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Beverly,

I admire your efforts to help individual investors like me. Question: In general, with regard to commonly published mutual fund returns (i.e. in my newspaper, on

TheStreet.com

, on television, etc.): Are these returns

before

or

after

fees and expenses? Thank you very much for your time, Don H., Palo Alto, Calif.

Good question. More investors should be concerned with how much their funds are costing them.

In short, the returns you'll find are the returns generated

after

, or

net of

, expenses. Both Morningstar and Lipper, a Reuters company -- two of the biggest resources for fund information of all sorts -- calculate returns after taxes. Lipper provides fund data for some major publications, including

USA Today

,

TheStreet Recommends

The Wall Street Journal

,

Financial Times

,

Barron's

and, of course,

TheStreet.com

.

The funds themselves are required to report only returns net of expenses. So while it's always dangerous to issue any absolutes, I'm hard-pressed to think of a source for fund returns that wouldn't first take expenses into account.

But that only covers ongoing costs such as management and administrative fees and 12b-1 fees (marketing costs). It doesn't include one-time costs such as load, redemption or account maintenance fees. Loads, or sales charges, are fees paid directly to the adviser (be it a broker or financial planner) who sells you the fund, and are considered an investor expense rather than a fund expense.

All that really means is that the load charges are deducted from your balance. Front-end loads (paid when you purchase the fund) are deducted from the money you're investing before it's even invested. So if you invest $10,000 in a fund with a 5% front-end load, only $9,500 actually gets invested in the market.

Back-end loads (paid when you sell the fund) are deducted from your account after expenses and taxes have been paid. Loads can be a major expense, and they can take a significant cut of what's in your account -- and if the load gets paid upfront, that means you'll have less in your account to benefit from the compounding of your investment.

Redemption fees -- usually implemented to discourage investors from jumping out of funds when the going gets rough -- are also one-time charges that are paid when the fund is sold, although most funds waive any redemption fees once you've been invested in the fund for a few years. Unlike back-end loads, though, redemption fees are paid back into the fund. Account maintenance fees are generally reserved for small accounts (those with less than $10,000 invested).

Expenses are one of the easiest ways of managing costs and thereby boosting returns. A fund's expense ratio is generally pretty constant, regardless of how well or how poorly a fund is performing. As the analysts at Morningstar point out in their

Guide to Mutual Funds

, when the

(JAVLX)

Janus Twenty fund was up 73% in 1998 and then swooned to a 32% loss in 2000, the expense ratio didn't budge.

To drive that point home a little more, Morningstar offers this example: Say you invested $10,000 in each of three funds -- the supercheap

(VFINX) - Get Vanguard 500 Index Inv Report

Vanguard 500 Index fund, which costs 0.18%, the reasonably priced Janus Twenty at 0.84% and the costly

(VWMDX)

Van Wagoner Mid-Cap Growth fund at 1.95%. Now, we're not making a point about investing

styles

here, just costs -- so let's assume that each fund produces a 10% annualized return before taxes over a 20-year period.

At the end of the 20-year period, according to Morningstar, you'd have spent just barely $1,000 in fees for the Vanguard 500 fund, $4,500 for Janus Twenty, and $9,100 for the Van Wagoner Mid-Cap fund.

But even those numbers are misleading. The differences in the amount you'd actually end up with in your account would be far greater than the costs paid imply. That's because the lower the expenses, the more money stays in the account and is able to compound. So that $10,000 investment in the Vanguard fund would have grown to $64,905, while you'd have just $45,605 in the Van Wagoner fund. That's a $19,300 shortfall

due entirely to expenses

.

So while the returns reported by mutual funds are net of expenses, they don't always convey the full impact those fees have. That's up to savvy investors such as yourself to keep in mind.

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