Candlestick Trading Blog
June 24, 2008
American Mutual Funds
American Mutual Funds – Loaded Funds American mutual funds are of the nation’s oldest and most popular mutual fund families. This fund company manages over $600 billion in investments and 30 million shareholder accounts. It was founded in 1931, and many investment analysts worried that it wouldn’t be able to continue successfully due to the growing popularity and difficulty in finding investments with more money at stake. American mutual funds are very popular due to the performance, the sales commissions generated for financial advisors, and the endurance of the funds. The fund is made up of 29 mutual funds and is most commonly found in retirement plans. American mutual funds come in many different classes and have 529 versions of most of the funds. These classes include bonds, balanced funds, large growth funds, large value funds and international funds. While American mutual funds are popular, keep in mind they are considered the best of the loaded funds. This means that brokers and investment advisors are paid to sell these funds and they typically carry a 5.75% sales charge plus a 0.25% 12b-1 fee. Ouch! Many investors are not fond of these fees, as you can imagine, and they look to only invest in no load mutual funds. In fact, unless the company that you work for waives the fees charged by these funds for your 401(k), you may want to talk to someone about looking into other fund families that are not loaded. How to Spot a Loaded Fund You should always research American mutual funds, or any other mutual fund that you invest in to determine all associated fees. Keep an eye out for anything that refers to a load and make sure that it says none or zero. When mutual fund investing, look for words such as front-end, back-end, front-end sales charge, deferred load, deferred sales charge, 12b-1 fees, and actual fees. Also, loaded mutual funds have classes such as Class A, Class B, Class C, etc. If you are discussing classes of mutual funds, then you are dealing with a loaded fund. Also, watch out for common lies that are told by some sales people who are very good at pointing you towards American mutual funds and other loaded funds. They will sometimes tell investors that there is no commission, and that the fund company will pay the commission. Guess what? The fund company is basically you. They may also tell you that load funds are better managed, and they outperform no-load funds when investing in mutual funds. This is completely untrue and in fact, no-load funds often prove the opposite after taking into consideration all of the fees associated with loaded funds. Another thing they tell investors is that you only pay on the loaded funds if you don’t hold them for at least five years. Sounds a little better, but this is only a way to prevent you from selling a fund that performs poorly. Mutual fund investing is a great way to diversify your investment portfolio while providing less investment risk that many other forms of investing. Check out if you are invested in American mutual funds in your 401(k) and take a look at the associated fees. While it is lower risk, it is important that each investor researches mutual funds as they would any type of investing that uses your hard earned money. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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