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The message from all these fund companies is that we'll use the new T-class shares for the DOL-related accounts. But we'll keep and use the commission share classes for everything else. M* asks how the A (and B & C) shares will survive. Easy, there will continue to be very little disclosure from the salespersons. So much for ethics. Am I cynical? Yes. I've been around this industry a long time. Why else did American Funds institute yet another of its fund share classes? Each share class was designed to be used and marketed to a specific situation. Ridiculous.
I must be really stupid. I've knowingly purchased B shares. At the time it seemed like it was worth the cost to get more dollars into a sheltered account (401k) where they would grow for 25-50 years without having to worry about taxes. Wasn't any more expensive than noload funds offered inside annuity wrappers I've had with other 401k's.
At least I have company in my stupidity. Lots of people here have purchased C shares of Templeton Global, or at least recommended it: CathyG, Shostakovich, Catch, Scott, 00BY.
Then there's OJ and his American Fund shares, recommended to him by what he described as an honest adviser.
I'm sure I can find others here as well who have ever paid a load. I don't think we're all stupid. But that's just MHO.
msf, what you describe is not stupidity, it's the chance to learn from our mistakes. Goodness knows I have made plenty in the past, and probably will do so in the future. We can all disagree on things (and we do), but one of the best features of this discussion board is the flow of information that allows each of us the opportunity to read, digest, respond, and learn. We can thank David, and we can thank Roy for his original idea behind the discussion board.
Hi @msf Yup, have held TEGBX (C shares); cause I/we wanted the fund holding at the time and the fund was only available via a company retirement offering. I don't recall all of the nuts and bolts of the share pricing at the time, but that the outright E.R. is/was .77%. Our house history with this fund: ---Purchase about May, 2009.........sell May, 2012 total return for this period = +27% ---this fund ran about another year with solid returns; May 2012-May 2013 = +14% ---Two price peaks occurred near May, 2013 and again at Sept. 2014 ---May 2013 return through present = -1% ---Sept 2014 return through present = -2%
I won't "dis" the manager's skill and/or knowledge of global bonds. Our house was merely attempting to wade through the nasty investing environment of the time. The U.S. was still moving to the next Q.E. policy, Euroland was still in austerity mode, Greece was blowing investing "stuff" up every 6 months or so and bonds were still having positive price moves (U.S. credit rating downgrade, Aug. 2011). TEGBX during our holding period was another diverse area in bondland, aside from investment grade and high yield. Playing in bondland is about as much of a challenge as one may choose in the investment world, IMHO. So, we got lucky with our "in" period for this fund, but apparently left when the leaving was good. I will presume @JoJo26 never had to be concerned with "A" or "C" share choices inside an offered retirement program. We all have different plates of choice, at least involving retirement plan offerings via an employer. I will nominate you, @msf for the MFO archiver award.
For what it may be worth and to whom it may concern ...
I have been investing a good number of years and a good number of my A share fund holdings can be traced back to the 70's and beyond. When I look at what some brokerage houses are charging in wrap fees of upward of one percent (and more) and I compare it to what Morningstar estimates my fund fee ratio to be (0.86%) ... Well, I'm thinking I've gotten a great deal compaired to others who are paying an annual account wrap fee plus advisor fees, etc. In addition, there is no sales load on American Funds A share funds (as well as some other fund families) once a million dollar threshold has been reached. And, purchase discounts are available depending on how much one invest with most loaded fund families back of the million.
In addition, I pay no account fees (or advisor fees) to hold my funds at my brokerage house which includes my IRA account. So for me buying A share funds and holding them through the years have been indeed a low cost option (not saying there are not other low cost options available).
I'm thinking I am going to continue to keep what I have and let my broker grandfather my IRA account in April when the DOL ruling takes effect.
And, @JoJo26 of your bold comment ..., I am most thankful that you don't govern my affairs for you appear, to me, you might be a person that is penny wise but dollar foolish.
@BobC - thanks for your post. In some cases at least, as @catch22 pointed out, the learning experiences weren't even mistakes. At the time there were sound reasons for the choices, whether they worked out or not.
Small companies often use annuities in their 401(k) plans. The annuities generate so much income for the insurance companies that they don't charge the employer (plan sponsor) anything for all the filings and administrative work they provide. This makes the employer happy, the employees less so.
