Mutual funds continue to be the dominant investment choice for small investors. Do you know what the real cost owning a mutual fund is?

Many investors really don't know, even if they conscientiously trudge through the fine print in a 150-page prospectus provided by financial representatives. The information problem is exacerbated by the scarcity of comprehensive financial websites and lack of uniformity in offshore mutual fund reporting, particularly when compared to the US reporting standards.

Visit a finance website such as Yahoo Finance http://finance.yahoo.com/ and view a plethora of pages' depth devoted to thousands of funds: profile, performance, holdings, risk, fees, prospectus search, analyst research.

Locally, domestic financial institutions do provide a basic report package; additional information, such as is difficult to obtain.

Having said that Morningstar Research did purchase a large offshore mutual fund rating service a couple of years ago, but it is not as well known.

However, the detail is there for the asking in what you can obtain. All mutual funds must issue a prospectus, which is a fact sheet (almost a book) that tells you everything about the mutual fund structure, investment policy, managers, auditors, administrative costs, sales commissions, risk of capital markets, asset allocations, board of directors and so on.

What the prospectus may not do is compute for the real cost of owning a mutual fund for say, one year, three years, five years, ten years. If you are not a capital market investor, you may think this article not relevant to your financial profile.

Consider this - do you have a pension? Unless, you've picked the guaranteed investment choice, your retirement is invested in mutual funds.

Any idea what the fees are in your pension funds? Make no mistake, there are costs.

Mutual fund fees are divided into several different categories: Sales commissions, management and administrative fees, custody, premature withdrawal fees, and others.

Sales commission remunerates the mutual fund representative who places your money into a particular fund. Commissions can run anywhere from one percent to seven percent of your investment; the amount may be deducted at initial purchase (front-end load), or smaller percentages over time, generally five years (back-end loads).

You didn't think buying the fund was free, did you? Just because you don't see a fee doesn't mean that there isn't one. No-load funds do not charge selling fees but there are second tier fees for administration and other expenses such as investment managers, who manage the fund within the guidelines of the fund's investment policy.

An experienced mutual fund manager with extraordinary investment acumen and knowledge of capital markets brings stability, consistency, and market performance (a decent return on investments), thereby appreciating your asset.

One more caveat. Don't forget that some mutual funds are actually funds of funds. You will need to calculate the fund layers underneath the main fund first. How do sales commissions and fees affect a mutual fund?

Fees can be a real drag on performance, especially if the mutual fund manager falls down on the job. But there have to be some fees; the trick is to find a high performance mutual fund that charges competitive ones.

Consider the example in the chart - this $10,000 investment in Manta Ray Mutual Fund with a one-time five percent front-end sales commission and a 1.23 percent administrative fee, charged annually, cost the investor $500 right off the top.

The differences in cost and the performance of the mutual fund can cost the investor a considerable sum over time. Nothing is free and research requires work.

You can calculate the real rate of return for your mutual fund free courtesy of BankRate.com by going www.Bankrate.com and look for mutual fund expense calculator. http://www.bankrate.com/calculators/retirement/mutual-funds-fees-calculator.aspx If you have US funds, go directly to http://apps.finra.org/fundanalyzer/1/fa.aspx

Free Mutual Fund Cost Calculator Tool. You can use this Tool for Comparing Mutual Funds for both onshore (US) or offshore products if you have enough information.

The Mutual Fund Cost Calculator enables investors to easily estimate and compare the costs of owning mutual funds, by taking the mystery and math out of the cost equation.

The cost calculator will the compare your funds based upon the premise that the total cost is the sum of the total fees paid plus opportunity cost. Go to the website listed above and try it, you'll like it.

The Cost Calculator is great for understanding costs, but costs aren't the only thing that should be considered - we'll address those in another article. Keep in mind that you must read your mutual funds prospectuses and shareholder reports, and scrutinise the fund's fees and expenses.

It takes only minutes to use the calculator courtesy of to compute how the costs of different mutual funds add up over time and eat into your returns.

Mutual funds are for the long haul. Having said that, some mutual funds have high charges plus excellent track records.

You, in doing your homework as an investor, should select a good mutual fund that will be held, no less than five years, but preferably 10 to 20 or more years. In that time frame, not only will a superior mutual fund outperform its benchmark and its peer group, but it will more than compensate the investor for paying the higher purchase fees.

So should you really pay attention to how well your mutual funds perform? Of course, and you should know before your purchase all fees assessed, and what their costs will do to the performance.

Be wise with your money.

Next: how mutual funds are constructed, onshore and offshore and the reporting requirements for US citizens, green card holders, and dual citizens with the United States.

Martha Harris Myron CFP(US) TEP(UK) is an international Certified Financial Planner practitioner in private wealth management. She specialises in independent fee-only cross border investment, tax, estate, and strategic retirement planning services for Bermuda residents with cross-border and multi-national connections, and US citizens living abroad. For more information, contact martha.myron@gmail.com">martha.myron@gmail.com or 296-3528