Loads and Expenses for funds


Sales loads are for chumps.  This gets back to my basic premise, namely “This person offering me advice; how are they compensated and what motivates them?”  If a fund has a sales load (either front-end or back-end), that’s a huge red flag and I just run away.


At Schwab, I try hard to stick to their “OneSource” (no load, no fee) family of funds.  I have deviated, but I always am aware of when I do it, and I think I have a good reason for it (at the time).


I also try to pick funds that are below the average (at least) for management fees. 


Some classes of funds tend to have higher management fees than others.  Examples are in picking small-cap value or emerging markets stocks.  These are areas where you are actively compensating a talented manager for his or her skills.


Looking back, I have felt constrained by some of the mutual funds I have picked at Schwab because they incur significant costs when trading (‘significant’ to me might mean $50 on a $3,000 trade, roughly a 1.7% hit).  These may be due to costs passed on by another brokerage (Vanguard) or by penalties for perceived ‘market timing’, selling a fund within 180 days of buying it.  Once I understood these costs, it cut into my ‘liquidity’, or my ability to rebalance when I thought imbalances warranted it.


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