When you buy an open-end mutual fund, did you know that you are paying a ‘stealth fee’? There are two types of open-end mutual funds, load funds and no-load funds. The load is a fee you pay for the honor of buying the fund. It includes commissions to the person who sold you the fund (even if it is the fund company) and advertising costs (12b-1 fees). The load can be charged up front or can be charged over a number of years. So a non-load fund usually is a better deal, since you don’t pay these fees. There are also management costs and fees that are charged to the mutual fund over the course of the year that you never see. These costs and fees are absorbed into the daily price of the fund (The Net Asset Value, or NAV). Basically if the fund has a Net Asset Value of $10 per share, it will actually be shown as $9.90 per share because of these expenses. You will never find out how much these costs are on your brokerage statement; you have to actively look for them in publications or on Yahoo Finance or another site that tracks mutual funds. That is [...]
Brian’s Financial Musings
I’d like to talk a little about something no one wants to talk about – Life Insurance! No one wants to think about dying, but if something happens, life insurance can help replace you or your spouse’s wages (or both) if something happens.There are two main types of life insurance; whole life insurance (I am including universal life and all other investment vehicle insurance here) and term insurance. Basically whole life ties an investment with life insurance to calculate your premium that stays the same up to 100 (assuming you keep it in force that long). You accumulate cash value along the way plus the protection of the insurance. Sometimes the insurance amount stays the same, other times it increases or decreases; this will change the cash value accordingly. You can borrow the cash value without cancelling the insurance. At 100 (assuming you live that long) you get cash value and face value back and the policy disappears. The problem is most policies guarantee only a small investment return and I have never liked tying an investment to buying life insurance. Term insurance is straight insurance that covers you or your spouse for a certain amount for a certain time (usually 5, [...]
Brian’s Financial Musings
Something that drives me crazy is that kids come out of high school and college with a diploma, but no idea of what the real world is like in many areas. They have lived at home all their lives and now they are out on their own for the first time. They have no clue how to spend wisely, use credit or even balance their bank account. No wonder a lot of them are constantly borrowing money from their parents and a lot of them end up moving back in. I’ve always felt high school seniors should be required to take a class called “Living in the Real World 101″ and be forced to learn all the necessary things to live on their own. Shop for insurance, look at their 401K statement, check their credit card statement, find the cheapest mortgage when they are ready to buy a home and set up a budget so they can sock money away for 33 years to compound and fund their retirement so they don’t have to eat cat food in their 60s because they live on social security. I don’t know how many people I have talked to wished they knew how much [...]