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What Is 12b-1 Fee?12b-1 fees pay funds' marketing, promotion and distribution expenses. The fee is named for the line of legislation that made it possible. The 12b-1 fee is included in the expense ratio, so you shouldn't worry about it, right? Ha! The 12b-1 lowers your overall return, and not all funds charge such fees. The argument for these fees is that they are used to sell the fund, which results in more people putting more money into the fund. This allows the fund to lower its cost ratio. By law, the 12b-1 fee can be no more than 1 percent. Don't rule out a fund because it has a 12b-1 fee, but choose funds that charge a 12b-1 of no more than 0.25 percent.
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