need fund advice for friend new to investing

[igsoy]

A friend who has just started investing, asked for some suggestions, and I told him I would look up the info on the funds his broker sold him within the last few years.

I looked his blue chip fund (KBCAX) up on the Scudder website and found expense ratio (1.11%), ytd (Oct. 31) returns including class A sales charge (3.46%) and ytd returns without sales charge (9.78%). I looked this up on Marketwatch to compare to peer group and s&p index, and it has obviously underperformed in almost all of the time periods listed. Is it just the load that has made it underperform, or are there more fees than just the 1.11 expense ratio hidden somewhere?

I think he realizes it is silly to keep paying a load on his monthly automatic investments. He is trying to decide, though, if he should keep the 15-20k that he's already paid the load on in there, and just move his new investments to an index, or if he should take all the money out and move it to an index...

Another thought is: this guy is 38, is a blue chip fund a good investment choice for him?

Thanks for any advice.

 

[FinanceDude]

A friend who has just started investing, asked for some suggestions, and I told him I would look up the info on the funds his broker sold him within the last few years.

I looked his blue chip fund (KBCAX) up on the Scudder website and found expense ratio (1.11%), ytd (Oct. 31) returns including class A sales charge (3.46%) and ytd returns without sales charge (9.78%). I looked this up on Marketwatch to compare to peer group and s&p index, and it has obviously underperformed in almost all of the time periods listed. Is it just the load that has made it underperform, or are there more fees than just the 1.11 expense ratio hidden somewhere?

I think he realizes it is silly to keep paying a load on his monthly automatic investments. He is trying to decide, though, if he should keep the 15-20k that he's already paid the load on in there, and just move his new investments to an index, or if he should take all the money out and move it to an index...

It depends on how comfortable you are advising him. I wouldn;t push the issue, but you could suggest he look at Vanguard or Fido.

Another thought is: this guy is 38, is a blue chip fund a good investment choice for him?

I wouldn't know that nor would you unless you did a risk profile on him...........

Is he asking for "advice" or to "tell me what to do"? There's a BIG difference there.........

Regarding Scudder, FWIW they have had a lot of problems over the years, and have been "for sale"several times.........who wants to be involved in that??

 

[igsoy]

I wouldn't know that nor would you unless you did a risk profile on him...........

I guess I wasn't thinking about the risk aspect, but the consequences of having a high dividend yielding fund in a taxable account, and 25% bracket?

I'm not well versed in these things, but I got the sense that dividend yields were good for people using the money as income in retirement, didn't know if it made sense for someone who has to pay the taxes on it on top of their regular income?

 

[FinanceDude]

I guess I wasn't thinking about the risk aspect, but the consequences of having a high dividend yielding fund in a taxable account, and 25% bracket?

I'm not well versed in these things, but I got the sense that dividend yields were good for people using the money as income in retirement, didn't know if it made sense for someone who has to pay the taxes on it on top of their regular income?

hard to say unless you have more info. Look at all the folks who buy CD's...think they're worried about the tax consequences of that??

 

[In-control]

I would strongly recommend that your friend takes the investor test @ Vanguard.com. I did and it really helps you itentify your risk tolerance, establish allocations and provides fund suggestions. It is a good place to start.

https://personal.vanguard.com/VGApp/hnw/FundsInvQuestionnaire?cbdInitTransUrl=https%3A//personal.vanguard.com/VGApp/hnw/planningeducation/general