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A Heavy Load
Front end loads. Back end loads. No load. A shares. B shares, C shares, Z shares. Deferred sales compensation charges. 12b-1 fees.
Confused? It’s no wonder. These are just a few of the different terms used to identify the type of sales commission your mutual funds or other investment products charge you. It is a pretty good bet that the people managing your money are not running a charitable organization, so here’s what to look for:
What type of commissions or other sales charges you are paying; and Specifically determine the rate (2%, 6.5%, 8%?) you are currently being charged; and When are these fees and/or commissions paid (annually, upon making the investment, upon selling it, both?).
Squeezing down costs (effectively increasing your return) is a worthwhile exercise. Reviewing and understanding the sales fees and other commissions you pay should be one of the first things you do when looking for savings. To give you a sense of just how dramatic the difference in sales charges can be from one investment to the other, we reviewed a database of nearly 2200 “Growth Stock” mutual funds. We found:
Fund A*, which carries an 8.5% front-end load. Front end load means that you pay the entire 8.5% of the investment ($850 for each $10,000 invested) as a sales charge right up front. Fund B*, which carries no sales charge. No commission to buy the fund, no commission to sell the fund. Over the past 3 years, the annualized return of Fund B* (the fund with no sales charge) was significantly higher than that of Fund A* (the fund with the big up front sales charge).
What are you receiving in return for the big up front cost? Where’s the value to you and your family?
Although this may seem like an extreme case, it’s really not. The list of similar examples is quite long. Doing your homework, and understanding what you currently own, is absolutely essential if you are serious about your money.
This is an excerpt from our 9-page guide “Keeping More of What’s Yours Already”. If you’d like a complimentary hard copy of this booklet, send us an e-mail by clicking here. Just type “Keeping More” in the subject, leave your name and address, and we’ll promptly send you a copy.
* It is not our intetnt to single out vendors of mutual funds. The names of the referenced items have been kept ananymous. Details are available upon request.
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