| A Shares Vs. B Shares: Did I Get Taken? |
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boulder_bum
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| A Shares Vs. B Shares: Did I Get Taken? |
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I ended up signing up for a Roth IRA with Chase Bank/ JP Morgan and hand-picked the funds I wanted to participate in. The first broker I talked to said that if I wanted to leave money in the funds long-term B shares were the way to go since they had no initial fee and some fees eventually disappeared after 5 years or whatever.
I sat back and let them set me up, but noticed afterwards that they signed me up for A shares without my consent. They said they neglected to notice that SOME of the funds I picked only had A and C shares (though they went ahead and chose A shares for all the funds), and later informed me that in the long term, A and B shares basically have the same fees.
This is a bit confusing for me because the way they described B shares made it sound like there were no fees if you left the money in long enough, and it's a little disconcerting considering that the sales charge was a bit above 5%.
Maybe everything is on the level, but can someone tell me if they think some salespeople got a little commission hungry on me? That's what I fear.
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Sat Dec 31, 2005 11:40 am |
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Rolo
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Yeah, you got taken. Take your ball and go elsewhere. They should have set you up with class C shares rather than class A.
I see the "oh, we neglected to tell you" with Chase a LOT (I have a car loan through them); it appears to be SOP.
If you choose your own funds, why not go with a discount broker? No fees and no a**holes to deal with.
"Expect me when you see me."
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Sat Dec 31, 2005 3:46 pm |
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coaster
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Better yet, if mutual funds are your chosen vehicle, go with a no-load mutual fund family such as T. Rowe Price or Vanguard. You can invest in just about any asset class you want with a fund family such as that. Plus I know Price allows you to purchase funds outside the family through their brokerage service. Vanguard might have that option, too, but I don't know for sure.
~Tim~
Eye Candy : Why Whimsy
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Tue Jan 03, 2006 12:23 am |
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Rolo
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Agreed on the no-load. Only pay a load when you have no choice because it is something exotic (like ING Russia, LETRX).
I have access to over 8,000 mutual funds (pretty much the whole fund universe) with my regular discount broker, all of them NTF (no transaction fees). Why limit yourself to one brand?
"Expect me when you see me."
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Wed Jan 04, 2006 1:42 am |
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Jaszbo
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coaster gave really good advice.
I have an HSA account with Chase Bank/ JP Morgan and their operating expense and funds are aren't any good either. I have no choice as to where I can go with my HSA account, so I'm stuck. As for you, if you need help and want to talk to somebody look for a financial advisor that gets paid hourly. On the main page there's a financial advisor that gets paid hourly and that's what you want to go, not by commisions and nothing else. It's either that or do it yourself
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Tue Jan 10, 2006 9:04 pm |
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coaster
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quote:
Originally posted by sarah
Personally, I would have been happy being in these funds.
If you, or I, had been able to predict those funds' outperformance, we'd be ecstatic!! 
But if it's a choice between two funds of similar performance history, similar management style, and similar portfolio, then the no-load fund wins hands down. Unfortunately, no one can predict future performance.
~Tim~
Eye Candy : Why Whimsy
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Tue Jan 10, 2006 9:51 pm |
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Jaszbo
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coaster said it perfectly "no one can predict future performance". I know there's a lot of people on the board that think going from one fund to another fund daily works. I don't think they have even read the article posted by the forum advisor that even shows you with numbers how it's stacked against you, but that's another subject
Would i invest in a fund like the one you posted................NO WAY!
Not me!!!!!!!!!!!!!! CVJAX Average return in the last 5 years is 3.32% and this is managed fund!.
I just looked at the first one you mentioned
CVJAX
Ok let me give some histor on this fund
1996 -11%
1998 -20%
2000 -34%
2001 -30%
2002 - 12%
Ok these are negatives. Take 100k and go down 50% and then go back up 100% to get back to where you were.
This year's return means nothing. The worst way to invest is just looking at the current return or last year's return. Hey VGENX at vanguard was 45% return last year. Why not just put everything in there.
A rule of thumb today's winners can be tomorrows losers.
Stay with them if you want, it's up to you. I'm forced to invest with them and I would do anything to go with Vanguard, T. Rowe Price, Fidelity or USAA.
lol they have such great managers that they charge 1.75% for their operating expense, while the average is 1.64%
Another tip go with no-load mutual funds.........
