Understanding one-time investment fees, such as sales loads
Sales load charges and commissions on investment purchases differ from the financial service industry’s numerous other recurring methods of charging fees to their retail consumers.
Sales loads are less straightforward to analyze for investment lifetime cost-effectiveness, compared to annually recurring charges. (See: Pay less to get more)
If you have a sophisticated and fully integrated lifetime investment growth modeling calculator like VeriPlan, which automatically takes into account all your investment returns expenses and taxes, then your lifetime losses to recurring investment expenses can be projected with reasonably straightforward methods. However, projecting the lifetime impacts of sales load charges requires additional and different projection modeling techniques, which VeriPlan also includes. (See: VeriPlan’s personal financial planning software helps you to understand the full lifetime costs of your excessive investment expenses)
Unlike recurring charges against current assets, front-end sales loads represent assets that did not get into your investment portfolio in the first place. They disappear before the process of calculating future investment returns and asset values can even begin. Therefore, your financial modeling software needs to remember that you lost or will lose these assets, and it needs to calculate the cumulative value of these ‘phantom’ assets over your lifetime.
Concerning the mechanics of a front-end sales load, when you pay a front-end load, some of your total payment is deducted at the beginning of the investment process. Depending upon the percentage of the front-end load charged, the amount invested on your behalf is reduced by the front-end load charge. If you write a check for $1,000 and the front-end load is 6%, then the sales load will be $60 and the remaining $940 would be invested for you. If you want to have $1,000 actually be invested for you when you pay a 6% load charge, then you must write a check for $1063.98. The front-end load formula used is: “Total $ Investment & Load charge” = “Actual $ Investment” / (1 – “% Load”).
The industry is gracious enough to offer you a supposed choice in this matter, when you buy mutual fund shares. You can choose between A, B, and C share classes. In doing so, industry sales representatives may suggest that you get to choose what is “best” for yourself. In this faux decision process, which The Skilled Investor has dubbed the “ABC Share Class Shuffle,” individual investors choose a share class. In the ABC Share Class Shuffle you really just choose one form sales fee over another. As long as you buy and pay a fee, the sponsoring firm and the sales rep do not care which choice you make. (See: Can you really get free and objective investment advice, when you pay investment sales loads?)
Brokerage firms understand well the behaviors of their individual investor customers. While brokerage firms provide apparent choices to pay front-end loads versus back-end loads with higher and lower annual investment fees, you can expect that the pricing of these alternatives will be neutral on a risk-adjusted basis from the investment bank’s point-of-view. It is probable that brokerage firms price their loads to be roughly equivalent on an expected profits basis and then let their customers sort themselves by personal preferences. Investors try to pick the fee that would be least costly, but they pay too much no matter what.
VeriPlan Is Simply The
Best Financial Planning Software
You Can Buy!
Only $57 for a license for ALL your household PCs
… with Free Shipping of the CD within the USA
Full 30-Day, 100% Money Back Guarantee — No Questions Asked
No Support Contract Required
No Need To Buy Upgrades, Since All Parameters Are User-Changeable
VeriPlan is a Great Product, a Great Deal,
and a Great Help with Your Personal Financial Planning.
Thank You Very Much for Your Order!
Note: We mail your VeriPlan CD on the next business day after PayPal has notified us of your order. When your order ships, we will send a shipment notification email to you using the email address supplied by PayPal. VeriPlan is shipped via the USPS, and deliveries typically take 3 to 10 days to arrive.
Tags: investment fees
Personal Financial Planning
- American Funds – AMCAP Fund – Class A Shares (AMCPX) fetch a +1 Fund Authority Score (The table below in this article presents The Skilled Investor's Fund Authority Score and other information for the American Funds - AMCAP Fund - Class A Shares.
The diversified investment fund strategy of the American Funds - AMCAP Fund - Class A mutual fund shares (AMCPX)
According to its prospectus filing on the U.S. Securities and Exchange [...])
- California Investment S & P 500 Index Direct (SPFIX) pulls in a +8 Fund Authority Score (
The Standard & Poors 500 stock index is the most common equity index fund benchmark in the U.S. The S and P 500 tracks about 75% of publicly traded U.S. equity market asset value. The dominant issue in choosing among passively managed index mutual funds and ETF funds benchmarked against the S & P 500 [...])
- The Optimal Investment Strategy for Individual Investors (The Solution - ONLY follow financial strategies that are scientific, passive, diversified, savings focused, risk controlled, low cost, and tax efficient
A previous article, "The Problem - Straight answers about personal financial and investment planning are difficult to find," summarized important reasons why individuals may experience difficulties, even if they are intent upon doing better with [...])
