Should I Buy These Great Load Funds

I have a quick question does anyone know about Pioneer Cullen Value (CVFCX), and Quaker Strategic Growth (QUAGX). They have a remarkable track record and have been recommended by Kiplinger for load funds. Thought it might by worth paying the load for the funds since there returns are higher than there peers. Thanks.

Quagx has performed very well and consistently over the years . The dollar return on $10,000 invested over a 10 year period also pretty good. I would look at it again in comparison ot other funds but I would pay the fee on this one.

As to CVFCX, I would not. The return over the years not as impressive for paying for a big load and total return over the past 10 years, not that impressive when compared to other funds that are cheaper.

Just my opinion based on how its done in the past 10 years which has had bear and bull markets.

benryanb

I would avoid load funds only because I hate paying any more than the expense ratio. However, if they are peforming well and in the last 10 years have made a significant growth than maybe you can risk it. But you may be able to find other mutual funds just as good with similiar securities, diversification and objective. I would look around before I buy one.

qk

I never bought any funds with load, front or back, simply because I don't understand why anyone would charge a fee for the privilege of investing in them. If they are confident they will do well, they can make tons of money from management fees as is the case for most well-performing no-load funds. Just my personal opinion of course, and maybe I've missed out on good opportunities with this approach, but no regret. :)

geesh, you would pay a load because paying a load gets you a lower ixpense ratio. paying the load SAVES the investor money over time and it doesnt save pennies, it saves 10s and 100s of thousands of dollars!!!

Benryanv;

The sponsor of this forum, Kiplingers, has a very good mutual fund education section. You have to dig a little to find it, (here's the URL of the domestic fund rankings -- http://www.kiplinger.com/investing/funds/completetables/2007_Jun_US_Stocks.xls) but you can download data that will show you at a glance performance for various time periods. And more interestingly, you can look at both sales charges and expense ratios side by side. You'll see that there is no definite trend -- loads and expenses are all over the place -- and that blanket generalizations -- such as paying an upfront load will always get you a lower expense ratio -- should be viewed skeptically.

Yes it's a chore to begin educating yourself on these matters, but if you can go to the trouble of finding this board to ask this question, you're probably ready to take that step.

Best of luck.

since the "blanket comment" comment is apparently directed to me, i will offer the following.

go to the FINRA Expense Analyzer http://apps.finra.org/investor_Information/ea/1/mfetf.aspx and see for yourself. is it possible that you will find a loaded fund share that is more costly than its no load variant .... i suppose. if you find it, please post here. i havent found one yet.

p.s. not to speak poorly of my host (kiplingers) but lets remember, they are in the business of selling you their advice by virtue of advertising and circulation. in all fairness, the company couldnt give a rat's patoot if you lose money ... they only care if you cancel your subscription.

that said, kiplingers has a lot to offer. just see it for what it is ... and what it isnt.

Of course this is the type of exercise in which you could spend all day picking and choosing funds that support or refute the point you're trying to make, but since the challenge was thrown down ........

My contenders are
Fidelity Equity-Income Fund (FEQIX) -- no load
Fidelity Advisor Equity Income Fund Class A (FEIAX) -- 5.75% front end load, with various breakpoints.

Since the challenge was to analyze comparable funds, I thought a broker-sold fund and no-load clone from the same fund family would be a valid way to go.

Assumptions:
$100,000 initial investment -- this resulted in only a 3.5% front end load for the broker sold option
10% aveage annual return
10 year and 20 year holding periods

Total account values after 10 years:

No load $242,380.72
Load $226,816.62

Total account values after 20 years:

No load $587,454.15
Load $533,116.88

Like I said, we could plug in different alternatives all day long to make one choice look better than the other, but this one does support the contention that some noloads will be beat the broker sold alternative over time.

gaken, thanks for taking the challenge. you ran EVERYTHING exactly the way it should be run.

just one small problem. the two funds are not like funds. they are similar. they are both with fidelity, they are both income funds, they even kinda sound the same. however, their holdings are NOT the same. their risk is NOT the same. even their returns are NOT the same.

if nothing else, wouldnt it be kinda fair to assume that if one fund had greater RETURNS then it would have greater RETURNS!

the point is to compare a red delicious apple with another red delicious apple. the only question is where you buy it and the costs. all other factors MUST remain the same if you want to do an analysis.

find a fund that offers a preferred class (A) and a no load variant (C) and run those numbers. those two funds are the SAME fund with different pricing structure.

try TEPLX and TECAX (the A and C share of Templeton Growth) for starters. then go crazy with any other funds you care to.

hasta!

p.s. Fidelity SUCKS!

i can respect a company that wants to focus only on no-loads (vanguard).

i can respect a company that offers funds with different pricing structures (Franklin Templeton and about a thousand other companies).

i can not respect a company that not only competes with itself. that has no identity. but hides itself in the closet cause of its shame.

