Mutual fund investment fee question.

[mike_s]

So my new broker is pushing some new mutual funds.

They seem good, but here's the catch. They have a 5.75% "front end" fee on them.


ouch.... is that high for mutual funds or is it just me thinking that?



I'm just not used to paying fees that high.

 

[ianr33]

Its not high its ridiculous. Ask him what his commission is on them.

 

[mike_s]

.


Question: What are typical fees on Mutual funds?


Note: These front end fees also don't require a sale fee as it's all in cluded "front end". but the ouch factor I still think is too high.

For comparison I think that market trades on stocks on Etrade are $15-$20 per trade and for a different full service broker around 1% per trade (on stocks).

 

[crlavoie]

Yes. That's extremely high but there are other things to consider like the overall expense structure for the fund. My sense is that it would be quite high if they need to off set so much which basically eats right into your anticipated return.

There are VERY few circumstances (virtually none) under which the "average Joe" investor could / should justify paying fees. There are way too many low cost, high quality funds out there to even consider it.

If you're an active trader or savy investor, it MIGHT make sense but again, there's a long line of other low cost alternatives before you even get there.

 

[PaulChristenson]

So my new broker is pushing some new mutual funds.

They seem good, but here's the catch. They have a 5.75% "front end" fee on them.


ouch.... is that high for mutual funds or is it just me thinking that?



I'm just not used to paying fees that high.

Go Vanguard...It is the only way to fly...

https://flagship5.vanguard.com/VGApp/hnw/HomepageOverview

 

[PerroneFord]

Run away. Quickly. There are DARN few mutual fund managers I'd be willing to hand 5.75% of my money to. That fund would need to beat it's index by nearly 6% for you to simply COMPETE with a no-load fund.

I don't know who your brokerage agency is, but brokers get paid big money to push these kinds of high load funds on unsuspecting customers. By even CONSIDERING this, you've identified yourself as an unsavvy investor. I suggest you close the door on it quickly, and move on. Find a no-load (or very small load) fund that is outperforming it's index over the last 3 years, invest, and monitor every 2 weeks to one month.

Best of luck.

 

[hdtran]

So my new broker is pushing some new mutual funds.

They seem good, but here's the catch. They have a 5.75% "front end" fee on them.


ouch.... is that high for mutual funds or is it just me thinking that?



I'm just not used to paying fees that high.

He's a broker. That's how he gets paid, from the front-end load. If you're comfortable 'rolling your own' (the Vanguard recommendation is good, btw), go no-load. Don't even bother with E-trade; go directly with either a Fidelity or Vanguard (or perhaps Schwab) brokerage acct. If you have sufficient assets (order of $100K), both Fidelity & Vanguard will do a no-cost asset allocation calculation for you. Vanguard has just about the lowest fees for index funds; Fidelity has a very wide selection of "no-transaction-fee" funds. If your assets are less than that order of magnitude, you can still do your own asset allocation calculations, and manage your investments yourself.

The 5.75% commission (that's what it is, even if it's called a load) is pretty much standard for retail funds sold at brokerage houses. Expensive fund companies play games and sell various classes; retail funds with a high commission, but lower expenses; institutional class of funds (same exact portfolio as the retail fund) with lower commissions, but higher expenses; etc. In the aggregate, none of them perform any better than the no-load funds. The only reason you pay the commission is if you want a broker to hold your hand and make recommendations for you. Of course, you have to realize that the broker gets paid every time you make a transaction! If that's worth it to you, then pay the 5.75%. I personally don't think it's worth it.

If it were me (and it's not, it's you), I'd dump the broker like a piece of fire coral in your wetsuit, and "DIY."

Good luck!