mutual funds sales loads

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gautamsa
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mutual funds sales loads

Post by gautamsa »

Hello, how do front end sales loads for mutual funds work ? eg I have invested $1000 in a mutual fund and then every month I add $100 to the fund. Do I get charged the sales load only once on the $1000 which I invested first time or do i get charged for the $1000 first time invested and for every $100 every month of recurring payment ?
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David Jay
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Re: mutual funds sales loads

Post by David Jay »

Generally, yes. Not all load plans are the same, but generally you pay the load on all new money, but typically not the re-investment of dividends.

Broader question: Why, in this day and age, with thousands of No-load mutual fund choices, would anyone even consider paying a load?
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pkcrafter
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Re: mutual funds sales loads

Post by pkcrafter »

If you give an advisor $1000 for A shares (front-end load), you actually only get $942.50 invested assuming you are buying A shares with a typical load of 5.75%. The difference goes to the advisor. This is structured in such a way that you don't notice the load (commission) that was removed. Every time you buy more shares, you pay that commission. Not a good idea when you can easily buy funds with no load.

https://www.thebalance.com/is-it-best-t ... es-4039035

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neurosphere
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Re: mutual funds sales loads

Post by neurosphere »

gautamsa wrote: Mon Aug 24, 2020 9:44 am Hello, how do front end sales loads for mutual funds work ? eg I have invested $1000 in a mutual fund and then every month I add $100 to the fund. Do I get charged the sales load only once on the $1000 which I invested first time or do i get charged for the $1000 first time invested and for every $100 every month of recurring payment ?
Once you learn how load shares work, you can forget how they work other than to remember to avoid them, and simply select no-load, low-fee mutual funds. Why pay a load? :D
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DSInvestor
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Re: mutual funds sales loads

Post by DSInvestor »

neurosphere wrote: Mon Aug 24, 2020 10:30 am
gautamsa wrote: Mon Aug 24, 2020 9:44 am Hello, how do front end sales loads for mutual funds work ? eg I have invested $1000 in a mutual fund and then every month I add $100 to the fund. Do I get charged the sales load only once on the $1000 which I invested first time or do i get charged for the $1000 first time invested and for every $100 every month of recurring payment ?
Once you learn how load shares work, you can forget how they work other than to remember to avoid them, and simply select no-load, low-fee mutual funds. Why pay a load? :D
I agree with this. My mom used to be with Ameriprise and they put her in funds with high front end loads, 12b-1 fees and high expense ratios. When I explained front-end loads to my mom, she mentioned it to her advisor and then she was put in a class B fund with no front end load but much higher expense ratio and 12b-1 fees to make up for the loss of front end load. Class C shares have back end loads. When I found out what happened, I helped my mom move her assets to Vanguard. That was over 20 years ago.

With high quality no load, low cost mutual funds available at Vanguard and many other firms, you should just remember to avoid load funds and advisors that recommend them.
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grabiner
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Re: mutual funds sales loads

Post by grabiner »

If your advisor didn't explain how loads work, that is a clear indication that you need a new advisor (which could be yourself). A good advisor will explain your investment options, including costs and benefits. An "advisor" who has no interest in helping you, only in his or her own commission, will recommend those investments which generate the highest commission, and minimize the importance to you.
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rkhusky
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Re: mutual funds sales loads

Post by rkhusky »

Vanguard does have a few funds that charge purchase and/or sales loads in order to discourage frequent trading. But instead of the loads going to Vanguard, they are returned to the shareholders of those funds.
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gautamsa
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Re: mutual funds sales loads

Post by gautamsa »

DSInvestor wrote: Mon Aug 24, 2020 10:46 am
neurosphere wrote: Mon Aug 24, 2020 10:30 am
gautamsa wrote: Mon Aug 24, 2020 9:44 am Hello, how do front end sales loads for mutual funds work ? eg I have invested $1000 in a mutual fund and then every month I add $100 to the fund. Do I get charged the sales load only once on the $1000 which I invested first time or do i get charged for the $1000 first time invested and for every $100 every month of recurring payment ?
Once you learn how load shares work, you can forget how they work other than to remember to avoid them, and simply select no-load, low-fee mutual funds. Why pay a load? :D
I agree with this. My mom used to be with Ameriprise and they put her in funds with high front end loads, 12b-1 fees and high expense ratios. When I explained front-end loads to my mom, she mentioned it to her advisor and then she was put in a class B fund with no front end load but much higher expense ratio and 12b-1 fees to make up for the loss of front end load. Class C shares have back end loads. When I found out what happened, I helped my mom move her assets to Vanguard. That was over 20 years ago.

With high quality no load, low cost mutual funds available at Vanguard and many other firms, you should just remember to avoid load funds and advisors that recommend them.
Thanks...yeah I am realizing how all these advisor work. All these fees.
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Stinky
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Re: mutual funds sales loads

Post by Stinky »

Is the advisor who put you in front load mutual funds the same one that sold you a whole life policy that you posted about a couple of days ago? Here’s your prior thread:

viewtopic.php?f=1&t=323540

If so, you need to get away from this guy. Right now. Double-quick.

Hopefully he hasn’t sold you anything else that is costing you money (and lining his pockets).
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GMT-8
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Re: mutual funds sales loads

Post by GMT-8 »

This is exactly what happened to me.

I told an advisor at a reputable brokerage that I didn't want any "Load Funds" (I didn't know what a class A fund was), and so he put a chunk of my money into back-loaded funds (class C). After the fact he explained that I didn't have to pay any fees if I stuck there for 7 years. I moved all my money out a month later, figuring that the price of the "hidden" fees was a good lesson learned by both myself and by HIM (*#*(&%^%^).

Get out when it seems right, and good luck to you,

GMT
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