Fidelity funds cannot be found on the Fidelity Advisor website. Fidelity Advisor funds cannot be found on the Fidelity website. in fact, if you want to do a comparisson of the two funds you listed above ... you cant do it on the Fidelity Public Website.

Fidelity doesnt know if it wants to offer Advisor Funds like American Funds or no loads only like Vanguard or somewhere in between. they want to be everything, all at once, and in the end ... are nothing.

IMO;

For now I'll decline running any further projections. I think we could go "round-n-round" forever pointing out flaws in fund choices, methodology, etc. The point I would like to make however is that for a good number of individual investors, such as myself, who do have the interest and discipline to do their own homework, our needs are very well served by noload funds. I've been investing in mutual funds for about 20 years now. I will consult with an advisor on estate planning, insurance, living wills, etc., but don't see the need (as of yet) to do so in selecting mutual funds.

You and I are actually in complete agreement regarding broker-sold class A and C shares. My father's broker once convinced him to buy C shares, which infuriated me. Dad thought he was getting a deal by not paying an upfront sales charge and couldn't be convinced otherwise. I have noticed however that in a number of posts, that you regard C shares and noloads as being equivalent. I don't think this is totally accurate and is adding a bit of confusion to the discussion. I would say that buying a noload share from someone like Vanguard is very different from buying a C share from someone like Putnam. They both have no upfront charges, but the ongoing internal expenses are very, very different. I've read in a number of places that the accurate term for C shares is in fact "level load' as opposed to a true noload.

Regarding Fidelity, I would have chosen a different set of contenders had I know it would touch such a nerve! I don't think they necessarily suck, but I have said before that I think they do sell basically the same fund (or a similar variation) under different names. A novice investor could easily end up with a portfolio of Fidelity Funds that are all the same investment and not providing any diversification at all.

A pleasure sparing with you; have a great Thanksgiving!

this may surprise you but i will agree with your general theme.

in comparing loads to no loads we do have to look at A vs C shares if we are simply comparing the most debated issue of our time ... cost.

you can make a point that while valid, is not necessarily noteworthy, in that a no load from vanguard is not necessarily the same as a no load (C) from an investment company that offers multiple share classes.

further, you can build JUST AS GOOD a portfolio with no-loads (aka vanguard) as you can with loaded funds. but that skews the math so drastically you can no longer have a debate, per se, about the internal cost structures of each.

with many no loads or with many etf's and such, you incur other fees you would not have with standard preferred shares (that contain a load).

i love when the online trading platforms argue about $10 trades ... no! we have $8 trades ... no! we have $7.99 trades. the company transaction COSTS for an online trade is ..... ONLY 13 pennies per trade. i wish i had that kind of profit margin in my business!!!!!

further, with loaded shares there are NEVER any further transaction costs. liquidate one fund and buy another ... no cost!

it just happens that i hate fidelity. but make no mistake about it, what i am looking at is cost structure first and foremost ... that is the crux of this discussion. i would have compared the funds to each other no matter what fund company was chosen. it is doubtful i would have posted a whole separate post on the fund company; however, had you chosen any other company.

one final note on a comment you made which is, in my not so humble opinion, quite interesting: A novice investor could easily end up with a portfolio of Fidelity Funds that are all the same investment and not providing any diversification at all.
i think it a common pitfall that many of us ascribe our own level of knowledge, our own values, our own experiences to the majority of those in our society. in reality, i think you would find the vast majority of "sophisticated" investors could not give you a decent compare and contrast statement on 'diversification' and 'asset allocation'. gaken, dont be so sure that it would ONLY be the "novice" investor who may end up with a poorly diversified portfolio. in my experience i have found that MOST investors have portfolios that are grossly different than what they wanted.

DIYers are the vast majority of those that use no loads. advisors use them but, again, there is a separate fee arrangement. for those using advisors, the commission rate is by FAR the cheapest fee an investor can pay.

Happy Thanksgiving to your and your family, Gaken!

geesh, you would pay a load because paying a load gets you a lower ixpense ratio. paying the load SAVES the investor money over time and it doesnt save pennies, it saves 10s and 100s of thousands of dollars!!!
I don't believe that's true. I've read at least one study which claims the average expense ratio for load funds is slightly higher than it is for no-load funds.

the point is to compare a red delicious apple with another red delicious apple. the only question is where you buy it and the costs. all other factors MUST remain the same if you want to do an analysis.

find a fund that offers a preferred class (A) and a no load variant (C) and run those numbers. those two funds are the SAME fund with different pricing structure.
LOL, well, of course the C shares will lose that battle. But C shares have a 1% (or so) never-ending annual load added to the management fees. Remove that nasty load from the equation and then see which one wins out. ;)

in comparing loads to no loads we do have to look at A vs C shares if we are simply comparing the most debated issue of our time ... cost.
C shares are NOT no-load funds. They're more loaded than even A shares are (over time).

with many no loads or with many etf's and such, you incur other fees you would not have with standard preferred shares (that contain a load).
What, 12b-1 fees? Only in some mutual funds, not ETFs. And those are included in the expense ratios anyway, which, like I said, are still slightly lower than those for load funds, I believe. What else, maybe a $5-$20 transaction fee? C'mon. BTW, I think this may be the first time I've ever heard it implied that low-cost ETFs are more expensive than load funds.

