My class A share mutual fund?

Question

I am being charged 5.75% share sales charge for class A share. Is this competitive? Is it a good deal? Am I being charged anything else?? I just started working with a financial planner and don't know if he's really looking over my interests or not. I'm new at this and really would appreciate some advice. Thanks

Answer 1

Is this competitive? Yes, many funds charge this amount if you are investing less than about $75,000. Above that, your planner should be able to get a discount off that load level.
Is it a good deal? Yes and no. Yes if you have a complex financial situation and the planner is handling your whole financial life. No, if this is just a long term retirement (30+ some years away) investment. In that case, you could have gotten some books on investing, taken a few months to learn, and invest in a much lower cost index fund.
Are you being charged anything else? Can't say for sure without knowing the fund name. A lot of load funds have higher annual expenses than the no load index funds mentioned previously. Plus they have an annual 12b-1 fee to pay the planner to check on your investment each year. With time and knowledge, you may be able to do better. If you are busy working 40 hours a week and don't have the time, a planner is the way to help.

Answer 2

The 5.75% is pretty standard for front end load funds. You are also charged an annual expense ratio. Normally class A share have a lower expense ratio than most other types of shares. The important question you should be asking is not whether the front end load is competitive but whether the fund has a good track record and is it tax efficient. A good track record is 10 year annual return in excess of 10% after calculating the load and a 5 year annual return in excess of 13%. The last 5 years have been real good years. You should also be asking if the fund is well diversified.

Answer 3

This is a load fund. There are load funds and there are no-load funds. Anytime you buy funds through a planner or full-service brokerage, you will get stuck with a load fund. The load is a commission that is paid to the broker (ultimately) and is taken out of your investment either at the beginning (when you buy), at the end (when you sell), or in the middle (through higher expense ratios), depending on whether you have A, B or C shares respectively. The only time you should buy a load fund is if you're getting good NEEDED advice (because that's what you're supposedly paying for, afterall). The problem is, many brokers are more salesmen than advisors interested in your best interests. If you know enough to make your own decisions, or if you're willing and able to LEARN, you should avoid the costly load funds and go with no-load funds, whether those are managed or un-managed (index funds).