12b-1 Fee.

In plain English

A 12b-1 fee is an annual fee, named after a SEC rule, that some mutual funds deduct to pay for marketing, advertising, and compensating the brokers who sell the fund. It is charged as a small percentage of the fund's assets every year and is bundled inside the fund's total expense ratio, so you never see a separate bill. Because it comes out automatically and recurs every year, it quietly drags on your returns over time. FINRA rules cap how high these fees can go.

01Why it matters

It is a recurring cost you are paying largely so the fund can advertise itself or pay your broker, and over decades that yearly drip adds up to real money out of your pocket.

02The math, step by step

A fund charges a 0.25% 12b-1 fee on a $50,000 balance, which is $125 in that year alone. Because the fee is charged every year on your growing balance, the cumulative cost over 30 years is far larger than that first $125 suggests. Under FINRA Rule 2341 (as of 2026), 12b-1 fees are capped at 0.75% of average net assets per year for the asset-based sales charge, plus up to 0.25% for service fees, so the total cannot exceed 1% per year.

03What this is NOT

04Receipts

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