Conference nyoss1::market_investing

      ALL  mutual  funds  charge  a  management fee, regardless or their
      load, lo-load or no-load status.  The only exception to this would
      be  situations  like  a  new  startup fund in which the management
      might wave the management fee for some period of time.

      ANY mutual fund MAY charge a 12-b "hidden load" fee, regardless of
      the funds load status.  (I'm not certain about closed  end  funds,
      but I think that is beside the point here.)

      Note  that management fees and 12-b fees (if any) are reflected in
      published performance records of all funds.  If a fund states that
      it made 10% then the management fees and 12-b fees were subtracted
      before the 10% was calculated.  (Either that or the 10%  claim  is
      made illegally!)
      
>    ...a financial planner ... suggested a fund with an 8.5% load ...
>    What is the advantage (if any) of such a fund?  ... the only thing 
>    I can figure is that this guy gets part of the load as commission.

      Well,  IF the fund is really better than comparable no-load funds,
      and IF the fund is held long  enough,  then  the  expense  to  the
      investor or the load will be more than made up.

      HOWEVER  --  For just about any type of mutual fund it is possible
      to find a no-load fund with history and prospects just as good  as
      the  best load fund of the same type.  In general the best no-load
      funds and the best load funds are nearly equal BEFORE you take the
      load  cost  into  account.   This  means that the no-load fund can
      reasonably be expected to do better when the  load  cost  for  the
      load fund is considered.
      

      A financial adviser who gets paid by commission on what he advises
      you to buy has a very strong  conflict  of  interest.   In  effect
      he/she   is   a  salesperson  trying  earn  the  highest  possible
      commssion.  He/she as an incentive to recommend a fund  that  pays
      him/her  the  highest commission rather than a fund that is "best"
      for you.  For this reason there is much advice in this  conference
      which  suggests  staying  away  from  commission  based  advisers.
      Superficially, it looks like their services are  free,  but,  when
      you  look at the commissions it becomes clear that you are paying,
      possibly quite dearly, for there advice.
      
      NOTE: It is likely that many commission based advisers are honest,
      professional people who do their best to overcome  the  effect  of
      this  conflict of interest.  It is also likely that there are some
      who are, shall we say, "less upstanding".  In my personal opinion,
      even the best CANNOT help being at least partially influenced. For
      a particular advisor and a particular invester this may or may not
      be significant.

      It  is  not  particularly  difficult  to  get  good  advice  at  a
      reasonable cost from newspapers, magazines and newsletters.  (Many
      of which are discussed throughout this conference.) In my opinion,
      if an investor really needs personal advice then he/she should  go
      to  an  adviser  who charges on a fee-for-service basis -- i.e. so
      much per hour, or so much for each type of analysis, etc.

      With  a  fee-for-service  advisor  the  cost  of advice is clearly
      stated and easily seen.  Thus the investor can understand the true
      cost of the advice and make an informed decision whether or not it
      is worth the price.

    Brakes on !!!!
    There are so many good no-load funds available today it is hard to
    justify paying any sales load.
    
    Funds have different ways of getting money out of you and you have to
    study the prospectus carefully to get the whole truth.
    All funds charge some form of management fee, usually around 1-1.5%
    per annum. 12B fees are optional and are used to cover marketing costs.
    Most funds have 12b fees but the amount charged varies widely (usually 
    under 1%). So you've got to read the prospectus and compare. Simple.
    
    IMHO paying high sales loads when there are comparable invetments with
    much less cost to you is unnecessary. There are many publications
    (Money Magazine, Barrons, Hurlburt Digest etc) that give performance
    rankings etc. Be patient, do your homework and you'll be on your way.

    re: .0
    
    You got it right! The "load" is a sales commission. It has nothing to do
    with the fund management. All funds charge a management fee. Some are
    lower and some are higher depending on the fund. The "financial
    planner" your parents saw is actually a "sales person". He recommends a
    fund with 8+% load, because that's how he makes his money. If a loaded
    fund is a superior performer for an EXTENDED number of years, then the 
    impact on the (front-end) load diminishes as time goes on. But,
    personally, I see no reason to buy a loaded fund. Because, there are
    many no-load funds can do just as well or even better. (If you read
    Money or any other MF rating articles, you'll agree with me.) The 12b-1
    fee is just a different form of "load" the share holders have to pay.
    And, it could be worse that the regular load. It's charged to your
    account ANNUALLY. So, it adds up to quite big numbers after awhile.
    
