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From: boucher@hsi.UUCP (Keith Boucher)
Newsgroups: net.invest
Subject: Re: A comment on "no-load" mutual funds (vs. load funds)
Message-ID: <319@hsi.UUCP>
Date: Tue, 25-Feb-86 18:04:17 EST
Article-I.D.: hsi.319
Posted: Tue Feb 25 18:04:17 1986
Date-Received: Fri, 28-Feb-86 22:16:52 EST
References: <1982@jhunix.UUCP>
Organization: Health Systems Int., New Haven, CT.
Lines: 118

> 	I have noticed that there seems to be an overwhelming preference
> for "no-load" mutual funds in this group.  While "no-loads" can be
> beneficial to one who has a short term investment objective of six
> months to a year, there can also be pit-falls.  I would like to alert
> you to some of these "hidden loads".  Pull out your prospectus and look
> for these things:

I decided to pull out my prospectus for the following four funds:
	1. First Investors Discovery Fund - March 1, 1985
	2. IDS Strategy Fund - May 28, 1985
	3. Strong Total Return Fund - January 1985
	4. 20th Century Select Fund - March 1, 1985

The following is a summary of the information in each prospectus.

> 1. Redemption fees:
> 	A % of the total value of your balance is subtracted when you
> 	sell the fund.

Strong Total Return Fund and 20th Century Select Fund charge no redemption
fee at all.  First Investors Discovery Fund charges no redemption either
but their is a clause in the prospectus stating that they reserve the right
to charge a 1% redemption fee if it is necessary to sell Fund assets to meet
the redemption request.  They then state that they do not intend to charge
this fee.  Sometime in the future they may change their policy and charge
this fee.  IDS Strategy Fund charges a redemption which declines the longer
the money is in the account according to the following schedule:

	Year 1  -  5%
	Year 2  -  4%
	Year 3  -  4%
	Year 4  -  3%
	Year 5  -  2%
	Year 6  -  1%
	Year 7+ -  0%

Only the money originally invested is subjected to this redemption fee.
For example if one invests $1,000 on 1-1-85 and through dividends and
capital gains the value increases to $2,000 on 1-1-86 then the redemption
fee applies only to original $1,000 even if the whole $2,000 is withdrawn.

> 2. Capital Gains:
> 	The distribution of capital gains is up to the discretion of the
> 	manager of the funds.

All four prospectuses state that they will follow IRS regulations and
distribute dividends and capital gains to the shareholders.

> 3. Dividends:
> 	Most "no-load" funds distribute 90% of the dividends to the
> 	shareholders.  Thus, these companies take 10% off of the top.

The prospectus for three of the four funds states that 100% of the fund's
income will be distributed to the shareholders.  Only First Investors
Discovery Fund's prospectus differs.  This prospectus states that at least
90% of the income will be distributed to the shareholders but says nothing
about all 100% of the income being distributed.  Of course, it also says
nothing about not distributing 100% of the income.

> 4. Custodial Fees:
> 	Many funds charge a % of the total value of your account each
> 	year.  Therefore, if a company charges 2%, over a ten year period that
> 	means a charge of 20%.  Much more than the 8-8.5% charge of a "loaded"
> 	fund.

None of the four prospectuses says anything about deducting shares from
your account each year.  All four prospectuses mention deducting a % from
the average daily net assets of the fund for management advisory fees and
other expenses.  This % is listed below for the time period given.

	1. First Investors Discovery Fund - 1.23%   Year 1984
	2. IDS Strategy Fund Equity Portfolio - 1.38%   5/14/84 - 3/31/85
	3. Strong Total Return Fund - 1.3% Year 1984
	4. 20th Century Select - 1.01% 11/1/83 - 10/31/84

The up front load for each fund is as follows:

1. First Investors Discovery Fund charges a load for any investment:

		$10,000 or less    8.5%
		$10,000 - $25,000  7.75%
		$25,000 - $50,000  6.25%
		$50,000 - $100,000 5.50%

The % goes down to 1.5% for $1,000,000 and up.

2. IDS Strategy Fund charges no load up front but charges a redemption
   fee as described above.

3. Strong Total Return Fund charges a 1% load up front.

4. 20th Century Select charges no load up front or no redemption fee.
   It is a true no load fund.

> 	The bottom line is...  If you want to do the research yourself
> and feel confident in making all of the decisions go ahead.  If you
> aren't sure or don't want to spend the time being your own broker; find
> a broker you trust and his advice will probably center around "loaded"
> funds.
> 
> 				Virginia S. Wesner
> 

The bottom line is what is the difference between the funds as far as what
it will cost you.  There is really no difference between the four funds
with regards to the four points made above except the redemption fees that
IDS Strategy Fund charges.  The income distribution and management advisory
fees and other fees are fairly close.  The real difference is the load that
you pay up front or that is charged upon redemption.  You can go to a broker
and invest in a load fund that he or she suggests or you can invest in a
no-load fund and save yourself the up front or back end costs.
That seems to be the only difference.  The decision is up to you but my
advice would be to do a little research and deal only with no-load funds.
You will be better off in the long run.  I am not a licensed broker but
I am a person who has tried it both ways with my own hard-earned money
and am thoroughly convinced that the only way to go is the no-load way.

			Keith Boucher HSI New Haven, CT