- Factors Favoring Roth IRA and Roth 401k Plan Contributions (Factors that tend to favor Roth IRA and Roth 401k tax-advantaged plan contributions
In a recent article, "Traditional versus Roth tax-advantaged plan contributions," The Skilled Investor discussed why the average taxpayer would tend to benefit more by contributing to traditional rather than to tax-advantaged Roth IRA and Roth 401(k) retirement plans. This follow-up article in two-parts [...])
- Tax-Advantaged Retirement Investing Is Good for Most People (Tax-advantaged investing is very good for most people at most times
A previous article, “The Solution - ONLY follow financial strategies that are scientific, passive, diversified, savings focused, risk controlled, low cost, and tax efficient,” suggested that individuals are much better off with a well-considered financial viewpoint. A stable set of financial beliefs can help you [...])
- Avoiding Financial Advisor Frauds and Scams – Part 1 (
Part 1 of the The Never-Do List - 22 Good Ways to Avoid Financial Advisor and Investment Counselor Frauds and Scams
This article discusses things that you should “never do” with a financial planner or investment advisor, and it covers adviser selection, contracts, signatures, and ownership title of your assets.
You should never do certain things with [...])
- Nationwide S&P 500 Index Fund – Class A Shares (GRMAX) fetch a +2 Fund Authority Score (Fund Authority Scores rate mutual funds and exchange traded funds (ETFs) on the most important economic factors that influence individual investors' net long term diversified investment fund performance. The Skilled Investor developed the Fund Authority Score system to provide individual investors with concise and objective summaries of mutual funds and ETFs for comparisons within investment [...])
- Retirement Savings Needs of Renters Without Financial Planning Improvements (Retirement savings needs of renters prior to any financial planning improvements
Starting to plan with a non-optimal baseline projection
Fran and Fred Frugal, both age 30, are a married working couple with $100,000 in combined annual earned income. They want to understand how valuable different personal finance strategies could be to their lifetime finances and retirement security. [...])
- American Balanced Fund – Class A Mutual Fund Shares (ABALX) collect a +1 Fund Authority Score (The table below in this article presents The Skilled Investor's Fund Authority Score and other information for the American Balanced Fund - Class A Shares.
The diversified investment fund strategy of the American Balanced Fund - Class A mutual fund shares
According to its prospectus filing on the U.S. Securities and Exchange Commission EDGAR system, the investment [...])
- Reduce investment expenses and control taxation – Step 7 of 10 Financial Planning Steps in the Right Direction (CLICK HERE TO READ THE SKILLED INVESTOR's OTHER ARTICLES ABOUT THESE "10 FINANCIAL PLANNING STEPS IN THE RIGHT DIRECTION
Even with optimal investment strategies, there is still substantial room to improve upon net investment performance through continued and vigilant focus on controlling investment costs and tax realization.
The fees extracted by the financial securities industry increased substantially [...])
- Mutual Fund and ETF Screening Requirements (
On-line screening of mutual funds and ETFs: minimum requirements
In this article, The Skilled Investor discusses minimum requirements for on-line mutual fund and ETF screening tools. This article summarizes our seven scientifically based fund selection criteria and reports on our survey of the capabilities of free on-line website tools to do screens using these criteria.
Automated fund [...])
- The John Bogle Blog and His Financial Article About ETFs (John C. Bogle's Blog and his article about ETFs
This article is a heads-up to people interested in investment blogs and personal finance blogs.
John C. Bogle, the founder of The Vanguard Group, Inc., has a blog called The Bogle eBlog. (If you are wondering about "eBlog," it is an anagram of Bogle.) Mr. Bogle just posted [...])
- Part 3 of the Never-Do List – What Not to Do with a Financial Advisor (
Part 3 of the The Never-Do List - 22 Good Ways to Avoid Financial Advisor and Investment Counselor Frauds and Scams
This article discusses things that you should "never do" with a financial planner or investment advisor, and it covers unsolicited advice, sales pressure, and account decision-making discretion.
You should never do certain things with a financial [...])
- Screening Index Mutual Funds with IndexUniverse.com (Screening index mutual funds on-line with IndexUniverse.com
In this article, The Skilled Investor discusses how to screen index mutual funds on-line. This article focuses on using the free index mutual fund screener and database available at IndexUniverse.com.
We also discuss how to apply our seven scientifically based mutual fund screening criteria.
In a previous article, The Skilled Investor [...])
- A Financial Decision Tool That Becomes Increasingly Valuable Over Time (As a financial decision tool, VeriPlan becomes increasingly valuable with the passage of time
Summary: While VeriPlan is an genuine bargain because of its low cost, it is an even greater bargain, when you consider that VeriPlan has no built-in obsolescence and that it can be used productively for years. We have engineered VeriPlan, so that [...])