Up, up and away.

How much should you expect to pay fund managers? Here's the scorecard by fund type.

We all know no two funds are, alike. So, it goes without saying that one fund's costs probably aren't going to mirror another's. An example: an international stock fund might require long journeys to Singapore. It might rack up sizable trading fees in Brussels. A domestic stock fund might move a number of companies in and out of its portfolio during a year, portfolio shuffling that incurs the same transaction fees we're all charged when we trade stocks.

Therefore, expense ratios--the percentage of a fund's assets that goes to pay the bills--vary according to the type of mutual fund you're talking about. Take the same international or global funds we've already mentioned. Because they require a lot of travel and time, and have to navigate entry and exit from a number of overseas markets, their costs tend to be higher than those of your average domestic stock fund. According to Jim Raker, a research analyst at Morningstar Inc., a Chicago firm that tracks the mutual fund industry, global and international funds average expense ratios of 1.97% and 1.66%, respectively, vs. 1.4% for the average U.S. stock fund.

Balanced funds, which invest in a combination of stocks and bonds, run a bit cheaper, with expense ratios of 1.37% on average. Bond funds are leaner still, with a 1.11% average. The thriftiest, however, is your average index fund, with a 0.60% average. Index funds usually have the lowest cost simply because they aren't actively managed. They merely track the performance of some benchmark--usually the S&P 500--so there's no need for a portfolio manager to hunt for good stock picks and actively trade these securities.

Experts say the size of a fund also plays a role in determining costs. Smaller funds typically have much higher expense ratios than larger funds because the bigger funds can, at least in theory, spread their costs out over a larger base of investors. But big funds frequently underperform small funds once their portfolios become too large, unwieldy and, in some cases, diluted across too many stocks. "These days it's something of a truism: when a fund gets too big, it hurts performance," says Sheldon Jacobs, publisher of the No-Load Fund Investor newsletter.

Expense ratios also vary according to your portfolio manager's habits. An itchy trigger finger--a manager who loves to shuffle his or her portfolio frequently--is going to run up trading costs such as commissions and fees. On top of that, research costs mount as new stocks flow into and out of the portfolio. Frequent trading in a portfolio, which is common for many stock funds, can drive up a fund's expense ratio. Turnover for the average diversified U.S. stock fund now runs about 84% annually, meaning 88% of the securities in the portfolio are bought or sold within a year.

High turnover is the root of another problem for the individual investor: capital gains distributions. When a fund registers a gain, there are capital gains taxes to pay, an expense passed on to fundholders. Last year, mutual funds paid out a record $150 billion in distributions, including capital gains and dividend income. That caused a nasty tax bite for investors who had fund investments outside of a tax-deferred retirement plan like a 401 (k) or IRA.

To keep taxes and expense ratios down, however, an increasing number of balanced funds are trying to hold down trading and minimize distributions, much like tax-efficient index funds. Other balanced funds avoid realizing capital gains in the first place by never selling--taking a cue from famed billionaire investor Warren Buffett, who favors a buy-and-hold-forever strategy. Vanguard's Tax-Managed Growth & Income Portfolio is a fund that has adopted both techniques. It offsets capital gains with losses, curtails other taxable occurrences such as dividend income and in 1997 had a turnover rate of 7%.

In the final analysis, there are two ways you can view the cost of owning mutual funds. The 1.4% you dole out for the average U.S. stock fund is an awful lot cheaper than what you'd pay if you went to get personal advice from a financial planner or stockbroker. On the other hand, mutual fund expenses could no doubt be cheaper if certain charges, such as 12b-1 fees, were either eliminated or reduced.

One last word of caution: you shouldn't pick a fund, or even a fund type, simply because it boasts the lowest annual expense ratio. As with any investment, make sure you also consider the fund's performance, size and objective along with your own investment goal, time horizon and tolerance for risk.

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