No Load vs. Load

Curious...where do you have your money? Do you invest on your own, or do you use an advisor?

I was an advisor for years and not only did I have to convince everyone to use LOADED funds...I was drinking the kool-aid myself.

Now that I'm on the outside, I realize that what the firms taught me was total bullshit. You should ALWAYS go no-load. And "B Shares" are NOT no loads....even thought people try to sell them that way.

SO...who here owns loaded funds? Who sold them to you? Are you happy with them?

 

All my funds contain "A" shares with American Funds in retirement accounts.

 

I've got a no-load, mid-cap, index fund through Vangaurd, I'm happy with it, this was a college experiment where I borrowed against my school loan, which consolidated to 2.5%, and put it in an index fund, yielding more than 2.5%, just like "A Random Trip Down Wall Street" taught us, go with the index.

 

So...you paid a load. Probably 4.25% of your initial investment was taken out as a fee for the broker. American Funds aren't bad overall. They are just loaded.

 

Yes, there was a load. I figure in 30+ years I'll have made that back plus some.

 

That's one way to look at it.

Here's the way the math works:

Let's say you're 30 and put $10k in a loaded fund. Let's say it was 4.25% for the purpose of this math.

Let's say the managed fund you bought manages to beat the S&P 500 over a 35 year time period by .5% per year on average ( a feat that would merit proclaiming the fund manager the smartest person on Earth, as most funds are lucky to beat the S&P 500 ever, with the exception of brilliant fuckers Like Bill Miller. Google Bill Miller. ) Even with that .5% above the index, the expense ration of your fund is likely alot more than .5% more than the admin fee of the index - .18%. So let's say for argument's sake that the fund you have matched the S&P over that time frame. Which it won't.

Here's the amount the load costs:

$10k into S&P and gets 10% over 35 years = $326,387

$9550.00 ( your investment after load ) gets 10% over 35 years = $311,699

So - that load costs you about $15k come time to use the money.

Loads are good for one thing and one thing only - making money for the guy that sold you the fund.

 

Dammit Meat, keep that type of info to yourself.

 

This is too easy.

 

Warren Buffett > Bill Miller

 

It's the power of compound interest.

Here's an example:

9 years ago, my wife and I were contributing to an IRA. We each had our own but invested in the same fund. We contributed to this fund monthly ($167 each) to meet the $2000 limit at that time. I think we skipped a month, and had $1800+ each. We never invested in those funds again after that year, and haven't sold them.

1 month, the USPS deliverd my $167 check one day later, so I bought at a slightly higher price. It wasn't much. After 9 years of solid performance, the one day difference amounts to $74.

So - in 30 more years, it'll be a fuckload of difference for $167 invested 1 day later. Nuts.

It's a great fund, BTW - Neuberger and Berman Genesis. Solid over a tough period. I think the $1800 and change is now close to $5k each. I believe it is closed.