God the more I look at this fund the more i dont' like it. In 1999 it was 49% below what the average fund in the same category for the returns.
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Tue Jan 10, 2006 10:28 pm |
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coaster
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quote:
Originally posted by sarah
If its a choice between two identical funds...that simply doesn't happen in reality.
Actually, Sarah, I said "similar", which does happen in reality. Similar historical performance, similar portfolio holdings, similar management style. Loaded funds that are similar to no-load funds are frequently reccomended ahead of their no-load twin by financial professionals solely to generate commissions. Uninformed investors are duped by this practice, and suffer a haircut of up to 5.7% off the top of their investment. So they could easily spend a year just breaking even.
I can't remember the particular example right off the top of my head, but I have read of cases of a no-load fund and another loaded fund with almost identical portfolios and managed by the SAME manager. Whew!! Tricky!! 
Performance and fit are the primary criteria, and if a loaded fund is the only choice, or it it's heads and shoulders above its no-load competition, then there's no question about choosing it and paying the load.
~Tim~
Eye Candy : Why Whimsy
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Wed Jan 11, 2006 12:19 am |
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Rolo
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quote:
Originally posted by sarah
a. Read the prospectus.
b. Ask the reps any questions you may still have.
c. After all your questions have been answered, then sign up..
a. standard blahbedyblah answer (who the hell actually reads those things anyway!?)
b. but--nguuuh! That's what started this thread! As if you can trust a stranger...
c. Like a lamb to the slaughter.. 
"Expect me when you see me."
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Wed Jan 11, 2006 12:21 am |
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Jaszbo
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what a second, please copy and paste where I said "ANY fund of these families
will outperform any Morgan fund." I did not say that what so ever, because that is without a question on true and please do not put words into my mouth.
Ok I wish people would read this article that was posted by the forum advisor here
Timing the Market Isn’t All Fun and Games (2005-12-19)
http://www.money-talk.org/viewtopic.php?t=6046&highlight=
http://www.emarotta.com/article.php?ID=158
The article is pretty good, because it shows numbers. I have read book after book after book, with numbers, charts and anything in between and only one author I know believes in timing the market. Watching the latestest news and jumping on a fund and that's bein stein.
Now Bogle, the person who brought you the index funds to the public has a chapter in one of his books and he says in his 40 years of being a funds manager not only has he never met a person who has truly been able to time the market, but he says he doesn't know a person who knows a person who can truly say that they have timed the market succesfully. Yes people get lucky, just like I could have put all my earnings in wallmart or disney and it would have paid off, if I would have done it at the right time, but what are the chances. The more you read and the more you educate yourself you'll see that you are hurting yourself in the long run.
A coworker of mine jumps from the I to the G, to the C fund and sometimes splits it, but he jumps around weekly, but this is the same guy who is complaiing about how much money he lost during the crash. He told me he still hasn't recovered, because when a stock doesn't do as well it's when he wants to sell it. When something does well it's already old news. I think most people are better off in the life cycle fund, becuase they are cashing something that you can see does not really benefit.
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Wed Jan 11, 2006 3:51 am |
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Jaszbo
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coaster I agree with you 100%
I'm trying to find an article about how these commisions started to lead to companies giving kick backs so that they would add their company to their funds. If a fund has a lot of companies adding one can help that company and you may not see even 1% difference, but the company could be hurting your fund. Here's the only thing I found so far about commisions from an archive were I thought I read it. Oh well
The mutual fund scandal has a new chapter every day, it seems. People have lashed out in anger by pulling money from Putnam and from other companies that were acting illegally and unethically. And the industry has suffered. But mutual fund companies are still ripping people off with junk fees. According to the SEC, if you put $10,000 into a mutual fund, you will pay nearly $1,600 in junk fees over a 10-year period. So, your money has immediately become about $8,400. How? It's a little-known charge known as the "12b1 fee." The mutual fund industry somehow convinced the government that it needed extra money to advertise. So, the government dreamed up what’s called the “12b1” fee. It was supposed to be a temporary thing, but the mutual fund industry manipulated the fee. It was using the money for anything other than advertising. So, what’s the chance that you are being ripped off? Pretty high, considering that two-thirds of companies are charging the 12b1 fee. People who are with companies such as Vanguard and TIAA-CREF are not paying this fee. But just about everyone else is. The industry took nearly $10 billion in fees from the American people last year. Find out if reading your prospectus is unknowingly charging you
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Wed Jan 11, 2006 4:06 am |
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Jaszbo
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I see what you are saying and understand were you are coming from, but front-end load are not just fees. Here's a defintion, so you can see the return may not be the actual return it's indicating
front-end load
A commission or sales fee charged at the time of the initial purchase for an investment, usually mutual funds and insurance policies. It is deducted from the investment amount and thus, lowers the size of the investment. For mutual funds, the use of loads is suggested to prevent frequent trading of the fund, which can hurt a fund if it has to hold large cash reserves to meet payouts.
