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08-26-2008, 06:57 AM
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#1
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Recycles dryer sheets
Join Date: Apr 2008
Posts: 157
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Front/Back end loads?
So who out there has any funds with front/band end loads? I currently have 3 that are about 5.75% each front load and one with a 5.00% back load. My parents set up the 3 front loads up a long time ago, and the back end one I picked up when I opened a Chase bank account. Is it worth keeping or should I look for something without the loads.
Can anyone explain why there are loads anyways? Does it make these funds any more special?
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Instead of getting angry I just LOL. Can't waste time with stupid people.
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08-26-2008, 07:00 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,021
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Quote:
Originally Posted by Keyboard Ninja
Can anyone explain why there are loads anyways? Does it make these funds any more special?
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Yes, it makes them more special - to the fund companies who $ell them! Loads exist to profit those who manage and sell the funds.
Since you already own these funds, I suggest you compare their performance to similar no load funds (check Vanguard and Fidelity) before making a decision to keep or sell them. The exception might be the back end load fund - I'd dump it immediately. The longer you hold it the greater the cost to you when you sell - assuming it actually does go up in value.
__________________
Numbers is hard
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08-26-2008, 07:14 AM
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#3
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Recycles dryer sheets
Join Date: Dec 2006
Posts: 191
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Quote:
Originally Posted by Keyboard Ninja
So who out there has any funds with front/band end loads? I currently have 3 that are about 5.75% each front load and one with a 5.00% back load. My parents set up the 3 front loads up a long time ago, and the back end one I picked up when I opened a Chase bank account. Is it worth keeping or should I look for something without the loads.
Can anyone explain why there are loads anyways? Does it make these funds any more special?
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I do not (and have never) owned any loaded funds.
I would get rid of the fund with the back end load... back end load may turn out to be quite a hefty fee if the fund does well. Are the 3 front load funds any good otherwise (good performance/low cost)? If yes, I would keep them --- since you already paid the load, you're not really "saving" anything by getting rid of them. I would not, however, increase my holdings in any one of them.
Loads are established as a way to pay commissions to advisers selling such funds (usually such advisers are not paid by the clients for their services). In my opinion, in the long run (assuming you stick with the fund for a while) front load funds are much better than back end load funds and they are even better than high expense no load funds, all other things being equal.
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08-26-2008, 07:42 AM
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#4
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Recycles dryer sheets
Join Date: Apr 2008
Posts: 157
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Quote:
Originally Posted by lucija
I would get rid of the fund with the back end load... back end load may turn out to be quite a hefty fee if the fund does well. Are the 3 front load funds any good otherwise (good performance/low cost)? If yes, I would keep them --- since you already paid the load, you're not really "saving" anything by getting rid of them. I would not, however, increase my holdings in any one of them.
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Even if it is rated at 5 star? I've thought about putting in more money into my ANCFX fund.
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Instead of getting angry I just LOL. Can't waste time with stupid people.
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08-26-2008, 08:09 AM
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#5
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Recycles dryer sheets
Join Date: Dec 2006
Posts: 191
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Well... it's up to you. I would have trouble parting with 5.57% right of the bat. Then again, I prefer index funds, so that may be another difference between you and me.
Having said all that, after a quick glance, ANCFX seems to be a solid fund (most american funds seem to be) and it's not expensive for a managed fund --- especially when you consider its significan foreign holding. If you are comfortable with this fund, its objectives fit yours (and your allocation) and you do not mind paying up front fee, then go ahead. Good investing!
Edit - I forgot to mention, I do not pay all that much attention to various star rating. My focus is on allocation and expenses. Than again, I think the star rating is probably more useful when dealing with managed funds (than index funds).
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08-26-2008, 08:11 AM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,708
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There is not only no correlation between fund loads and performance, loaded funds over ten+ year periods significantly underperform their benchmark indexes.
