sanders (02/14/83)
I have been looking into investing in a mutual fund group. There are two basic types of funds: load funds which you buy through a broker and pay a sales fee (usually 8.5%) for, and no-load funds which you buy directly from the fund and pay no sales charge for. In looking into past performance, it appears that no-load funds have done just as well as load funds on the average. It appears obvious to me which of the two types I should invest in. What bothers me is that it is TOO obvious. Why would anyone pay an 8.5% sales fee when they don't have to? Sure, the sales fee allows load funds to sell themselves whereas the investor must take the initiative in searching for no-loads, but is that it? Am I missing some obvious reason for avoiding no-loads? I'll post summaries of responses if interest warrants it. Thanks, Al Sanders HP Design Aids, Cupertino, CA ucbvax!hpda!sanders
charlie (03/09/83)
The question was: why would anyone in their right mind buy a load-type
mutual fund when no-loads are "just as good".
There are two reasons. The first you can hear from any salesman; the
best performing funds are load funds. In any given year, this may or may
not be true. Given that the vast majority of funds are load, it would
not be surprising if this were true (the worst performing funds would
also be load) just by chance. I have never seen any evidence that there
is a statistically significant difference between loads and no-loads in
aggregate.
The second is the real reason. It is the same reason some people buy
cameras at the local camera shop instead of mail order from New York.
What that 8 percent commission pays for is for the salesman to discuss
your needs and help you decide what you want. There is certainly a
conflict of interest on his part and he will not understand your
financial situation as well as you do, but for many people the help is
worth the price. If you are sophisticated enough to know the difference
between a load and a no-load (don't laugh), the loads probably aren't
for you.
-- Charlie Kaufmansuhre (03/30/83)
There is a handbook about No-Loads (subsequently NLs) which is put out by The No-Load Fund Investor Post Office Box 283 Hastings-on-Hudson, NY 10706 I purchased the 1982 edition (which has the 1981 results) sometime last year (price $24 I think). I don't know when the 1983 edition will be published, but the handbook contained a lot of information, some of which I already knew. However, for someone just starting out I would certainly recommend it. Also, the June 1982 issue of Money magazine was devoted to stock market timing strategies. Since it is possible to switch around within a family of funds, one must consider whether the market is going to go down long term and perhaps switch into a constant value asset (money market fund). These switches are sales for tax purposes (not a problem for IRAs) and you may have to decide whether to wait for capital gains and risk a decline versus switching now. I just started reading this net recently and it took me a while to decide if I was qualified to respond, but after reading net.suicide I realized only a certain minimum typing ability was required. Maurice Suhre (rhymes with hurry)
rs55611 (04/01/83)
The most recent issue of Money magazine (just came in mail, so it might not be on stands yet) has a section on mutual funds, in which the last 1 year, 5 years and ten years records of all mutual funds are listed and ranked. In addition, fund families are ranked. There are also several articles on related topics, etc.
markf@tekgds.UUCP (08/17/83)
Can anyone recommend a no-load mutual fund? I gather from their 'no-loadedness' that they're not likely to reach out and grab you, but I haven't even been able to find even a small ad in the back of the Journal or anything. tektronix!markf
guarini@wivax.UUCP (08/18/83)
I recently performed some calculations to determine which no-load mutual funds performed the best during the recent bull market. The funds I considered, 74 in all, can all be classified as either maximum capital gain or growth funds (as opposed to growth-and-income or income funds). The first figure I calculated was the percent rise in each fund's price from the stock market low in August 1982, to the market high in June 1983; these values are labeled "rise" in the table below. Next, I computed the amount each fund dropped from the market high in June to the recent low last week (labeled "chg"). Finally, the net rise in price from last August to last week was computed (labeled "net_rise"). Note that in none of these calculations was the distribution of capital gains or dividends taken into consideration. The following table shows the top ten funds in terms of net rise (one key omission from this table is Fidelity Select Portfolio-Technology, because I was unable to find a price quotation from last August; the April issue of Money magazine reported it was the top-performing fund since August at that time. Also, 20th Century Ultra does have a small load, 1%): |fund |rise |chg |net_rise | |-----------------------------------------------------| |Constellation Growth| 185.774| -14.458| 144.456| |20th Cent Ultra | 188.251| -15.924| 142.350| |Hartwell Leverage | 162.993| -15.770| 121.520| |Hartwell Growth | 139.235| -8.289| 119.405| |Quasar | 130.351| -8.650| 110.427| |Weingarten Equity | 139.252| -12.134| 110.221| |USAA Sunbelt | 132.910| -11.601| 105.889| |SteinRoe Cap Opp | 137.458| -15.059| 101.700| |20th Cent Select | 98.865| 0.937| 100.729| |Vanguard Explorer | 117.930| -8.004| 100.486| |-----------------------------------------------------| Even though the top-performing funds from August to June fell the most during the recent dip, they still had the best gains overall. However, if an investor in these funds thought the market had peaked and was entering a long downward trending phase, it would probably be best to get out of the funds before they dropped too much in price. The addresses for all of these funds can be found in the April issue of Money magazine. Joe Guarini Wang Institute of Graduate Studies ...!decvax!wivax!guarini (USENET) guarini.wang-inst@udel-relay (CSNET)