Brian Raleigh is President and Founder of TruWealth Strategies and TruWealth Capital Management.

It’s always good to know what you are paying for. When it comes to mutual funds cost analysis, that is easier said than done.

This article is absolutely not about investment advice, but rather it is about how to determine how much you are paying to have your money managed for you. In an age of high tech gadgets, you would assume tracking this would be easier, but it’s not. So here’s a quick tutorial on how mutual fund costs add up and how you can do some homework for yourself.

In the box at the lower right, you will see three versions of the same mutual fund: the Alliance Bernstein 2030 Retirement Fund. You will see there are three different purchase options. Let’s take a look at the costs associated with owning the Alliance Bernstein 2030 A share version.

There is an initial load of 4.25 percent, which means if you buy this fund, there is a built-in cost of $425 per 10,000 purchased; therefore, on a $20,000 fund purchase, you will pay a commission of $850 so your initial $20,000 on Day One would put $19,150 to work for you. Larger investments often get “discounted” through breakpoint discounts; the larger the investment, the smaller percentage-fee. There is also an on-going cost in the .65 percent management fee and the .30 percent 12b-1 marketing fee. When you add it all up, it’s a little less than one percent ongoing (actually, .95percent).

So is B better? Well, there is still a sales charge. It is just deferred, and if you wait long enough it will go away. In B share funds, the fee is a “back-out” fee. These are often marked as no-load funds, but that is an inappropriate description, plus you will see the on-going management fee is significantly higher at 1.72 percent which is a .77 percent higher annual cost. After the deferred sales charge period, the B share converts into an A share and the costs reduce to the A share management fee schedule.

So, is C the right choice? Again, you will see the higher expense and a redemption fee of one percent. These are often marketed as “advisor shares.” The advisor typically has a “trail” commission coming from the fund for acting as the advisor; C shares were designed for a shorter duration investment.

How to choose the right fund? Well there’s more to it than share class – a lot more. Mutual funds struggle with the strain of forced diversification and the drain of redemption, both of which make tax management difficult. A fund manager’s decision to sell for diversification purposes, or to get money together for investors cashing out, affects your tax bill. In the year 2000, the tax bill to American Investors during the “hot market” was $19.8 BILLION Dollars (http://www.sec.gov/news/speech/spch491.htm).

The decision to invest and where to invest is a difficult one, and all too often retirees and those seeking retirement make purchases for all the wrong reasons like past performance or a “hot” tip or advice from an unreliable source like the internet. There is no easy answer to which fund class to buy or where to invest.

An ideal situation occurs when you find an advisor you can trust, who’ll tell you straight what a reasonable expectation is, and who speaks enough about safety that you are comfortable with not only the return on your money but the actual future return on your money. Slowly and steady seems a logical way to win the race to a secure retirement.

Call 919-852-1215 for a complimentary copy of Consumer’s Guide to Retirement Income Planning.