Everybody knows that before buying a mutual fund, you're supposed to look at the portfolio's performance, the manager and the expense ratio.

Checking these facts has become second nature to consumers, like glancing at the expiration date on a milk carton. These details will tell you how the fund has done in the past, who is handling your money and how much you're giving up in expenses every year.

But there are a few things that you probably don't know about your funds that you should -- items that will tell you if you're losing a lot of money to excessive trading or paying your manager too much.

Trading Costs

Every mutual fund gives up some money every year to trading costs -- money spent on brokerage commissions or lost to the bid-ask spread. (The bid-ask spread is the difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept.)

Trading costs are

not

reflected in the fund's expense ratio. That number only will tell you how much money you're paying every year for the management and operation of the fund. But any money spent on trading comes right out of the fund's net assets.

And it can cost you a bundle. Over the 15-year period that ended April 30, the average mutual fund lost 0.7 percentage points every year to transactions costs, according to data used by

Jack Bogle

. Looking at the average fund's cumulative return of 426% over that period, investors lost 7% to trading costs, while an additional 12% went to the expense ratio.

Unfortunately, investors have no easy way to quantify what's lost to trading every year. The number isn't broken out for you in a fund's prospectus or annual report. You can, however, look at a fund's turnover for an indication of how much a manager is trading every year. The higher this number, the more a manager is trading in the portfolio and potentially losing money to those transaction costs. The

(VWEGX)

Van Wagoner Emerging Growth fund, for example, has an annual turnover of 353%, while the

(JANSX)

Janus fund, a less aggressive fund than Van Wagoner, has an annual turnover of 63%.

Alas, turnover is still not a perfect proxy for how much a manager is trading. Turnover is calculated by taking the lesser of purchases or sales and dividing by the average net assets. A fund could have zero sales and $1 billion in purchases and still have turnover of 0%. But that fund is still spending money to buy securities. "So, a fund that only gets cash inflow and never sells a security has 0% turnover," says Joel Dickson, a principal in

Vanguard's

portfolio review group.

For now, the turnover ratio is the only thing you've got to estimate how much money you're losing every year to trading.

Taxes

As a fund shareholder, you'll have to pay taxes on any net realized gains distributed by a fund each year. But do you realize that other shareholders affect your tax situation just as much, if not more, than the manager?

If a fund is doing well and cash is flowing in, a manager won't have to sell securities -- possibly realizing gains -- to meet any redemptions. Too, a fund's gains are spread among a larger and larger number of shareholders.

If your fellow shareholders start selling shares en masse, the manager will be forced to sell securities to raise cash and will probably end up realizing gains in the process. With investors heading for the exit, those gains are then spread over a smaller shareholder base, which means you could wind up with a larger per-share distribution for the year.

If you read that your mutual fund is bleeding money, you should brace yourself for a hefty taxable distribution. In November of last year, the

(OAKMX) - Get Report

Oakmark fund made a taxable distribution that was 15% of its

net asset value, and the firm blamed the distribution on shareholder redemptions.

The Management Fee

A fund's overall expense ratio will tell you how much total money you are paying for the management, marketing and operation of the fund.

But this number is broken down into administrative, management and marketing, or

12b-1, costs. You should take a look at what you are specifically paying for fund management. You can find this information in a fund's prospectus or on

Morningstar

.

The costs to operate a fund should be relatively flat from year to year. The big difference comes in the management fee. That number will definitely make you think about if your manager is really worth the money.

Shareholders of the

(LMVTX) - Get Report

Legg Mason Value Trust are paying 0.65% of their money for manager Bill Miller every year, according to Morningstar. Given Miller's index-beating record during the 1990s, it's safe to say he's worth it. For Tom Marsico's eponymous

(MFOCX) - Get Report

Focus fund, you'll pay 0.85% a year for management.

For comparison, the management fee on the

(KAUFX) - Get Report

Kaufmann fund is 1.5% a year, more than double what Legg Mason charges you, without the impressive track record.

The Board of Directors

A few words on a fund's board of directors: It is useless.

Yeah, yeah. These boards are supposed to be the representatives for each fund's shareholders. A fund's board typically meets four times a year and votes once a year to approve the fund's advisory agreement. The directors look at performance, expenses and the growth of fund -- to make sure everything is running smoothly.

But do they ever really do anything to improve your results? Rarely.

Of course, the actions of a fund board cannot be tracked by shareholders. But you rarely see them try to fire the adviser if performance is bad. A fund's board couldn't fire

Fidelity

or any big fund company as the manager. Then the fund would be an orphan, left with no home and no distribution.

In essence, directors can be paid thousands of dollars for doing very little and having no power. Wouldn't everybody want that job?

Their salaries come right out of the money in the fund. You can find out what your fund's board is getting paid by looking in its statement of additional information. You can get this document from the fund company or attempt to find it in the

Securities and Exchange Commission's

Edgar database.

If shareholders should believe that the boards really do anything, then somebody should come up with a way to quantify or reveal what their performance.

If not, get rid of them.

The Benchmark and Peer Group

A fund's name only tells you so much. You have to look deeper to understand the fund's style and make the proper comparison.

The benchmark included in a fund's prospectus or regular shareholder reports will tell you the broad index that a fund should be measured against, but more importantly you want to know its peer group, or who you should be comparing your fund to.

When the large-cap

S&P 500

index is doing well, your small-cap fund might be suffering. To know if it's doing its job, you'd have to compare it to its peers or an appropriate index such as the

Russell 2000

.

A fund, like

(TVAFX) - Get Report

Thornburg Value, might have the V-word in its name but its peers are mid-cap blend funds, according to Morningstar.

Rather than allocating this fund in your portfolio as a pure value play, you'll have to consider it a core position, straddling growth and value, and compare it to how its peers are faring.

Knowing a fund's benchmark and peer group will help you balance your portfolio more accurately but also adjust your expectations.

Send your questions and comments to

deardagen@thestreet.com, and please include your full name.

Dear Dagen aims to provide general fund information. Under no circumstances does the information in this column represent a recommendation to buy or sell funds or other securities.