AboutJohn D Smith, CFP Expertise I can answer detailed questions regarding mutual fund investing, retirement planning, education planning and related financial planning/investment issues. I have a B.S. degree in Financial Planning & Counseling. I am also a Certified Financial Planner practitioner and have performed fee only investment management and financial planning services for the past 11 years.
(1) How is the total return of a mutual fund determined?
(2) When is the total expense ratio of a fund deducted?
I thank you for your reply.
Answer Hi. The total return of a mutual fund is a combination of the change in the underlying share price (NAV - net asset value) of the fund and the income or distributions paid out. For example, if a funds NAV goes up by 5% and it pays 3% in income, the total return is 8%. The total expense ratio of the fund is deducted as part of an ongoing fee to the fund company and taken out of the assets inside of the fund. Therefore the % return an investor receives is net of this fee. I hope this helps.
