core remodeling services 1950s kitchen remodel atrium additions to homes single wide mobile home exterior remodel local bathroom remodelers .. Chicago Drug testing

Expense Ratios

Mutual funds and brokers are always preaching not to buy any fund with a high expense ratio. That is the annual costs of the fund to pay for trading of stocks within their portfolio, salaries, rent, telephone, analysts, etc. Most of them tell you not to buy one that exceeds 1.5%. There is also another expense added by some mutual funds called a 12b1 (usually from ?% to 1%) that is supposed to be used for promotional purposes only. These numbers may appear small, but they are being applied to multi-millions, sometimes billions of dollars.

The 12b1 is for advertising of the fund to bring in more investors. The more customers, the more money in the fund, spreads expenses over a greater amount of money and should reduce the expense ratio.

We have seen allegations recently that many funds are putting the 12b1 in the pockets of the fund managers and even as the fund gets larger and larger the expense fees have not been reduced.

I won't be discussing here the loads (commissions) charged as I see no reason to buy any fund that charges commissions; there are thousands of no-load (no commission) funds that outperform the load funds.

For example, here are 2 funds. The first is Pioneer Fund which incidentally has a commission charge of 5.75% with a price per share increase of 22% in 2003 and an expense ratio of 1.11%. Another fund Yacktman Focus Fund with no commission charge and a return of 27% with an expense ratio of 1.25%. Five percent better return is a huge difference. Which one would you buy?

The Merrill Lynch Global Technology Fund with a back end load of 4% and an expense ratio of 2.78% yielded 52% so far this year. Another no-load fund, Profunds BioTechnlogy, with an expense ration of 2.92% and has made 56% YTD. Another no-brainer as to which one you wished you had bought earlier this year. Just a couple of more: Enterprise Growth Fund with a commission of 4.75%, an expense of 1.73% and a return of 20% YTD and Rydex Energy Fund a no load with expenses of 1.39% and a return of 23% YTD.

Even if you leave out the commission charges you will easily find funds that have returns in excess of those with lower expense ratios. Don't be fooled by Wall Street nonsense of anything but net total return on your money. Period. If you take into account the additional commissions that many funds and brokerage companies charge you will quickly see you have been hoodwinked all these years.

The above examples are not extreme as I don't think expense ratios should mean anything to influence your purchase. Don't let any broker or financial planner sell you anything other than the best return for your money.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Copyright 2005

In The News:

The Information Age

It is wonderful to be alive in the information age.... Read More

Mutual Fund Ball and Chain

The broker told me not to sell because the mutual... Read More

DIY Portfolio Management

Exchange Traded Funds (ETFs) are growing. Investors are choosing low... Read More

A Triple Dipper: How to Make 3 Profits on 1 Stock Trade

This is a rather simple strategy with which I am... Read More

Why Technical Indicators

The fight continues to rage among traders who use technical... Read More

A Stock Market Investment Strategy

I feel that an investment strategy in the stock market... Read More

Is Active Trading The Answer?

One of the main reasons many of us get into... Read More

Oil Stocks As A Long Term Investment

The demand for world oil is increasing while world reserves... Read More

You Don?t HAVE To Be Trading

As a novice trader, you'll often feel the need to... Read More

Investing in Stocks and The Game of Monopoly

To begin, you might look at playing the stock market... Read More

Peer Groups

Whenever I see mutual fund comparisons in the trade publications... Read More

Prosperity

It has fallen upon the consumer to make our economy... Read More

Small-Cap Stocks: The Beginning of the Journey

When an individual investor wants to roll up his sleeves... Read More

What Are You Waiting For?

Do you own any mutual funds? In an IRA or... Read More

Acapulco - The Stock Market Dives

There is a famous cliff on the ocean in Acapulco... Read More

Its Better

Question: How does it get better when it gets worse?Last... Read More

Pension Plans

If you have a pension plan at work you will... Read More

Does Japan Matter?

For the last 12 years we have seen the Japanese... Read More

Choosing An Investment Stock Broker

If you want one.And I don't recommend any broker with... Read More

Buying Stocks and the Importance of Correct Timing

An investor can find and research the best stock on... Read More

Stocks & Oil, Sat Jun 18th, 2005

Both the stock market and oil prices rallied recently, which... Read More

Trading vs Investing

I often hear from people, "I don't trade. I invest.... Read More

Long Term Financial Vehicles

Investing in long-term financial vehicles give you the most gains... Read More

Pamplona, the Wild Investment Bulls

You remember (they show it on TV every year) the... Read More

Online Investing & Stock & Share Trading: 4 Reasons Why Most Online Investors & Traders Go Broke

Are you attracted to the idea of being in control... Read More

street light music broken street light Pete's produce ..
street light music broken street light Pete's produce ..