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All actively managed mutual funds are run by professional managers. Some are more successful, some less; some are more capable, some less. But unless the fund is an index fund or practices some other very rigorous discipline, it's run by professional managers. To pay a mutual fund load of 5.75% is most likely throwing away that money, and worse yet, the money it would have earned over the duration of one's investment. Essentially, every day you hold it the gap between what you should have earned, and what you actually earned, widens a bit more.
It's great for a full-commission broker, of course, because he or she gets a nice payday--but the objective is to make money for yourself, not a stockbroker. Paying a mutual fund load in this day and age without even getting the benefit of a broker's knowledge (assuming he or she has any worth gaining, which is not always the case) is about the least wise way I can think of to invest in mutual funds. They must significantly outperform other offerings in order to compensate for the instant wipeout of 5.75% of the initial capital invested. Plus, I have never seen anything to suggest that load funds have much lower expense ratios, which is the other way mutual fund investing siphons off money. Then again, I suspect most people who would pay a load don't understand expense ratios.
One of the pro-load mantras is that "the impact of the load is minimized if you hold your fund for a long time." That one always makes me chuckle. It's only minimized if you don't consider what that load would be earning all of those years if it had been invested. If you take a minute to figure what that load may really cost you after 20, 30 years, you might have second thoughts about load funds.
As for expense ratios, what I've read suggests that, on average, load funds actually have slightly HIGHER ERs than no-load funds. This might be because of the C-share load funds, which contain their loads within their (inflated) ERs, not sure.
It would be kind of interesting to run a growth of $10K chart comparing a load fund to a no-load fund, then calculating the difference in performance necessary for the load fund to catch the no-load fund in twenty years, or ten. If ERs were equal, I'm guessing it takes about 400 bp to make up for the load.
All actively managed mutual funds are run by professional managers. Some are more successful, some less; some are more capable, some less. But unless the fund is an index fund or practices some other very rigorous discipline, it's run by professional managers. To pay a mutual fund load of 5.75% is most likely throwing away that money, and worse yet, the money it would have earned over the duration of one's investment. Essentially, every day you hold it the gap between what you should have earned, and what you actually earned, widens a bit more.
It's great for a full-commission broker, of course, because he or she gets a nice payday--but the objective is to make money for yourself, not a stockbroker. Paying a mutual fund load in this day and age without even getting the benefit of a broker's knowledge (assuming he or she has any worth gaining, which is not always the case) is about the least wise way I can think of to invest in mutual funds. They must significantly outperform other offerings in order to compensate for the instant wipeout of 5.75% of the initial capital invested. Plus, I have never seen anything to suggest that load funds have much lower expense ratios, which is the other way mutual fund investing siphons off money. Then again, I suspect most people who would pay a load don't understand expense ratios.
American Funds do have a high load but it has perform very well in the long haul. You also get th benefit of a FA managing your portfolio daily.
American Funds do have a high load but it has perform very well in the long haul. You also get th benefit of a FA managing your portfolio daily.
A flight attendant manages it? I'd upgrade if I were you.
I don't think it's a benefit when someone who stands to gain by trading your securities is managing your money. Your interests are not aligned. So if you are hiring a full-commission broker and buying load funds through that broker, far as I am concerned, you don't like your money very much.
When I worked for a mutual fund management company, I felt very comfortable with shareholder/manager alignment. Not only were all the managers significant shareholders in the funds, but all employees were as well. That's why I am still a shareholder in that family of funds. The place is squeaky clean--in fact, it was a condition of employment that employers could not buy or sell separate issue securities. Disclosure forms went out quarterly; penalty for refusing to fill them out, getting caught, automatic and instant termination. It was draconian, but I abided by the policy because I understood very well the reasoning.
A flight attendant manages it? I'd upgrade if I were you.
I don't think it's a benefit when someone who stands to gain by trading your securities is managing your money. Your interests are not aligned. So if you are hiring a full-commission broker and buying load funds through that broker, far as I am concerned, you don't like your money very much.
When I worked for a mutual fund management company, I felt very comfortable with shareholder/manager alignment. Not only were all the managers significant shareholders in the funds, but all employees were as well. That's why I am still a shareholder in that family of funds. The place is squeaky clean--in fact, it was a condition of employment that employers could not buy or sell separate issue securities. Disclosure forms went out quarterly; penalty for refusing to fill them out, getting caught, automatic and instant termination. It was draconian, but I abided by the policy because I understood very well the reasoning.
Financial Advisor plus he does my 401K as a courtesy at no charge. Edward Jones have special software to do this.
You can't buy AF's without a load. The load % does go down after $25K.
It would be kind of interesting to run a growth of $10K chart comparing a load fund to a no-load fund, then calculating the difference in performance necessary for the load fund to catch the no-load fund in twenty years, or ten. If ERs were equal, I'm guessing it takes about 400 bp to make up for the load.
You can do that here, and analyze overall fees in various funds. I think many will be surprised that although many funds have some kind of a sales load the fees charged by "no load funds" end up being MORE in the long run than paying a sales load. NO ONE gets these for free.
I think many will be surprised that although many funds have some kind of a sales load the fees charged by "no load funds" end up being MORE in the long run than paying a sales load. NO ONE gets these for free.
Well, sure, if you buy a no-load fund with a significantly higher expense ratio than a load fund, the no-load fund can end up being more expensive over a given period of time. You always need to look at expense ratios, as well as tax efficiency, turnover, etc., when comparing funds of any kind. But like I said, ON AVERAGE, expense ratios for load funds are slightly greater than for no-load funds.
As for "no one gets (no-load funds) for free," I'm not sure what you're implying there. No one gets ANY fund for free--of course--because all funds charge management fees. If you mean you'll generally pay just as much for no-load funds as for load funds, you would be wrong about that.
Well, sure, if you buy a no-load fund with a significantly higher expense ratio than a load fund, the no-load fund can end up being more expensive over a given period of time. You always need to look at expense ratios, as well as tax efficiency, turnover, etc., when comparing funds of any kind. But like I said, ON AVERAGE, expense ratios for load funds are slightly greater than for no-load funds.
As for "no one gets (no-load funds) for free," I'm not sure what you're implying there. No one gets ANY fund for free--of course--because all funds charge management fees. If you mean you'll generally pay just as much for no-load funds as for load funds, you would be wrong about that.
What I mean is that people assume that since it is a no load fund they are not paying any fees and that assumption is incorrect. Again, looking over the life of many, many, many "no-load" funds their fees are often higher then a managed account like American Funds. Put your funds into the FINRA analyzer I posted and compare it to a similar fund with American Funds and you might be surprised at how much more your no-loads are costing you.
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