| |
| |
|
Stocks & Mutual Funds Information |
|
|
|
How to Evaluate Load vs. No Load Mutual Funds
If you have been dealing with mutual funds for any length of time, you undoubtedly have faced the question of which is better: Load Funds or No Load Funds. If you are new to investing, "load" simply refers to the commission paid to the broker selling the fund. "No load" means there is no commission on the purchase or sale. Most discussions in the past have centered exclusively on performance comparisons. Even rating services like Morningstar have occasionally chimed in with their opinion. However, rather than focusing only on performance, there are some other issues I consider far more important: Who is selling load funds and why? Most load funds are being sold through brokerage houses, financial planners and Registered Representatives. With few exceptions, most of those folks operate on the basis of selling as much product as possible. They collect their commissions up front, as a back end charge, or both (usually in the range of 5 - 6%). Whether you make money or not is not their primary concern. What matters most to those operating under this approach is how often you buy-and thereby generate new commissions for them. Who markets no load funds? No Load funds are either marketed directly by the mutual fund companies or, more commonly these days, offered through discount houses like Schwab, Fidelity, and many others. The advantage to this is that you have an unlimited choice of funds in one place and don't have to open separate accounts for each mutual fund family that you are considering. Most fee based investment advisors, like myself, have independent relationships with such major discount firms and are able to offer clients just about any no load mutual fund available. They receive no compensation from the firm and only get paid by the client at a pre-determined fee arrangement. Under this arrangement, there is no hidden motivation to sell you a particular fund or to try and sell more in order to get a larger commission. Which one is right for you? Whether you prefer dealing with someone selling load funds or an advisor getting you into no loads, let me make one thing very clear: You can make money or lose money either way! Why? Let's assume for the moment that there is no difference in performance between the types of funds-some of either kind will do well and some of either kind won't. What then determines the successful outcome of you buying either a load or a no load fund? The key is the advice you're getting. And the fact is that many brokerage houses and Registered Representatives tend to be more interested in their profits than yours. Their investment advice is generally centered around Buy and Hold or dollar cost averaging and similar financially questionable recommendations. Hardly ever will you receive advice about when and why you should exit the market, either because of accumulated profits or to limit your losses. Getting out of the market is simply not in their best interest, though it may be in yours. I must confess that, as a fee based advisor, I am somewhat biased and I prefer no load funds for my clients. I believe that this type of arrangement is best for all parties involved. It allows me to avoid any conflict of interest and to work exclusively for my clients' financial benefit. And the better my clients do, the better I do. I am able to choose no load funds and make buy decisions solely on the basis of my mutual fund trend tracking methodology. Following its signals, I can get clients into the market or out of it as often as is necessary to maximize profit or protect assets. And because I work with no load funds, other than a very occasional short term redemption fee, there are no transaction charges no matter how many times we move into or out of the market. If market conditions dictate that we stand aside in a money market for an extended time in order to avoid a bear market (as was the case from 10/13/2000 to 4/28/2003), I can advise that because it is in the best interest of my client. I am always thinking about what will benefit my client, not worrying about lost commissions. (Please see my article "How we eluded the Bear in 2000" at http://www.successful-investment.com/articles12.htm. Bottom line: Load fund vs. No Load mutual fund shouldn't be the issue. Having a methodical plan and reliable advice as to when to buy and when to sell is far more important and will help you to secure a prosperous financial future. © by Ulli G. Niemann About The Author Ulli Niemann is an investment advisor and has written about methodical approaches to investing for over 10 years. He avoided the bear market of 2000 and has helped countless people make better investment decisions. Subscribe to his free newsletter: www.successful-investment.com; ulli@successful-investment.com
MORE RESOURCES:
Google News |
|
|
|
RELATED ARTICLES
