American Funds

[sweeps]

American Funds' mutual funds have completely taken over the list of most widely held mutual funds. Admittedly they seem to do well, but they come with a 5.75% front load? Why are these funds so popular?

[Broken Arrow]

Woah! 5.75% front load?! That alone just about negates any advantage these funds have, except for one.

[cptacek]

I have both my taxable account and my Roth IRA with American Funds. I started out with them because I had just graduated from college, had some money I wanted to invest, and knew someone who had just become a financial advisor, and he advised me to buy it. I've sent in about $50 a month to that fund for about 5 years, and just recently started sending in $50 every two weeks. I didn't know any better when I started, to tell you the truth.

[jIM_Ohio]

wife hold a couple of these in her 401k.

not all funds are load all the time

if you buy through an advisor, the advisor is paid with the 5.75% load.
if you buy without an advisor, you can save yourself 5.75%

some load funds can do things managed funds cannot. Most load funds are bad... especially for the average investor. If you decide to be above average, there are some tax managed load funds which can give significant benefits I have yet to find in other funds available to us common folk.

[Scanner]

You know. . .most people object to loads

When my sister showed me her portfolio, it wasn't the load that made me angry as much as the fund had 2.5% expense ratio.

I didn't object to the fact that my sister got advice and paid for it through a percentage agreement through her advisor. I believe the advisor deserved to be reimbursed for her time/expertise.

But there's no reason a domestic fund can't run around 1%.

That's the major problem I see with loaded funds - they are expensive to boot.

[Ima saver]

I have never had any fund that charged a load.

[sweeps]

wife hold a couple of these in her 401k.

not all funds are load all the time

if you buy through an advisor, the advisor is paid with the 5.75% load.
if you buy without an advisor, you can save yourself 5.75%

Your wife may avoid the load because they're available through her 401k, but I'm not aware of a way to buy them without a load otherwise.

[cptacek]

I have a brokerage account that we used to buy more American Funds for my roll-over IRA (I forgot about that when I originally posted). I don't have a load on that, and it brought my commisions down for the taxable fund and the Roth IRA as well.

[kv968]

if you buy through an advisor, the advisor is paid with the 5.75% load.
if you buy without an advisor, you can save yourself 5.75%

You can get funds through an advisor without a load. If you do however, they'll sell you Class B or, most likely, Class C shares. Both have no loads but higher expense ratios. With a load, the advisor will get most of his/her money right away. With the other classes, the advisor will make money over time with the higher expense ratios. In the case of Class C shares, they'll make more money off of them in the long run than a loaded fund. Regardless, you're going to pay high fees one way or another.