I think I'm beginning to detect the unmistakable spin of a commisson-based advisor. :D

further, with loaded shares there are NEVER any further transaction costs. liquidate one fund and buy another ... no cost!
That depends on the brokerage.

for those using advisors, the commission rate is by FAR the cheapest fee an investor can pay.
If you're referring to sales loads for A & B shares, and over a long period of time, okay, I'll half-heartedly buy that one ;). But all things being equal, paying a load will get you a lesser return than not paying a load. And given that there are plenty of really good, reasonably-to-very inexpensive no-load funds out there, why put yourself at an immediate disadvantage by paying big bucks for a load fund? Unless you absolutely need the hand-holding of an advisor, I see no point in it. Maybe, just maybe, I'd consider a load fund if the track record of the fund manager was that much better than his no-load peers...but it'd have to be SIGNIFICANTLY better.

Alright, enough rambling. I stumbled upon this forum and had to respond (I enjoy a friendly debate). Happy Thanksgiving.

lots and lots of opinion. and i am really glad that you read "at least one study" but if you truly do "enjoy a friendly debate" why not offer up some facts or some proof.

Today's 1MOism: A debate without proof is just a friendly argument.

i have stated proof and ways to verify my "proof" in other posts. how bout this comment why put yourself at an immediate disadvantage by paying big bucks for a load fund? Unless you absolutely need the hand-holding of an advisor, I see no point in it. this research appears to be proof an advisory relationship is beneficial: http://qaib.com/showresource.aspx?URI=howadvisorsprotectfree&Type=FreeLook that said, and again, i dont care how you pay for it. but whether it is worth it or not, it seems right to me.

by the way, i am all up for a debate on costs. but c'mon, is 5% really "big bucks"? is that what you tell all your friends, "i am getting BIG BUCKS on my savings account!" hmmm, i think not.

Happy Thanksgiving to you as well. the turkey is in the oven and he is BIG (a lot more than 5 pounds, i guarantee that!).

Well, so far, we've both just offered up opinions in this thread. Whose is based more on facts, bias, whatever, is debatable (although, I'm sure we both have opinions on that too ;)). I do look forward to browsing the forum for your "proof" though (seriously). If I learn some new stuff, I'll be thrilled to have done so, even if it proves me wrong on some things.

As for your "proof" above, though, all it claims is that sound investors who dollar cost average outperform uneducated investors. Hardly a revelation there. You certainly don't need to pay big loads for the guidance of an advisor to learn and implement basic strategies like DCAing. Sure, investors who are uneducated (and likely to stay that way for whatever reason) may be better off with an advisor, even if it means paying for loaded funds--but then I did say I see no point in buying load funds "unless you absolutely need the handholding of an advisor." IMO, educating yourself on the basics and going with good, no-load funds is the better option for those who are willing/able.

Five percent isn't big bucks? Let's see, 5% of, say, $20k is $1000. If that money were invested, and assuming a 10% per year return, that equates to around $6700 after 20 years. After 30 years, $17,400! You don't think that's a lot of money to give away on a $20k investment?

Alright...time to prepare myself for massive quantities of turkey, stuffing and potatoes.

having finished my massive amounts of turkey and fully recovering from my Tramadol (oops, triptofan) overdose, i thought i would add:

if you read the QAIB, it is not simply stating that simple DCA is the cure all. dalbar does many of these studies each year. what it does say is that financial advisors being there as a sounding board and (as their name implies) advisor, helps investors keep the "Principles of Behavioral Finance" in mind in their decisionmaking process. To support this, even if an investor had a portfolio that returned 3/4 of the S&P, then THAT investor would significantly outperform a "normal" investor who had 25% better returns.

i had a great example (in my personal life) yesterday. i had a legal issue arise and it was semi short fuse. i thought about it and talked it over with my spouse and thought i had a good handle on it. i have an attorney on retainer but couldnt get hold of him until after i had done all my "personal" analysis. after speaking with my attorney, he added significant value to my decisionmaking process and while we actually did everything the way i had originally planned without his guidance ... we added one thing that made us all happier with the outcome.

finally, as for a lot of money: no, i dont think that paying $17400 (in opportunity cost) is too much when my account is valued at $331,550. further, if the dalbar study were correct then doing it on my own i would more likely have only $152,200 total after 30 years. so in effect:

1. pay an opportunity cost of $17,400 and get $331,550
2. pay no cost but have $152,200

so, another way of looking at it is that if i pay $17,400 i get an additional $179,350.