    Mike

    In the final analysis, the only thing that matters is how much money
    you put in and how much money you take out.  Most analyses of
    load-vrs-noloads will tell you if the load/comission is included in the
    performance figures.  Kiplingers and Consumer Reports, for a couple,
    explain that.  If a fund charges 8.5% commission and still does better
    NET LOAD AND EXPENSES than the no-loads, buy it and smile.
    
    If you want to look into it further, get a copy of the prospectus where
    you will see the fund's share price history; it includes (required by
    law) the effects of all charges including comissions.  Run the numbers
    as if you bought in at day one, subtract all charges, add all
    distributions and see what you would walk away with.  Mutual funds are
    intended to make money for the Fund Managers.  Running the numbers
    shows how well they do for YOU.
    
    Remember, as a general rule, at any given time, LESS THAN 20% of all
    funds do better (NET CHARGES) than the unmanaged S&P 500; fund managers
    have a lot of brass to charge management fees.  If you doubt it, wander
    through any of the MF ratings and become a believer.  What is worse,
    most of the load funds perform just as poorly, but they still charge
    their loads.
    
    There are MANY no-load funds that consistently produce annualized
    returns (net expenses) over 15%.  There are some no-loads that
    consistently produce annualized returns (net expenses) over 20%.  There
    are even some load funds that do that well (net expenses and load), but
    bloody few.  If you really know what you are doing and are willing to
    monitor closely, you can intelligently select load funds that will do
    well.  But I have found that I can still do better with no-loads.  And
    without paying close attention.
    
    As always, FWIW
    
    Dave

    re: .3
    
    Ops, .1 & .2 "cut" in front of me. I guess my fingers type too slow.
    :-)

.4>    explain that.  If a fund charges 8.5% commission and still does better
.4>    NET LOAD AND EXPENSES than the no-loads, buy it and smile.
    
    I agree with .4s excellent analysis, but think this advice may be
    mis-taken, though it is not mistaken.
    
    At any point in time there are always going to be load funds that
    perform well, far better than the average fund.  With a name like
    "United Income" I'll bet this is a bond fund, and of course it's
    going to do well with the Fed lowering interest rates the last two
    years.  Had interest rates been rising, do you think this fund would 
    have outperformed?  No.  Would your "advisor" be pitching it to you?  No.
    The salesman would be pitching you something like gold, oil, or maybe
    even Van Gough Limited Partners.
    
    Get it?  The salesman picks the recent best-performing high-load fund
    and pitches to to the mark, I mean, you, the customer.  If it continues
    to do well then everybody wins.  If it doesn't do well, then you lose
    but the salesman still wins and can claim it was a good idea at the time.
    
    Thank the man nicely and find your own fund.  There are many
    recommendations in this file and still more available off-line.
    
      John

The guy doesn't even deserve a thank you....just walk away.

michael

    So: who is it that provides the investment base for the heavily loaded
    funds ?  If the loads were truly veiled rip-offs, these funds wouldn't
    be so ubiquitous.  Would they ?

    L.

You would find that they are declining in number.  Back in the good old days,
when there were few funds to choose from, most were fully loaded (ie. 8.5%).  The
United Income fund is one of the few left.  They continue to exist because the
general public is just beginning to get an education on Mutual Funds.  Not every
one has the resources like a notes file, that within a 3 hour time frame, could
generate 8 responses (mostly negative I might add).  Car salepeople rip off
consumers everyday, but they still exist.

michael

    Well, so far the responses tell me that my understanding of load funds
    was correct.  Thanks for the response.
    
