Mutual Fund Fees

[ShrimpPajamas]

Hi,
I have a small investment in Emaxis Slim All Countries through Rakuten.
My question is how are fees paid? From reading/translating the Rakuten page it seems that fees are calculated daily. Does that mean that my total return already includes deduction for fees and thus could all be withdrawn?
Many thanks.

[adamu]

The management fee is deducted automatically by the fund and reflected in the price, yes.

If you are due capital gains tax and are using a tax collecting account, the tax will be deducted after you sell the fund (I've never sold a fund on Rakuten, so not sure exactly how it works there).

[Mrblobby]

I want to dive deeper into this.

Let's say the fee is 0.05%.

I understand that the management fee is deducted by the fund and reflected in the price, and almost 'invisible' to us ---- but how(/when) exactly does that actually work?

Thank you.

[beanhead]

I want to dive deeper into this.

Let's say the fee is 0.05%.

I understand that the management fee is deducted by the fund and reflected in the price, and almost 'invisible' to us ---- but how(/when) exactly does that actually work?

Thank you.

Why do you care? It is a small amount of money, and as you said, already deducted from the value we see on the screen.

[Mrblobby]

I have an inquisitive mind. I'm just interested to know how it works and have been unable to find out. That's all.

Is that ok?

If anyone has a constructive answer, I'd be really keen to hear! Thanks.

[TokyoWart]

I have an inquisitive mind. I'm just interested to know how it works and have been unable to find out. That's all.

Is that ok?

If anyone has a constructive answer, I'd be really keen to hear! Thanks.

My understanding for how management fees are deducted from mutual funds and ETFs is that they are taken out of cash positions each month. In all cases funds have to maintain some cash for the turnover of stocks in the funds and to cover redemptions and the management fee is just subtracted from those funds.That does slightly lower the NAV, because the NAV includes that cash, but doesn't interfere with the stock allocations for index funds.

[captainspoke]

Googling, I'm seeing some different answers. But the most common is that the expense ratio is pro-rated and charged daily--probably as a part of setting a fund's daily price (after closing). Given that shares are traded daily, this seems most logical to me, as all the given unit holders, collectively, would be all over the map as to when they were buying and selling.

I then wondered if it was pro-rated on business/trading days only, or on a 365 day year. Dead end, but I guess it wouldn't make much actual difference.

And 0.05% / 365 = 0.0001369863% per day.


Edit: or, as just above, maybe it's monthly.

[Mrblobby]

Thank you, TokyoWart and captainspoke.

Interesting! The fact that people will be buying/selling all the time and for different time periods got me wondering...

I've learnt so much these last few months. I think I'm at the point where spending much more time now might start bringing diminishing returns and I'm nearly ready to start taking less interest in it all - just let it happen in the background (once I have finished allocating my investments).

[sutebayashi]

I believe it is calculated and reflected on a day to day basis.

Say you invested 1,000,000, so that we can see some fee. ChatGPT helped me with this:

Convert the annual fee to a daily fee:
Annual fee = 0.05% = 0.0005 (as a decimal)
Daily fee = Annual fee / 365 (assuming daily compounding) = 0.0005 / 365 ≈ 0.0000013699 (rounded to 10 decimal places)

Calculate the fee deducted after one day:
Principal investment = 1,000,000 yen
Fee for one day = Principal investment × Daily fee ≈ 1,000,000 yen × 0.0000013699 ≈ 1.3699 yen
So, the fee deducted after one day would be approximately 1.3699 yen.

It made me think it’d be interesting to look at a fund, and figure out how much the manager takes in each day in these fees. Or also calculate fees paid annually for funds you hold.

[captainspoke]

I guess I forgot to convert 0.05% to a decimal...