"i would buy that for a dollar!"

LA, make no mistake about it. i am not saying that YOU or that anyONE else cant do this on their own. but in the long run the value of having a professional to assist you in the research, planning, implementation, distribution, et al more than makes up for a small cost. but, i still respect a person for trying it out on their own.

i will bet you that a person who uses no professionals and does their money on their own is an employee somewhere. there is nothing wrong with that, i did it for DECADES. but if the person runs their own business (and is even moderately successful) then i will guarantee they use professional advisors to make smart decisions about their money choices. there is a reason why there is a saying that the rich get richer ... and according to Dalbar, the "poor" get "poorer" returns.

...but in the long run the value of having a professional to assist you in the research, planning, implementation, distribution, et al more than makes up for a small cost.
Well, sometimes yes, sometimes no. You seem like an honorable guy and I'm not saying you fall into this category, but many so-called "advisors" are nothing more than salesman looking to benefit themselves, not the client. I know of two cases personally in which the guidance received from the advisor was at best, incompetent, at worst, criminal. And this kind of thing isn't exactly news. It's not a gimme that receiving guidance from an advisor equates to better investing decisions, although, at times it surely does.

now this is an area where you and i can certainly agree to disagree.

your belief about salespeople is valid whether true or not. they are your feelings. they are based on your experience.

we live in a capitalist society ... and i support that. people who sell things (widgets, airplanes, financial products) are the engines of our economy. there will be those who try to sell things even when the customer doesnt need them ... that is both unfortunate and true enough.

that said, if you are working with a true professional you are least likely to encounter these negative traits. finding the right "professional" can be the stressful part. a consumer needs to do their due dilligence to ensure they are getting what they want and not some quack.

one of the first things i look for is the company. if i know nothing more, i think it allows me at least a starting point. i live in a nice neighborhood and there is a convenience store/gas station about 1 mile from my home. attached to it is a fairly run-down strip mall. i noticed that some "doctor" opened a shop there. he has neon signs in the window advertising tramadol and acupuncture.

while i am not in need of tramadol and not the type of person who would go for acupuncture, the setting wards me off like garlic to vampire. he could be a great doctor, but his office doesnt breed much confidence in me.

the same for financial services. you couldnt get me to fork over a dollar to a primerica or AIG rep to save my life. but if you find a good company and an advisor who has been in business for several years (without complaint or disciplinary action), i think you are ahead of the game.

then again, you might find someone in florida who seems to know what they are talking about at first but ends up being a dufus in a short period of time.

your belief about salespeople is valid whether true or not. they are your feelings. they are based on your experience.
Well, not quite. I don't base my views on the experiences of two people. As I said, this kind of thing is not exactly news.

finding the right "professional" can be the stressful part. a consumer needs to do their due dilligence to ensure they are getting what they want and not some quack.
Now that, I agree with!

then again, you might find someone in florida who seems to know what they are talking about at first but ends up being a dufus in a short period of time.

You all just never stop, do you?

At any rate...for those of you with children: how many of you could find an apple tree, sit your daughter underneath it, snap a picture, develop it, frame it, and be happy? Probably any number of you. Probably with a little research, you could even make your photo better; you know, tweak the ISO settings, play with the shutter speed, the aperature settings, etc. When you were finished, you could have a very nice picture of your daughter that you will treasure forever (even if you don't mess with the settings). Now, let's say you take your daughter to a professional photographer; do you think that the photographer may be able to make that picture just a little bit nicer? Of course!!! Why? Because the photographer does that for a living. It is their livelihood; they are paid to be good at taking pictures. Similarly, you can invest your own money, do a little research, find good funds, implement good strategies, and at age 65 be fairly happy with your nest egg. On the other hand, if you take it to an advisor, you are going to a professional and chances are, you will be a lot happier with your nest egg at 65 than had you gone it alone.

When a passenger jet has an accident and wrecks, every news channel will have coverage of the event. We know this because we see these accidents in the news periodically. Tragic? Yes. Common? No. Flying is still the safest way to travel. If you ever get to wondering about the safety of flying, just sit at a major airport and watch just how many jets take off and land in an hour. Then think about multiplying that times 24 hours and 365 days per year. Then those three or four accidents don't seem like they are so common.

Similarly, we hear about tragic stories in the media about an advisor that drops the ball on a portfolio and loses all (or nearly all) of their client's portfolio. It is infortunate that this happens, however, to disregard the work of all advisors because of these irresponsible "advisors" is not exactly the smartest thing. It's just as was mentioned and agreed, the due diligence must be done, but in the end the due diligence will never be regreted.

-Joe