    I think it does make sense to pay the load IF - and only if - you think
    the return will be mush better than other funds (after considering the
    load).  But in the recent past, the top performers have been no-load
    funds.
    
    Jerry.  

>    I think it does make sense to pay the load IF - and only if - you think
>    the return will be mush better than other funds

Or, potentially, if you don't want to spend any time for investigation and
don't mind paying someone else to do it for you.  I have a friend who doesn't
really want to spend time tracking his retirement investments.  He has a
(family) advisor who recommended ICA (Investment Company of America, I think)
fund for him.  He's very pleased with the results (I think the load was only
4.5%, and he didn't mind his advisor taking a cut).

John Piekos

That all funds with loads are bad.  But FULLY loaded.  The Strong Common Stock
fund I believe has a 2% load.  Great deal.  But the fully loaded funds are a
thing of the past.

michael

    re: -1
    
    The Strong Common Stock fund has recently stopped charging the 2% load.
    It's now a truely "no-load" fund. However, their management fee is
    still a bit higher than a "reasonable" fund management would charge
    (1.4*% I think?). But, I believe that will be coming down in the not too 
    distant future. I am considering buying into this fund right now. I
    really like the fund managers. They did a great job when they managed
    the Stein Roe Special Fund a couple of years ago. That's why I got into
    that fund. But, they left the fund in 1991 and went to Strong.  :-( 
    I did not want to follow them to Strong right away because their fund 
    was charging a load and I didn't know if they were going to do as well 
    with the new fund. But, I guess now time has proven that they haven't 
    lost their touch and they can do just as well in Strong as in Stein Roe. 
    So, I think it's time to buy into this fund. I personally feel that
    their fund's return is high enough to justfy for the "higher"
    management fee. 
    
    Mike

    See "Fee Madness" in the current issue of FORBES Feb. 15, 1993
    
    Shearson's Advisors Fund has an expense ratio of 3.8% each year _and_ a
    sales commission of 5%.  It's really required reading for any mutual
    fund investor.

    re -1. I hope that fee is delivering a ton of return to its' investors.
    If it is not it is one brazen, incredible rip off. I assume shearson
    tells its brokers to push it so that they can make more expense
    dollars.
    

    Well, I've been baptized.  Over the dining table, this nice young 30
    year old broker for Norcross (local Arizona brokerage) is pitching his
    "product" -- Meridian Tactical Asset Allocation.  (Nice Mercedes too,
    I noticed ..)
    
    Although the sales charge (load) says 2.5% in the literature (with a
    2.5% annual mgmt fee), the broker pitches a 3% load to me.  (Maybe the
    Feb 93 material is out of date ...).  Anyway, they boast annualized
    rates of return:
    	
    	1986	1987	1988	1989	1990	1991	1992
    	15.7%	39.9%	20.7%	16.6%	6.9%	38.4%	0.7% (1st 2 
    							      qtrs)
    
    Annualized rates of return:
    
    	1-yr => 12.2
    	3-yr => 17.3%
    	5-yr => 17.6%
    
    Meanwhile, he's talking from a chart and touting 21% returns after 
    fees, etc.  Minimum investment amount is $25K.  Has a list of
    references .. who check out happy.  Oh, BTW, he only plays about 3
    stocks, which I'll presumably get to know when/if I buy this product.
    
    Meridian directs investments to Fidelity Sectors (about 38 industries).
    They reportedly have a great formula for picking the undervalued
    industries and funneling investments accordingly, profiting on the
    upswing.  So here we have:
    
    Norcross => 	Meridian 	=> Fidelity Sector
    (Does nothing but   (Has the method	   (Has 38 industry managers
    sell, gets full     to choose the       furiously managing 50-60
    load and 40%        winner industry     stocks in their sector)
    of quarterly        sectors in 
    fee)		Fidelity)
    
    I get to pay $1,250 to play and then 2.5% quarterly for the privilege.
    Meridian is relatively new .. principals came from MAMCO.
    