With C shares, some annuities give you credit for the trailing fees they are getting from the funds. So instead of paying, say 1.25% for the annuity and 1.77% for TEGBX, you'd get credit for the 1% kickback, and get charged a total of : (1.25% - 1%) + 1.77% = 1.25% + (1.77% - 1%) = 2.02%.
Effectively, you're getting TEGBX for 0.77%.
Regarding archives - google is your friend. Of course, you have to know what you're looking for
And, @JoJo26 of your bold comment ..., I am most thankful that you don't govern my affairs for you appear, to me, you might be a person that is penny wise but dollar foolish.
Old_Skeet
Talk to me in 15 years and we will see whose portfolio performs better. Why on earth would you want to dig yourself into a 2-5% hole by paying loads.....
It is really simple @JoJo26, pay the up front load and avoid the ongoing account wrap and advisor fees plus higher transaction cost, etc. Also, note the load diminishes as the amount invested increases. With load funds, it is all contained into one while in most no load funds many of the items contained in to the loaded fund fee structure are paid separate by the investor such as transaction cost, advisor fees, and account wrap fees, etc. In addition, once the sales load is paid an investor is free to do nav exchanges into other funds within the family of funds without paying another load.
By my math the one time load is extreemly small considering the number of years I have been invested and, as such,is no longer factored into my expenses. According to Morningstar I pay an estimated 0.86% expense ratio for everything. With this, I plan to continue to move forward as I have in the past.
Jo-Jo - Stop taking your cues regarding etiquette from the Pres-elect. I've also on occasion purchased load shares. So will proudly join the growing group who say they have.
We paid a load on a bunch of AF A-shares back in the early 00s when we transferred our full-service portfolio to (then) AG Edwards and let the new broker/FA manage part of the portfolio .... and before we really looked into/thought about loads. All have performed admirably since then and I've more than recouped those fees. And tbh, although that particular account is mainly a hands-off one[1] with very little trading activity except when we make minor stock swaps on the "individual equity side" we lucked out and have a really good, low-key, no-pressure and conscientious broker/FA there.
But would I buy a loaded fund now? Unless there's a really really compelling reason (which I doubt) .... ABSOLUTELY NOT.
[1] My TDA account is much more active, but that's still not saying much since I'm not an active trader anymore.
In addition to having no alternatives in Annuities and some 401k, some of us have worked with brokers in the past who only have access to A or C shares. I have done the math many times, and old_skeet is correct... A shares make sense if you hold them for long periods of time ( usually 7 years or longer) to take advantage of their generally lower ER, even factoring in the opportunity cost of not investing the 5.75% immediately.
If you use a broker whose advice you find excellent, this is a small price to pay and probably a better deal than the 1% of all assets Merrill Lynch is reportedly going to charge their customers yearly.
There are some brokers whose advice is excellent. Advisers, fee only or in wrap accounts or whatever, will not work for nothing. I would rather know what I was paying them than find hidden fees buried in the prospectus
A shares make sense if you hold them for long periods of time ( usually 7 years or longer) to take advantage of their generally lower ER, even factoring in the opportunity cost of not investing the 5.75% immediately. ... If you use a broker whose advice you find excellent, this is a small price to pay and probably a better deal than the 1% of all assets Merrill Lynch is reportedly going to charge their customers yearly. ... There are some brokers whose advice is excellent. Advisers, fee only or in wrap accounts or whatever, will not work for nothing. I would rather know what I was paying them than find hidden fees buried in the prospectus
John Rekenthaler, Vice President of Research at M* would seem to agree with you. He makes essentially the same point in Barron's ("The View From 30,000 Feet" - Jan. 9, 2017). Rekenthaler adds: "I think A shares, in which you pay a one time commission (known as a load) are underappreciated." ---
(This is from the print edition. However, Ted's recent link, "How to Pick Great Funds", should take you to the online version.)
Jo-Jo - Stop taking your cues regarding etiquette from the Pres-elect. I've also on occasion purchased load shares. So will proudly join the growing group who say they have.
Comments
At least I have company in my stupidity. Lots of people here have purchased C shares of Templeton Global, or at least recommended it: CathyG, Shostakovich, Catch, Scott, 00BY.
Then there's OJ and his American Fund shares, recommended to him by what he described as an honest adviser.
I'm sure I can find others here as well who have ever paid a load. I don't think we're all stupid. But that's just MHO.