You've already paid the fee on the front load funds, but with history as a guide they'll underperform cheaper funds over the long haul. And while you didnt give any expense ratio's for any of the funds, I'm pretty sure they're carrying a pretty expensive annual cost. Maybe 1% or 1.5%?
REW's comment about the back end fund is spot on. Might be best to cut your losses now and find a cheaper fund to work with. It might only take you a year or so to recoup your losses.
Once again the psychology of feeling something is better or worth more because you have to pay extra for it is in play.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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08-26-2008, 08:23 AM
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#7
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Moderator Emeritus
Join Date: Jun 2007
Location: At The Cafe
Posts: 6,873
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I have mixed feelings about them but take no guff about the fact that a stockbroker sold me a front-end load fund in 1972. I doubt very much that I would have made it to FI at age 59 without that spark of interest in equities while in my mid-20s. As soon as I learned about no-load funds I bought them exclusively and whenever I wanted to sell something, say for a great train trip, the money came from the load fund. I've mentioned this before that that particular fund at some point joined the no-load craze, but soon went back to front-end loaded while my account remained no-load. It's an experiment still, holds about 3.02% of my NW now, should be interesting to see where it is when it finally gets cashed out.
[Edit to add: how to you figure the value of spending X-number of hours per week doing it yourself? Is your time worth more or less than a 5% front-end load? I know a very rich former stockbroker who hires a team of stockbrokers while he set up charities, plays tennis, etc.]
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08-26-2008, 09:06 AM
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#8
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Thinks s/he gets paid by the post
Join Date: Jan 2008
Posts: 2,020
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So, just to confirm, you have three funds with class A shares and one fund with class B shares?
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08-26-2008, 02:56 PM
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#9
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Recycles dryer sheets
Join Date: Apr 2008
Posts: 157
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Quote:
Originally Posted by Marquette
So, just to confirm, you have three funds with class A shares and one fund with class B shares?
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Yep. My parents set up the Class A funds a long time ago, and I signed up with a Class B fund through Chase (OICGX) about a year ago. I plan on calling Fidelity and exchanging it out for cash to purchase my FFFFX fund (I think that is what it is called). The other two Class A funds are Oppenhiemer Funds in a traditional IRA account. I don't think I'll keep those either because I already have a TSP account, and from my understanding they are basically the same thing. The whole looking into funds thing is overwhelming with the amount of work/schoolwork I do but I'll manage somehow.
__________________
Instead of getting angry I just LOL. Can't waste time with stupid people.
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08-28-2008, 06:28 PM
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#10
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Recycles dryer sheets
Join Date: Dec 2006
Posts: 479
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Don't back ends funds reduce the fee over time? Like 5% 1st yr, 4% 2nd yr, etc.
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08-28-2008, 06:44 PM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,708
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Maybe some do, but not in general. Back ends stay in there to keep you from making a good decision and taking your money out.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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08-28-2008, 06:54 PM
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#12
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Thinks s/he gets paid by the post
Join Date: Jan 2008
Posts: 2,020
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Quote:
Originally Posted by JohnDoe
Don't back ends funds reduce the fee over time? Like 5% 1st yr, 4% 2nd yr, etc.
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Depends on the share class.
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08-28-2008, 06:55 PM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
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Quote:
Originally Posted by Keyboard Ninja
So who out there has any funds with front/band end loads? I currently have 3 that are about 5.75% each front load and one with a 5.00% back load. My parents set up the 3 front loads up a long time ago, and the back end one I picked up when I opened a Chase bank account. Is it worth keeping or should I look for something without the loads.
Can anyone explain why there are loads anyways? Does it make these funds any more special?
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Once you have paid the front load, you will never pay it again, so it is water over the dam. Look at fund performance and ongoing expenses to make your decision whether to stay or go.
It used to be that there was a secondary market for some load funds that were highly sought after, so if that is still the case you may be able to recoup some of the money your parents paid.
Check the prospectus on the bck load fund, it may go away after a certain length of time in hte fund.
Ha
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