    Should I dump $25K into this .... ?  No-load alternatives? 
    
    I'm a novice who's been in real estate.  Getting the D&B Guide to Your
    Investments when it hits the streets next month.
    
    BTW, I really appreciate you folks out there who take the time to help
    those of us who are d-u-m-b get a little smarter.....
    
    /Kent

    check Morningstar Mutual Fund Research Report at the library.  Their
    fund should be rated with risks discussed.  Markets are at an all time
    high.  Be cautious, and be aware!

    
    Earning 40% in 1987 is impressive... I don't know what the average
    growth fund earned that year, but I sure wouldn't expect it to be 40%.
    
    I'm suspicious why such an apparently good fund as Meridian Tactical
    Asset Allocation would not show up in Barron's.  One explanation is
    that they are very small; not likely given those numbers and the
    length of time they've been in business.
    
    There is a Meridian fund listed, but all the %return figures are N/A,
    which I presume means that they've only recently started up and 
    haven't established a track record yet.
    
    Anyway, I'd want to ask the salesman where you can find Meridian TAA
    listed in the WSJ or Barron's.  
    
    /Jim
    

    re .16
    
    This is the "Fund of Funds" approach that was such a fashion
    in the late 1960's (and crashed soon afterwards, helped on by
    a fair amount of criminal action [do the names Bernie Cornfeld
    and Robert Vesco ring a bell?]).
    
    I suspect that what you're seeing is the one start-up fund of
    several that did well (this is a standard technique for some
    large fund groups, by the way: they start several small aggressive
    funds.  After a few years, they publicize the winner and open it 
    to the general public, touting its great past record).
    
    If it were me and my $25K, I'd go for most of it in some no-load
    (like Vanguard's Wellesley Income, or the Nicholas Fund, or the
    Vanguard SP500 Index Trust, etc., depending on my risk and time
    preferences), with a "growth kicker" in another no-load (like
    Magellan or T. Rowe International Stock, etc.).  No way I'd go
    for the deal in .16--paying two sets of people to manage your
    money is expensive.  Paying three sets is just madness ("hit me 
    again, sir!").
    
    		-John Bishop

re .16

If I were a novice with $25K to spread among 5 funds, for instance.....

Since this guy is essentially building a Fund of Fidelity Funds, I can give you 
a first hand bit of experience/advice.  A few years ago I made an unscientific 
observation that has consistently held up.  

Fidelity publishes a magazine each quarter and they list the performances of
all their funds.  I thought, "Gee, what would happen if after seeing each
quarter's performance a manager simply shifted his Fidelity investments around
(within appropriate diversified categories) so that he fully jumped into the
latest "highest flyers" ?"  I have always held a secret suspicion that the "top
performers are top performers because they know something that the others do
not".  Instead of trying to figure out what they know, why not just tag along
as long as they are the top performers? 

So I bought into the "highest Flyers" (annual performance) in a few categories
in order to diversify.  The results have been satisfactory.  Net load fees, I
average over 20% per year and have done so with that philosophy for the last 4
years (since I have been playing this strategy). 

Granted, knowing what categories to invest in and when has helped, but all in 
all, I would say that for a relatively brain-dead selection process, it has 
worked. Perhaps not the best ROI attainable, but I'm happy.  And I don't pay
some Yuppie a service charge. 

I suspect that if you did this each month using the Kiplinger Magazine's 
ratings, you would do OK as well.

As Always, For What It's Worth...

Dave

    re:.17 on...
    
    Thanks for the advice.  I think I'll pass on this loaded fund and do my
    Morningstar research, etc.  Will also look into the no-loads mentioned.
    I just got my Aufhauser package .. for $10K they'll open my margin
    account and I can pretend I know what I'm doing .. Looks like I can get
    into no-loads through them, reasonable trading fees, etc.
    
    Going to Vegas with the other $15K  .. 'j'skidding ;>)
    
    /Kent