"Will Trice" <wwtrice[at]paragondynamics.com> wrote in message
news:41C7D5A7.4070906[at]paragondynamics.com...
- quote -

That's not an attack. If I attack, I destroy.

I dismissed them. That's a subtle, yet vast difference.

- quote -

So what you have is a bunch of academics preaching to each other, and none
of them are making a tangible differnce in the lives of those around them.

That's what a good financial advisor does -- making a tangible positive
difference in the lives of those around them. They don't have time to preach
to each other, as the failed planners at FPi do.

Only a myopic academic compares returns of funds based on sales charges vs.
No Help funds. The comparison is only valid with an advice component with an
element of consideration in exchange added to the No Help funds. Absent
that, all those hokey reserach papers are just blatherings of a bunch of
mooks, and they verify the irrefutable fact that the internet can be a
dangerous thing to the uninitiated.

So, your study remains dismissed as irrelevant.

Next!

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/
http://www.topgunproducers.com/
http://forum.topgunproducers.com/

Si vis pacem para bellum!

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

Forgot the date in the cite below. It was published in 2003.


- quote -

Brent D. Gardner, ChFC wrote:
- quote -

Attacking the source does not change the fact that this paper provides
"verifiable evidence" (as you requested) of the returns of fee based
funds vs. no-load funds.

Nevertheless, I thought you would have been familiar with SSRN, my
mistake. The Social Sciences Research Network is an online database
providing access to financial journals (among other fields), including
the Journal of Finance. Eugene Fama and William Sharpe are on the Board
of Trustees (maybe you've heard of them). Note that The Journal of
Finance is "touted" by William Bernstein on his website
www.efficientfrontier.com as, "definitely worth visiting a few times a
year." I believe that he qualifies as one of "those who manage billions".

Just so you know, Mr. Morey's paper was also published in The Journal of
Banking and Finance, Volume 27, Issue 7, pg. 1245-1271. But you may
think that this source is bizarre as well.

"Will Trice" <wwtrice[at]paragondynamics.com> wrote in message
news:41C522DF.5000903[at]paragondynamics.com...
- quote -

Again, with the bizarre sources. SSRN isn't one touted by those who manage
billions. Who are they? Nobody. Case dismissed.

Next!

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/
http://www.topgunproducers.com/

Si vis pacem para bellum!

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

<BreadWithSpam[at]fractious.net> wrote in message
news:yoby8ftauh5.fsf[at]panix2.panix.com...
- quote -

Exactly!

- quote -

All but impossible to measure, although those of us that do this for a
living DEFINITELY know.

- quote -

Both of the studies shows so far are oranges, and cannot be used to support
an argument in favor of apples. Period.

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/
http://www.topgunproducers.com/

Si vis pacem para bellum!

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

"anoop" <ghanwani[at]gmail.com> wrote in message
news:1103442187.015182.317100[at]f14g2000cwb.googlegroups.com...
- quote -

CR's a great place to compare toasters. They can't even spell performance,
and are worse than typical financial porn. Case dismissed.

Next!

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/
http://www.topgunproducers.com/

Si vis pacem para bellum!

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

BreadWithSpam[at]fractious.net wrote:
- quote -

You have a point. Since the load is a direct cost of the fund, I would
count the load against the return of the fund. But I think it would be
fair to count the fees from an FP against funds the FP selects as well.
Of course, those fees would need to be split amongst all the funds
that the FP recommended and would need to be reduced for the all the
other work the FP does for the client (e.g. planning, insurance needs,
etc.). That may be hard to put a number on as well unless the FP has
some kind of breakout.

BreadWithSpam[at]fractious.net wrote:


- quote -

More generally, a load is a mechanism for paying for some services. Those
services could include, among others:

1) Selecting funds
2) Developing asset allocation stragies.
3) Developing financial plans
4) Financial counselling


Investors need to figure out what services they are getting and whether those
are worth what they are paying. I'd like to call attention to the counselling
aspects of the services.

In general, average investors get well below average returns. They chase
performance, buy high and sell low, and make bad allocation decisions. They do
this because successful investing is as much an exercise in self-pyschology as
anything else.

Developing a relationship with a trusted, objective, advisor can prevent many
of these mistakes and increase overall returns beyond what the raw numbers would
show. Finding and recognizing a trusted, objective, advisor is a whole 'nuther
problem.

-- Doug

Will Trice <wwtrice[at]paragondynamics.com> writes:

- quote -

Maybe, maybe not. It's not so much a fee associated with
*owning* a fund as with *selecting* or *buying* a fund.
Would you count against performance the fees paid to a
fee-only financial planner when an individual takes that
planner's advice and buys a no-load fund?

