• Don't think you're special. You may not see the fees you're being charged show up as a line item on your quarterly or annual statements, but that doesn't mean they're not there. The fees included in your expense ratio are taken right off the top of your returns before they're even reported to you. Other fees aren't included in your expense ratio; they fall under the category of commissions or under no category at all. Those fees are often deducted in the few days between the time you send the fund company your money and the time it shows up in your account. "When people see that their account is a few hundred dollars less than their deposit, they assume it's market movement," Lu said.
• Ask which fees you're being charged and when they are being applied. If you have a financial advisor, he or she should be able to tell you. In addition to the expense ratio and commissions, you should ask about transaction fees, redemption fees (for when you cash out the fund) and other fees, such as fees for research, legal transfers, custodial fees and fiduciary fees—or even a purchase fee, separate from your sales commission or load. Tip: Ask which fees are included in your annual expense ratio and which are not.
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Also find out if your fund charges 12b-1 fees, which are marketing fees charged by the fund to the client and then paid out to the advisor or broker who sells the fund. The SEC imposes no limits on the size of those marketing fees.
You could, of course, read your prospectus, where you'd find the fees mentioned, too. But the dense document written in legalese is often hard to weed through. "The design of a prospectus is perfectly matched to the desire of someone to read it," said Charles Ellis, the author of "Winning the Loser's Game" and an investor advocate who is an advisor to low-fee online advisors, including Rebalance IRA and Wealthfront, both based in Palo Alto, Calif.
The bottom line: Do your homework.
—By Elizabeth MacBride, Special to CNBC.com