Photo by Dusty M.

We hope you guys are taking full advantage of the bearish stock market right now and buying up bargain stocks for your portfolio. But since stock purchasing can be a confusing maze of percentages and fees, we’ve decided to throw together a list of typical investment fees to be aware of and — in some cases — to avoid. Keep on reading for the six most common fees associated with investments accounts and what you should know about each one.

• Expense Ratio – An Expense Ratio is a percentage taken out of the entire fund (usually a mutual fund) that goes towards operating expenses. If a fund with $1,000,000 invested has a 1.2% Expense Ratio, each year $12,000 will come out of the fund to go towards the fund’s operating expenses. When you get your annual return number, it is already sans this Expense Ratio.

• Investment Advisory Fees – This is basically an annual fee (although it’s usually debited from your account on a quarterly basis). It’s a percentage of the total amount of assets being managed. For example, if you have $1,000 invested and your investment firm charges a 1% Advisory Fee, they will debit $10 for that year (or $2.50 each quarter).

• Transaction Fee – Remember those ShareBuilder ads in the subway that say “Buy Stocks for $4″? That’s a Transaction Fee. It’s a flat fee that you pay each time you buy or sell stock. These normally range from around $10 to $50.

• Front End Load – This fee is a percentage that is charged for each stock you buy. For instance, if you purchase a stock for $100 and it has a 5% front end load, your stock would automatically be worth $95 because $5 was taken out as the Front End Load. If you’re just starting out with investing or have limited funds, try to stay away from these.

• Back End Load/Redemption Fee – Similar to the Front End Load, this is a percentage that is charged for each stock that you sell. Let’s take the previous example – you have a stock worth $100, and your investment firm charges a 5% Back End Load. When you sell your stock for $100, you will receive $95 and the firm will receive $5 (a 5% fee of $100). Most of the time, a Back End Load fees decrease with each year you have the account ie 5% the first year, 4% the second year, etc. The fee typically drops off after the seventh year.

• Custodian Fee – This is an annual account fee and just like any annual fee with a bank account or investment account. It can range anywhere from $25 to $90 per year. Some firms like Vanguard will waive the fee if you sign up for their automatic debit program and have a specific amount deposited into your investment account each month.

Although some of the fees don’t seem like hefty amounts, they can certainly add up over time and sometimes hurt your initial investments. Always look low fees and try to have them waived when possible (usually by signing up for automatic debits). By being aware of each fund’s fee structures and alternative options, you’ll maximize your returns and get the most out of your investments.

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