of a mutual fund's marketing and distribution efforts.