Yup, have held TEGBX (C shares); cause I/we wanted the fund holding at the time and the fund was only available via a company retirement offering. I don't recall all of the nuts and bolts of the share pricing at the time, but that the outright E.R. is/was .77%.
Our house history with this fund:
---Purchase about May, 2009.........sell May, 2012 total return for this period = +27%
---this fund ran about another year with solid returns; May 2012-May 2013 = +14%
---Two price peaks occurred near May, 2013 and again at Sept. 2014
---May 2013 return through present = -1%
---Sept 2014 return through present = -2%
I won't "dis" the manager's skill and/or knowledge of global bonds. Our house was merely attempting to wade through the nasty investing environment of the time. The U.S. was still moving to the next Q.E. policy, Euroland was still in austerity mode, Greece was blowing investing "stuff" up every 6 months or so and bonds were still having positive price moves (U.S. credit rating downgrade, Aug. 2011). TEGBX during our holding period was another diverse area in bondland, aside from investment grade and high yield. Playing in bondland is about as much of a challenge as one may choose in the investment world, IMHO. So, we got lucky with our "in" period for this fund, but apparently left when the leaving was good.
I will presume @JoJo26 never had to be concerned with "A" or "C" share choices inside an offered retirement program. We all have different plates of choice, at least involving retirement plan offerings via an employer.
I will nominate you, @msf for the MFO archiver award.
This link is overview of this fund and class info:
https://www.franklintempleton.com/forms-literature/download/406-FF
Regards,
Catch
I have been investing a good number of years and a good number of my A share fund holdings can be traced back to the 70's and beyond. When I look at what some brokerage houses are charging in wrap fees of upward of one percent (and more) and I compare it to what Morningstar estimates my fund fee ratio to be (0.86%) ... Well, I'm thinking I've gotten a great deal compaired to others who are paying an annual account wrap fee plus advisor fees, etc. In addition, there is no sales load on American Funds A share funds (as well as some other fund families) once a million dollar threshold has been reached. And, purchase discounts are available depending on how much one invest with most loaded fund families back of the million.
In addition, I pay no account fees (or advisor fees) to hold my funds at my brokerage house which includes my IRA account. So for me buying A share funds and holding them through the years have been indeed a low cost option (not saying there are not other low cost options available).
I'm thinking I am going to continue to keep what I have and let my broker grandfather my IRA account in April when the DOL ruling takes effect.
And, @JoJo26 of your bold comment ..., I am most thankful that you don't govern my affairs for you appear, to me, you might be a person that is penny wise but dollar foolish.
Old_Skeet
Small companies often use annuities in their 401(k) plans. The annuities generate so much income for the insurance companies that they don't charge the employer (plan sponsor) anything for all the filings and administrative work they provide. This makes the employer happy, the employees less so.
With C shares, some annuities give you credit for the trailing fees they are getting from the funds. So instead of paying, say 1.25% for the annuity and 1.77% for TEGBX, you'd get credit for the 1% kickback, and get charged a total of :
(1.25% - 1%) + 1.77% = 1.25% + (1.77% - 1%) = 2.02%.
Effectively, you're getting TEGBX for 0.77%.
Regarding archives - google is your friend. Of course, you have to know what you're looking for
By my math the one time load is extreemly small considering the number of years I have been invested and, as such,is no longer factored into my expenses. According to Morningstar I pay an estimated 0.86% expense ratio for everything. With this, I plan to continue to move forward as I have in the past.
Wishing you the very best while you grow wisdom.
Skeet
I've also on occasion purchased load shares. So will proudly join the growing group who say they have.
(Ain't that the truth OJ?)
But would I buy a loaded fund now? Unless there's a really really compelling reason (which I doubt) .... ABSOLUTELY NOT.
[1] My TDA account is much more active, but that's still not saying much since I'm not an active trader anymore.
If you use a broker whose advice you find excellent, this is a small price to pay and probably a better deal than the 1% of all assets Merrill Lynch is reportedly going to charge their customers yearly.
There are some brokers whose advice is excellent. Advisers, fee only or in wrap accounts or whatever, will not work for nothing. I would rather know what I was paying them than find hidden fees buried in the prospectus
---
(This is from the print edition. However, Ted's recent link, "How to Pick Great Funds", should take you to the online version.)