Save on Mutual Fund Fees

Pay lower fees to mutual funds by using breakpoints.

Andrew Horowitz
5-minute read
Episode #75

Combine Family Accounts

Another way to obtain a breakpoint is by combining accounts or making concurrent purchases. This is often done with immediate family members who all want to purchase investments at the same time or have similar holdings within the same mutual fund family. Fund companies can look at all the accounts as one investment amount and give everyone a breakpoint. Of course, each account is still separate, but you can use your combined buying power to qualify for the savings.

Add it up Over Time

There is also the Rights of Accumulation also known as ROA. An ROA allows you to receive breakpoints on smaller, ongoing investments after the total surpasses the breakpoint level. For example, suppose someone already has $50,000 invested in a fund family but they plan on continuing to invest $5,000 at a time every few months. Investing only $5,000, this person typically wouldn’t qualify for a breakpoint since as we have seen it will usually begin at $25,000. But since they already have so much invested, they are allowed to still qualify for the total level of their overall investment.

Make Your Intent Known

Similar to this, there is the Letter of Intent that creates a contract of sorts. If you plan on investing a certain amount of money over a specified time you can write a letter of intent to qualify for breakpoints. A letter of intent expresses your intent to invest some amount of money over some amount of time. This has to be initiated by you and the letter submitted to the company before you invest, but as long as the total is large enough and you do it within 13 months, you will qualify you for a lower fee on each investment, even though the initial monies are not at the breakpoint level.

So for example, if you intend to invest $40,000 over the next six months and want to qualify for a lower fees, you can do this by making an initial deposit that is greater than the breakpoint level or qualify several small deposits with a letter of intent.

Move Around Within a Fund Family

Lastly, even if you want to move your money to a different fund, you can continue to qualify for breakpoints if you reinvest within the same mutual fund family. For example, if you withdraw your investment from one fund and wanted to change those assets to another within the fund family, you could do so without paying another sales charge. You will carryover your investment and if you continue to invest, you can still qualify by using one of the breakpoint strategies.