Fund operating expenses vary widely depending on the type of fund. The largest component of operating expense is the fee paid to a fund's investment manager/advisor. Other costs include recordkeeping, custodial services, taxes, legal expenses, and accounting and auditing fees. Some funds have a marketing cost referred to as a 12b-1 fee, which would also be included in operating expenses. Curiously, a fund's trading activity - the buying and selling of portfolio securities - is not included in the calculation of the expense ratio.
Costs associated with mutual funds but not included in operating expense are loads and redemption fees, which, if they apply, are paid directly by fund investors