The load is *not* a management fee. It is a payment for
the advice which led to the selection of that fund.

That said, of course, many people do the research on
their own and buy no-load funds and there is no corresponding
fee paid to a fee-only planner, but in that person's
case, the appropriate comparison is the value of that
person's time spent researching. Very hard to put a
number on.

Nevertheless, there is an enormous potential for
apples-to-oranges comparisons here.


--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

On Fri, 17 Dec 2004 04:01:22 CST, Mike
<michaelloll[at]nospam.hotmail.com> wrote:

- quote -


Both of these funds have 12b1 fees. For more information, suggest a
Google search on "12b1 fee".

-HW "Skip" Weldon
Columbia, SC

Mark Freeland wrote:
- quote -

Ah, thanks for the enlightenment. I looked up several of the references
in the thread you mention above. Some of the papers have changed URLs
but the two papers by Wermers can now be found at:
http://www.smith.umd.edu/faculty/rwermers

I noticed that the 1997 Carhart paper cited by Wermers is also sited by
http://www.efmoody.com/investments/fundexpenses.html which was also
referenced in the thread you mentioned.


- quote -

Good info here, too. I hate paying for info that I can get for free...
Thanks.

-Will

Mark Freeland wrote:
- quote -

Correct. While Mr. Morey's data indicate that no-loads outperform
loaded funds even before the load charge is considered, that
outperformance is not significant until loads are included in the
return. But then, shouldn't loads be considered? It is a fee
associated with owning a fund.

- quote -

Note that Mr Morey points out on Page 1 (his numbering) that none of the
papers he cited, including Ippilitto's 1989 paper (which you quote
above), incorporated the load directly into the return. Hence the
qualifying word, "plausibly", in Ippilitto's passage.

-Will

Will Trice wrote:
- quote -

His data show that the performance of funds' portfolios (not including
the load, which of course bleeds cash) is NOT significantly different
depending on whether a fund is load or noload. That lack of difference
is still sufficient to substantiate Frank's claim that load funds do not
outperform.

Specifically, he uses four different metrics to compare fund
performance: mean excess monthly return, Sharpe ratio, Jensen alpha, and
4-index alpha. Broken down by Morningstar style (the old style
categories - equity income, etc.), Table 3 on p. 20 (pdf p. 22) shows
that differences of every metric for every category between load and
noload funds are not statistically meaningful (even at only the 90%
confidence level), except for:

Growth funds - noloads outperform according to their average Jensen
alpha, while load funds outperform according to their 4-index alpha. In
other words, a wash. Average mean performance differences were not
statistically meaningful.

http://papers.ssrn.com/sol3/Delivery...265133&mirid=2

He also cites several other studies on p.2 (pdf p. 4) that show no
difference between load and noload fund performance, though footnote 6
on that page points to a 1989 study that suggests that "load funds earn
rates of returns that plausibly off-set the load charge".

With respect to that result, one can find other studies that show that
load funds assume more risk to achieve this offset.

Finally, I would criticize Morey's methodology in that he penalizes
noload funds. "A deferred-load fund is considered a no-load fund due to
our holding period of five years." (p. 11, pdf p. 13). Since B shares
incorporate higher fees to pay for the commission, those fees have a
similar bleeding effect to that of a front end load. Verily, the way
that a front end load is handled in the study is by calculating its
monthly effect! (See equation (1) on p. 10, pdf p. 12). So, counting B
shares as noload funds understates the performance of noload funds.

--
Mark Freeland
nBeOwXs[at]pacbell.net

Will Trice wrote:
- quote -

I've cited several studies in the past documenting a moderate negative
correlation in equity funds between expenses and returns. Here's one
such posting I've made (quoting from a Morningstar study that you can
find in your library):
http://groups-beta.google.com/group/...c29045e36bf809

There's a strong negative correlation when one looks at bond funds;
Schwab did a study on this (unfortunately, no longer directly available
on the web, so here's an article referencing the study):
http://www.thestreet.com/funds/funds/1253511.html
"[E]very 1% increase in the expense ratio is associated with an
estimated 0.7%-per-year decline in future returns."

- quote -

Correct.

"[T]here's another charge investors pay that is not included in the
expense ratio: trading costs. They include brokerage commissions for
buying and selling stocks or bonds as well as other charges."
http://www.consumerreports.org/main/...East_id=333147

- quote -

As the CR report points out, you can find these data in documents filed
by the fund. For example, Legg Mason Value Trust was mentioned in this
thread. Its brokerage fees for the year ending March 31, 2004 were:
$3,893,533 paid to outside brokers, and $90,800 paid to Legg Mason (not
the fund). This is in the Statement of Additional Information. No need
to pay more for the info.
http://www.leggmason.com/funds/ourfu...sai/equity.pdf

Divide these numbers by the average number of shares, and you'll get the
approximate brokerage fee per share; divide that by the average share
price, and you'll get the approximate brokerage cost ratio.

