I have long noted that mutual fund advetisements show the "effect of charges"(the weasel name for the manager's cut), after 1,3,5 & 10 years but never, beyond that. I also noted that not only does the sum take by the manager increases with time, but also the % age. So I decided to calculate how much they take in the longer term. After all, the government keeps extorting us to save for our old age. My findings were as follows:
If a mutual fund grow at an average rate of 6% pa and has a front load of,say, 5%, and annual charges(TER) 2% the manager's cut (effect of charges)is:
After 1yr 7%
After 5yrs 14%
After 10yrs 22%
After 20yrs 36%
After 40yrs 57%
The load & annual charges assumed in this example are common in UK. In the US they are lower, but do let me assure you that the results are only a little less shocking. Is it any wonder they never show us the figures after 10 years? Still want to invest in mutual funds? Well, there is a fool born every day,as they say.
2006-06-19
03:15:38
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6 answers
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asked by
Anonymous
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Investing