re: High fees for Mutual funds

I am not a fan of high turnover investments, but the author of the story wrote this very poorly and he is wrong:

quote:

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At any given moment, for example, a security may have a bid price of $96 and an asking price of $100. Say a fund bought that security for $100, and the security's value later rises. If the fund decides to sell the security when the asking price is $110 and the spread has stayed the same, the fund will only receive $106. The spread thus cost the seller $4. Over time, spreads can be a significant cost for a fund that does a lot of trading in less-liquid holdings, such as very small stocks.

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The price would likely be closer to the mid-point of the spread buying and the fund would likely receive that upon selling, if not closer to the ask. Then there are the slow learners that put in market buy orders for thinly traded securities and get taken to the cleaners.