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I'm looking to purchase a mutual fund, but I'm a bit confused about some of the fees. Can you hit the highlights for me? Thanks, H.G.

Fees and expenses should be a big topic for you to consider when buying a mutual fund, since high fees can significantly eat into your returns.

The expense ratio of a mutual fund is one of the most important things to understand. This cost includes the management fee, which is used to pay the portfolio manager (or managers), administration costs, which pay for things like record keeping, and 12b-1 fees, which are for distribution expenses like the marketing and selling of fund shares.

Expense ratios are not paid directly, but instead are deducted from the fund's assets. They can range from as low as 0.18% for certain index funds to well over 2%. For an actively managed fund, costs tend to be around 1.5%.

In addition to the operational fees that are charged to run the fund, you also need to consider fees that are based on shareholder transactions.

For instance, some funds have sales charges, known as loads. They're basically a commission that is paid to the broker who sells the fund. There are front-end load funds where you pay the sales fee up front, back-end load funds, in which the fee is paid when you exit the fund, and a few other variations.

Funds are often divided into different "classes" -- most commonly Class A shares, Class B shares or Class C shares -- based on their load structure.

Say you wanted to purchase Class A shares of a fund (Class A shares generally charge front-end loads). If you decided to invest $10,000 and the front-end load charge was 5%, you would end up paying $500 to buy the fund. That money would be deducted from your investment, so you would receive shares worth only $9,500.

Load fees can be as high as 8.5%, which is why many people buy only no-load funds. These can be bought directly from the fund and, as their name implies, they do not come with a load fee.

Other fees you may end up paying are redemption fees if you redeem shares before a specified amount of time, purchase fees (which are different than a load because they go to the fund, not a broker), exchange fees for switching into another fund in the same fund family, and account fees, which are basically account-maintenance payments.

A list of fees and other vital information can be found in a fund's prospectus, which is often available on the company's Web site. The

Securities and Exchange Commission's

site offers a tool to help calculate the cost of investing in a mutual fund -- as does the NASD's