Unfortunately, you do.

Often we look only at the expenses listed in the prospectus believing that all costs are included. Operating costs are usually derived directly from your assets. If you pay 1% in expenses, a dollar of every hundred invested goes towards the running of the fund. This has been why indexed funds remain lexx expensive than actively traded funds.

But actively traded funds also have another hidden expense. Trading fees. The cost of buying and selling stock within a fund, the broker's commission, is deducted from your total return. More trades mean higher fees which can adversely effect an already struggling return. These costs can add up in a hurry and sometimes amount to almost 60 cents of every share traded. Or about 2% of the average share price of a large capitalization stock.

Disclosure would be an excellent way for you to determine the real cost of your mutual fund. But how to disclose is another matter. John Bogle of the Vanguard Group suggests that the disclosure be separate from the funds expenses, a cost that tends to be relatively steady. Trading, especially among the high turnover funds, would slow the pace these funds trade stocks. The average mutual fund turns its total portfolio over 110% each year. This adds to overall market volatility and can be quickly curtailed by disclosure.

The question remains whether this would help the mutual fund industry or the investor. The commission costs can be hard to pin down because of all of the so-called qualifiers involved in the complicated world of trading. Don't expect any reform in this area soon. Disclosure is being fiercely fought by lobby groups representing both mutual funds and brokers.

The best defense against these hidden fees is to look at the turnover numbers.

While we are on the subject of fees, it is only fair to note that at the largest stock mutual funds, expenses rose 11% between 1999 and 2001. According to a draft of a General Accounting Office report, this is a reverse of a a five-year trend of declining fund charges paid by investors.

In 1978, mutual funds held $56 billion of assets and carried a 0.91% expense ratio, on average. Today, mutual funds have more than $6 trillion in their coffers with an average fund carrying a 1.36% expense ratio.

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