Question

Name three categories of explicit costs of mutual funds.

Answer 1

The three categories of explicit costs of mutual funds are management fees, administrative costs, and marketing and distribution costs.

Step-by-step explanation:

The three categories of explicit costs of mutual funds are:

1. Management Fees: These are the fees that investors pay to the fund manager for managing the mutual fund. It is usually a percentage of the assets under management.
2. Administrative Costs: These include expenses such as legal fees, accounting fees, and other administrative expenses incurred by the mutual fund.
3. Marketing and Distribution Costs: These costs are associated with marketing and promoting the mutual fund, including advertising expenses and fees paid to brokers for selling the fund. Such explicit costs are out-of-pocket expenses for the fund and therefore directly affect an investor's return on investment in a mutual fund.