Mutual Funds: The Modern Den of Thieves! Mutual funds were created with the idea that one person can specialize and manage the investments of a large pool of money from multiple investors. Before the great depression mutual funds were called investment pools and mutual fund managers were called pool operators. Defining a Long-Term Investment in the Stock Market For some "long term" would mean holding a stock position over the weekend. For others, it may mean holding a security for at least 1 year for the purpose of declaring a long-term capital gain, thus saving on taxes. Trading Tips No 2: The Big Lie in the Stock Market It is commonly reported that the stock market averages about 10% per year return over the long term (decades). So the investor that buys and holds a diversified portfolio of stocks or mutual funds is led to believe that their portfolio will grow by 10% per year on average. Traders, Defend Against the Dreaded Death Spiral. It has often been said that there is only two ways to get hurt really bad on a stock trade, getting caught in a "death spiral" by not using DTM: Decisive Trade Management in the way of stop loses and having a stock halted on you. Halts you have zero control over. Hill of Hope Just about now everyone is confused as to which way the stock market is going to go - up or down. For the past 3 years it has been headed south, but the Wall Street experts have told us that the market never goes down 4 years in a row so this has to be an up year. The Stock Market is a Roller Coaster: Prepare for the Ups and Downs IT'S REMINISCENT OF THE OLD children's tale about an old Chinese farmer who tells his friends his story, and they enjoin with "That's good" or "That's bad" on alternating lines:Farmer: My horse ran away.Friends: That's bad. Why This Bear? People are constantly asking me why is the stock market going down. What is causing this bear market? It is relatively simple so don't ask an economist. Where Is The Rabbit? We need a rabbit!This was a pretty horrible week for the market with two 100-point days and Friday closing on the lows.During these past few days Sir Alan told us things are looking up and the economy is basically strong. Stock Investment Advice Stock investment advice is easy to find. Do you get cold called by brokers with the latest investment tip? I have, as have countless others around the globe. Price Targets Every day in any financial publication you will find the Wall Street mavens giving their predictions on many stocks. It was issued here and should go there. Is The Bear In The Cage? For the last few weeks we have seen the stock market averages going higher and higher each week yet the economic news is still very bad. Is this bear market coming to an end? Will the stock prices and mutual funds go back up to where they were?It seems all the talking heads on TV and the talk radio guys are telling you that now is the time to buy because the market will be much higher next year. What is a Trading Plan - and Why You Need One? How do you make money without picking tops and bottoms?I am glad you asked.. Dont Buy Stocks based on P/E Ratio alone I use the P/E ratio as a secondary indicator for buying and selling stocks but I don't use the ratio in the same a manner as many value investors teach. I will explain the difference in my methodology for using the P/E ratio to your advantage. Successful Trading - Taking Profits - Part 1 So you're started trading, you bought some positions with your online broker, you've set some reasonable stop-losses to protect your account and all of a sudden one of your positions move strongly in your favor - so what do you do now? This my friend, is probably the hardest situation to deal with in trading the market - believe it or not.Do you take profits? Do you hold on for more profits? Do you take partial profits? There is no textbook answer to these questions as it depends on your trading objective. Bollinger Bands Strategies The Bollinger Band theory is designed to depict the volatility of a stock. It is quite simple, being composed of a simple moving average, and its upper and lower "bands" that are 2 standard deviations away. Keep Your Profits It looks like we have now entered a new bull phase in the stock market and I have a question for you. Will you give back the profits that you make this time as you did in 2000? You sure don't want to, but you are not going to get any help from your broker. Enron Cure Let's hope you did not have any of the Enron stock. Maybe you know someone who did and lost everything, but you certainly might know several people who owned stock that lost almost everything. Trading Education: The Best of Both Worlds! I made my very first investment in the stock market when I wasten years old. Ever since then I have been hooked! Now I checkout hundreds of trades each year with the same excitement andenthusiasm, and each time try to find that one market at theright time that could dramatically create wealth. Boiler Room 7/17/00 On Friday or Saturday evening my wife gets a movie from Block Buster and after dinner we sit, hold hands and watch. This week she brought back one that I think every investor or anyone contemplating investing in the market should see. Leverage - Margin Debt What is leverage?Here is a definition of leverage from an online dictionary "leverage - The use of credit or borrowed funds to improve one's speculative capacity and increase the rate of return from an investment, as in buying securities on margin."Essentially, the core idea of leverage is that investors can use less money to control bigger amount of investment so that investors can make more money when the price movement is in investors' favor.
|
| home | site map |
| © 2006 |