Some investment brokers are not as above board as they lead investors to believe. They use convoluted contracts to bilk their mutual fund investors out of what amounts to millions of dollars each year. The mutual funds they tell the client is such a great bargain turns out to be a financial drain the is not worth the money invested in it. They have back-end loads that are costly and also a lot of hidden fees. Most of these only make money for the broker that manages the fund. Your profit goes to pay mostly brokerage cost and fees.
You may wonder what the term "back-end" load means. This is just an accounting term to explain away the fact that you are paying fees for the shares as well as other cost associated with the fund. The amount of these fees could be from 2-8% depending on the mutual fund. Some brokers have flat rates for investors, this means no matter how much or little you are investing you pay the same rate.
A no load mutual fund is a lot easier to deal with because it is cheaper for the investor. The buying, selling and trading of the units or shares can take place without a lot of added fees. The only thing about this is that when you go to redeem them the banks or brokerage houses will charge for handling a third party transaction.
The working definition that sufficiently describes a back- end loaded mutual fund is one in which you invest in that already has a lot of fees attached to it. It is not quite illegal but it is up to the individual investor to know when an investment is not right for them.
With all the trading platforms available today online you can cut out the middleman and make your own trades for a lot less. You can research the investment opportunities to find the no-load mutual funds. These give you about the same in return as the loaded ones but without the additional expense. The only time you will incur a fee is if you redeem it before it matures.
When dealing with a mutual fund you have to ask yourself if it is worth it. Are the fees you are being charged justified? This is easy to calculate if you only take the time to find out exactly what it is you will be paying for. If for example the fees and commissions are getting paid and you are seeing little profit then it is not worth the effort. If your profit to loss ratio is less 1.4 this is not a very good deal.
Sometimes when you have been with a broker for a period of time it seems that there is more to it than a purely business relationship. Do not let this stop you from asking the important questions. You can find platforms online that allow you to buy shares, trade stocks, sell and make plenty of other transaction without the high brokerage costs and fees of hiring a firm.
You may wonder what the term "back-end" load means. This is just an accounting term to explain away the fact that you are paying fees for the shares as well as other cost associated with the fund. The amount of these fees could be from 2-8% depending on the mutual fund. Some brokers have flat rates for investors, this means no matter how much or little you are investing you pay the same rate.
A no load mutual fund is a lot easier to deal with because it is cheaper for the investor. The buying, selling and trading of the units or shares can take place without a lot of added fees. The only thing about this is that when you go to redeem them the banks or brokerage houses will charge for handling a third party transaction.
The working definition that sufficiently describes a back- end loaded mutual fund is one in which you invest in that already has a lot of fees attached to it. It is not quite illegal but it is up to the individual investor to know when an investment is not right for them.
With all the trading platforms available today online you can cut out the middleman and make your own trades for a lot less. You can research the investment opportunities to find the no-load mutual funds. These give you about the same in return as the loaded ones but without the additional expense. The only time you will incur a fee is if you redeem it before it matures.
When dealing with a mutual fund you have to ask yourself if it is worth it. Are the fees you are being charged justified? This is easy to calculate if you only take the time to find out exactly what it is you will be paying for. If for example the fees and commissions are getting paid and you are seeing little profit then it is not worth the effort. If your profit to loss ratio is less 1.4 this is not a very good deal.
Sometimes when you have been with a broker for a period of time it seems that there is more to it than a purely business relationship. Do not let this stop you from asking the important questions. You can find platforms online that allow you to buy shares, trade stocks, sell and make plenty of other transaction without the high brokerage costs and fees of hiring a firm.
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