How are the fees for a mutual fund paid? Are they removed from your dividends and capital gains?

I'm not talking about loads, just the fees that comprise the expense ratio.
If i have a fund with 1% fees, will I be billed for these fees directly and then pay by check, or are they taken out of the dividends and capital gains before they are distributed, or are they actually part of the NAV calculation?

How can it come out of account balances? They aren't going to force you to sell shares just so you can cover their fees are they?

Management fees are factored daily into the NAV or Net Asset Value of your fund. The NAV is the price per share to buy or to sell a mutual fund. If there were no fees, for example, the NAV would a bit higher that it is and simply reflect the actual value of the stocks in the portfolio. But because ALL mutual funds have fees the NAV is always a bit lower. The difference between the NAV and the actual value of the portfolio is the profit for the fund company. The average difference between the NAV and the actual portfolio in most funds range between .5% to around 1.5%

If there is a load in your fund you do not buy at the NAV but at the Maximum Offering Price (MOP) Which is the NAV plus the sales charge. When you sell a load fund you will sell it at the NAV.

Please read my profile. If you would like to chat about this or anything else please send me an email. Great question by the way!

It depends on share class. It depends on the load or lack of load. And it depends on the expense ratio.

A shares have a maximum 5.75% sales charge up front taken from amount invested

B shares have no load but a contingent sales charge which will be typically waived if you leave the money there for 6 years.

C shares have no load, usually a 1 year contingent sales charge, and a higher expense ratio than the other options.

In all instances fees come out of account balances not just capital gain amounts.

Okay. You specifically mentioned you didn't want to hear about Loads, and that seems to be comprising all of the answers given to you. Nice.
The Expense Ratio is removed from the Fund by the Fund Management team. The bulk of the Load Fees go to whomever your Advisor is, with a smaller portion going to the Fund Management itself. In addition to the Load the Expense Ratio fee is removed from the gains over the course of the year. So, if your Fund had a 10% return that year, with an Expense Ratio of 1.5%, than your Portfolio yielded 8.5%, as this money is taken from your earnings. You never see that though, you just see the 8.5% gains you made. As for Cap.Gains and Dividends, they do not take a fee from that. Usually it is all rolled into your Portfolio, purchasing more of the Fund the Dividends or Cap.Gains originated from.
I hope I explained this well enough. You do not physically pay for the Expense Ratio, this fee is taken from your gains by the Fund Management team themselves.
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Is someone actually selling services to this question. Given the level of compentency from the Question Asker, I do not think they need to pay someone else to do what they are more than capable of doing themselve. Moreover, this is a skill that can be taught to children, thereby releasing them from the mundane, cyclical existence of living from paycheck to paycheck.

You automatically sell shares to cover fees. generally if you reinvest the dividends then they more than cover the fees. However NO LOAD is the way to go in terms of mutual fund investment.
Plus they have to disclosed when they sell your shares as fees. So it should be broken out on your account statement. If not call your fund provider and ask for an explanation. They are required by law to disclose how and where they charge fees.

almost correct.

Seems like you have a couple of different answers here. I just want to second what "Kicker" said.

The expense ratio fees are NOT out of pocket. The mutual funds takes the fees out (and pays distributors, advisors, etc) before the profits are distributed to individuals.

Essentially, your return is lower because of these fees, but you will never have to bring more money to the table to pay the fees.