Note that these figures probably don't include brokerage fees for bonds,
because bonds are usually priced with the commission built in. So, the
commissions for bonds are buried in the bid-ask spread.

--
Mark Freeland
nBeOwXs[at]pacbell.net

Brent D. Gardner, ChFC wrote:
- quote -

Available at www.ssrn.com:

Morey, Matthew R., "Should You Carry the Load? A Comprehensive Analysis
of Load and No-Load Mutual Fund Out-of-Sample Performance" (undated).

Mr. Morey's data shows that no-load funds outperform load funds.

-Will

Brent D. Gardner, ChFC wrote:
- quote -

Here is an excerpt from an article that appeared in March 2004
in Consumer reports:

"There's no proof that paying loads buys superior fund performance.
Our analysis of Morningstar data shows that load funds in the nine
domestic-stock categories we surveyed did not produce higher returns
than no-load funds over the last year or 3, 5, or 10 years."

Anoop

"Frank" <franksplace2[at]email.com> wrote in message
news:1103120454.936095.319340[at]f14g2000cwb.googlegroups.com...
- quote -

Can you provide verifiable evidence to support your bogus assertion?

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/
http://www.topgunproducers.com/

Si vis pacem para bellum!

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.

"Chris Thomas" <cthomas[at]mminternet.com> wrote in message
news:MPG.1c2aaf881d8c5c87989689[at]news.ucla.edu...
- quote -

Remember this irrefutable fact of life: The market is DRIVEN by people who
are sold investments with a toll to get in and get out. Without them, your
investments would wither and die a quick death.

More people pay a load than do not. This has been true since the invention
of the mutual fund. With the inclusion of fee-based and fee-only advice, and
the exclusion of qualified plans and employer sponsored savings, the
percentage of Americans can pay for financial advice is over 90% (source:
ICI, LIMRA, Conning).

Remove 90% of the demand and my money market account would smoke your best
equity fund.

- quote -

Incorrect. Never, in the history of the public security markets here in the
USA, has a load been paid directly to a broker.

To the contrary, a sales charge is paid to a broker/dealer (that's NOT a
person, but an entity - a corporation or partnership). The broker/dealer in
turn pays their sales force. Wirehouses generally pay less than half to the
soliciting broker.

In many cases, part of the sales charge is RETAINED by the fund. In some
cases, 100% is retained by the fund. Therefore, your assertions are
completely without merit.

- quote -

Then why are you here? This site is about Financial Planning, primarily
those in the craft of advice, not Do It Yourself Investing with No Help
funds? =)

Brent D. Gardner, ChFC
Chartered Financial Consultant
http://members.cox.net/brentdgardner1378/
http://www.topgunproducers.com/

Si vis pacem para bellum!

"Be ever questioning. Ignorance is not bliss. It is oblivion. You don't go
to heaven if you die dumb. Become better informed. Learn from other's
mistakes. You could not live long enough to make them all yourself." - Hyman
George Rickover (1900-86), Admiral, US Navy, advocated development of
nuclear subs & ships

The Chartered Life Underwriter (CLU) and Chartered Financial Consultant
(ChFC), designations owned and exclusively offered by The American College,
signify the highest standards of academic study and professional excellence
in the financial services industry.


======================================= MODERATOR'S COMMENT:
This newsgroup is for all; our charter is at http://www.algebra.com/~mifp/Charter.txt

- quote -

While it seems intuitively obvious that cost and rate of return should
be inversely correlated, is this assertion actually true? I thought I
had read that the two were uncorrelated when looking at the actual
results of mutual funds, as a previous poster pointed out. Of course, I
can't find the reference now when I need it...

- quote -

I don't think that commissions show up in the expense ratio of funds.
Right? This is why investors might think about turnover ratios even in
tax advantaged accounts. For a fee, personalfund.com will tell you what
a funds transaction costs are.

-Will

"HW \"Skip\" Weldon" <skip5700removethis[at]hotmail.com> wrote in
news:chn2s09ghi036o7ao3aqb2986uorh8usg0[at]4ax.com:


- quote -

Here you go .. based upon all of the documentation I have read, the
following funds (which were recommended by my FA and I own) have no load:

Legg Mason Value Prime (LMVTX)
Royce Pennsylvania Mutual Fund (RYPCX)

Although now that I check morningstar more closely, it seems RYPCX has a
redemption fee of 1%.

--
Mike Loll