Understanding Dean Witter’s Fee Structure
Dean Witter, now part of Morgan Stanley, offers a range of index funds that provide investors with exposure to various market segments. However, understanding the fee structure associated with these funds is crucial for making informed investment decisions.
Management Fees
Most Dean Witter index funds charge annual management fees to cover the operating expenses of the fund, such as portfolio management, administration, and marketing. These fees typically range from 0.10% to 0.20% of the fund’s assets under management.
Expense Ratios
In addition to management fees, Dean Witter index funds also incur other operating expenses, such as trading costs, accounting fees, and regulatory compliance. These expenses are incorporated into the fund’s expense ratio, which provides a more comprehensive measure of the fund’s overall cost. Expense ratios typically fall within the range of 0.15% to 0.30%.
Performance-Based Fees
Some Dean Witter index funds may also implement performance-based fees, which reward the fund manager if the fund outperforms its benchmark. These fees are typically calculated as a percentage of the fund’s excess returns and can vary widely depending on the specific fund.
Types of Dean Witter Index Funds and Their Fees
Dean Witter offers a variety of index funds tailored to different investment objectives and risk tolerances. Each fund has its own unique fee structure and expense ratio:
Large-Cap Index Funds
| Fund | Management Fee | Expense Ratio |
|---|---|---|
| Dean Witter U.S. Large-Cap Index Fund (SLG) | 0.10% | 0.15% |
| Dean Witter Institutional U.S. Large-Cap Index Fund (SLGX) | 0.05% | 0.10% |
Mid-Cap Index Funds
| Fund | Management Fee | Expense Ratio |
|---|---|---|
| Dean Witter Mid-Cap Index Fund (SCV) | 0.15% | 0.20% |
| Dean Witter Institutional Mid-Cap Index Fund (SCVX) | 0.075% | 0.125% |
Small-Cap Index Funds
| Fund | Management Fee | Expense Ratio |
|---|---|---|
| Dean Witter Small-Cap Index Fund (SML) | 0.20% | 0.25% |
| Dean Witter Institutional Small-Cap Index Fund (SMLX) | 0.10% | 0.15% |
International Index Funds
| Fund | Management Fee | Expense Ratio |
|---|---|---|
| Dean Witter International Core Index Fund (IWD) | 0.15% | 0.20% |
| Dean Witter Institutional International Core Index Fund (IWDX) | 0.075% | 0.125% |
Bond Index Funds
| Fund | Management Fee | Expense Ratio |
|---|---|---|
| Dean Witter Intermediate-Term Bond Index Fund (BTG) | 0.10% | 0.15% |
| Dean Witter Institutional Intermediate-Term Bond Index Fund (BTGX) | 0.05% | 0.10% |
Comparing Dean Witter Fees to Industry Benchmarks
According to the Investment Company Institute (ICI), the average expense ratio for actively managed index funds is 0.40%, while the average expense ratio for passively managed index funds is 0.10%. Dean Witter’s index fund fees generally fall within the lower end of these industry averages, indicating that they offer competitive pricing.
Strategies for Minimizing Dean Witter Index Fund Fees
Investors can consider several strategies to minimize the impact of Dean Witter index fund fees on their returns:
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Choose passively managed index funds. Passive index funds, which track specific market indices, typically have lower expense ratios than actively managed index funds.
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Invest in lower-cost index funds. Dean Witter offers a range of index funds with varying expense ratios. Consider investing in funds with lower expense ratios to reduce long-term costs.
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Consider institutional share classes. Institutional share classes of index funds often have lower expense ratios than retail share classes. However, these share classes may require higher minimum investments.
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Negotiate with your financial advisor. If you have a large investment portfolio, you may be able to negotiate lower fees with your financial advisor.
Conclusion
Understanding Dean Witter’s fee structure for index funds is essential for making informed investment decisions. By carefully considering the management fees, expense ratios, and performance-based fees, investors can choose funds that align with their financial goals and minimize the impact of fees on their returns.