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What are 12b-1 fees?

Updated: 9/14/2023
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On top of management fees for operating a fund, most funds will also charge a fee for share distribution and service costs, commonly referred to as "12b-1" fees (named after a regulatory paragraph regarding investment companies). "12b-1" fees in practical terms refers mostly to money incentives (kickbacks) paid to brokers and other wholesalers for pushing the funds to retail investors. The 12b-1 fee reduces after-fee performance of a fund and decreases the return on your initial investment.

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