Definition of Fund Management Cost
Fund managers charge fee for providing their expertise and time to potential investors help in getting best investment options. This is kind of broker or agent fee. It includes managing the portfolio of investor and other administration cost, maintenance cost and portfolio account dues.
Fee varies from fund to fund and institution to institution. It is mostly in the form of percentage of Asset under management (AUM)
Asset under management means the amount of money or investment managed by any individual manager or financial institution.
The management cost can be as low as .1% and can be more than 2 %. How much is charged to any individual investors depends upon his amount of investment.
Brief Explanation of Fund Management Cost
Management cost also varies if an investor is aggressive or a passive investor.
Aggressive means an investor is looking for better profit opportunities and want to frequently sell and re purchase other securities. In this case of course the management cost increases because this type of client keep the manager busy in researching and looking for better and safe opportunities.
Passive investors on the other hand invests once in any security and then does not demand frequent sale or purchase out of their portfolio.