Mutual funds are the best investment vehicles for those who don't wish to directly dabble into the world of securities trading. Instead, you trust an able investment manager and let him invest on your behalf. That's what mutual funds are all about. A liquid asset pool provided to fund managers to invest in diverse securities. Profits are shared among investors, after the managers are paid for their services. Mutual Fund Working: An Overview Cost is one of the most important factors, when choosing a mutual fund. In order to understand the underlying concepts of mutual fund 'cost', let me briefly explain the operation mechanism of these funds. The mutual fund acts as an entity wherein money is pooled from investors such as you and me and is invested into destinations such as stock market and money markets, under the leadership of expert fund managers. All the investing is done in accordance with the decided portfolio of the fund. To enter or participate in a mutual fund, you can either buy a policy or a share of the fund and following that you will need to keep on paying off the premium of the fund. Alternatively, you can invest a large bulk sum in one go. On the returns side, the mutual fund company pays off certain payments to you periodically, or you can withdraw the entire amount from the fund for a 'Net Asset Value'. In some cases, the withdrawal is termed as a 'sale' of the fund share. The conventional life cycle of a mutual fund is divided into 3 phases, installment, investing and repayment of the total principal amount, plus the total return on investment (total repaid amount - total principal amount). Mutual fund companies also tend to charge, in several cases, some obnoxious fees as a kind of service charges or fees to cover up some of their own expenses. These expenses have the following treatment and basis... Expenses and Cost of Mutual Funds Conventionally, there are two types of fees which are charged by mutual fund companies.

• Yearly Fees: These fees are the ones which help the company to hire manpower, expand their investment infrastructure and in general, keep the fund and its operations continuously running. All these expenses are usually expressed in a percentage expense ratio, which is known as the Expense Ratio (ER) or the Management Expense Ratio.
• Load: Now the returns, as mentioned above are generated by investing, trading and reinvesting in the stock and money markets. The load is a sort of fee imposed by brokers or other professionals who are involved in the day-to-day trade. Within the loads, there some fees which cannot be curbed down, whereas there are some fees which can be suppressed.

These fees usually amount to about 1% to 5% of your mutual fund's Net Asset Value or the total repayment which you would receive back from the mutual fund. The problem here thus is that the mutual fund fees tend to eat up a certain part of your returns, that is, they are actually deducted from the returns that are offered. However, there are some mutual funds who have very low costs, which of course come with certain drawbacks, such as a drop in the level of returns. Hence, in any advertisements or brochures and reviews, you can check the ratio to ascertain how cheap the mutual fund is going to be. Cheap Mutual Funds for 2012 The following is a list of the best cheap or small cap mutual funds for 2012.

• Intrepid Small Cap Investor
• Ave Maria Opportunity Fund
• Virtus Small Cap Sustainble Gr A
• Rice Hall James Small Cap Port
• Oak Assoc-Pin Oak Equity
• Managers AMG TSqr SmCap Gr Premium
• Wasatch Small Cap Growth
• Fidelity OTC Portfolio Fd
• Paradigm Opportunity
• Cambiar Small Cap Fund Inv
• Paradigm Select
• FMI Common Stock Fund
• Eaton Vance Atlanta Cap SMID Cap A
• T Rowe Price New Horizons
• CNI Charter CSC Small Cap Value R
• James Advantage Small Cap Value A
• RS Select Growth Fund A
• Wasatch Small Cap Value

Note that the exchange traded fund does not have a minimum investment value as the minimum investment value is chiefly decided by the market value of the fund's shares. On the whole when you analyze and assess the fund, make it a point calculate, compute and compare the expenditures and costs.