Some also have a back-end load, but the front-end load I think of it differently and I could be wrong, so please correct me if I'm wrong, but say I put in 1k and there's a 10% front-end load, then only 900 dollars is what is being invested. If it made 20% return that was after the front-end load.
I personally stay away from loaded funds, except for JPMorgan where I'm forced to put my HSA account with.
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Wed Jan 11, 2006 2:07 pm |
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coaster
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Jazsbo, your definition of loads is correct. Except if my memory is working this morning, the maximum permitted load is 5.75% -- so your example is slightly "over-the-top." Back-end loads are actually worse than front-ends because the load is a percent of the NAV at redemption, not of the initial investment. Often the argument given for loads is that the fees are less than no-loads. While this is often the case, it can easily take 10 years for the difference in fees to make up for the load when two funds with similar performance are compared. So I suppose if you're planning to hold a fund for longer than 10 years even the load isn't much of a decision factor. But let's face it: how many of the people who plan to hold a fund for that long actually do so?
~Tim~
Eye Candy : Why Whimsy
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Wed Jan 11, 2006 3:36 pm |
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Jaszbo
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When I said 10% yeah, I was over exaggerating and just throwing numbers out there like 20% also. I never saw anything that's 10%, but I didn't know the limit was 5.75%, but now that you mention it I have seen that value often, so it does make sense.
As far as you mention how many people keep funds for 10 years. Well vanguard published how all their funds have done on average and how each fund does on average and then how each investor has done on average and for each category the average investor in vanguard does worse than the average fund. They showed so many numbers as the investors who are currently investing in a certain fund for instance say the wellington returned 12% this year, they look at every investor that was in the wellington and their average was alwyas less like 10%. They then looked at every single fund and took the average and then the average of investors.
They showed so many numbers, with the same conclusion that the average investor does worse than the average fund. The reason was that they showed that too many people try to time the market from what's on the news and they end up doing worse than the average returns. Some people even don't know how to add up how much return they get and mark other things, some people don't know the difference between your holdings and what your investing. When you have 90% in an internatinoal fund and then next month you decide to invest 100% in bonds and you do well, you think you made a good choice, but yet you are still highly invested in what you didn't want to buy.
I just googled this http://www.indexfunds4.com/
Jeffrey Lauderman wrote a BusinessWeek article dispelling the myth of market timing, which he called a perilous ploy and a guessing game. His 1998 analysis included an interview with Mark Hulbert, who monitors the time pickers recommendations. Hulbert's conclusion provided a knockout blow to all 25 newsletters he tracked. None of the newsletter timers beat the market. For the 10 year period ending 1988 to 1997, the time pickers' average return was 11.06% annually, while the S&P 500 stock index earned 18.06% annually and the Wilshire 5000 earned 17.57% annually. The figure below tells the story.
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Wed Jan 11, 2006 3:58 pm |
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Jaszbo
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Are you referring to Coaster or to Jbo, because I'm trying to figure out where you gathered this information "you won't find any managed funds that consistently outperform the indices", becuase I can assure you, it wasn't me.
I have both index funds and managed funds. If I could only pick one single fund I would probably go with a manged fund, if I could pick a bunch of index or a bunch of managed I would without a doubt have a bunch of index funds. Besides my HSA account I have two managed funds and there's a reason to have managed funds.
Just like I invest in pretaxed dollars and after tax dollars and inside retirement accounts and outside retirement accounts I invest in index and manged funds. I like index funds for my retirement long term holding very much so.
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Wed Jan 11, 2006 6:05 pm |
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