In general, a class A fund charges a load (often between 5 and 6%) when you buy the fund, a class B charges when you sell it, and a class C charges during the time you hold it. I am skeptical about the wisdom of buying a load fund for any reason, as I don't understand what you get in exchange for the load.

Anyway, it's hard to talk about your options without knowing a few more details. First, are you sure this is a brokerage you're talking about, or is it a mutual-fund company, perhaps with a brokerage add-on? If it's a stand-alone brokerage, then whatever these funds are are presumably capable of being held in any brokerage, but it's a kind of arrangement with with I'm unfamiliar.

If it's a mutual-fund company, you probably can't transfer the fund to another brokerage without selling it and buying somethine else. That might or might not expose you to taxes, depending on whether you have capital gains and whether we're talking about a taxable account or a tax-deferred account such as an IRA.

Also, how come your brokerage is buying funds (and charging you load fees) without your authorization? Can you tell us more about what's going on here?

Alphacat,thanks for your response. I am not really sure what I have since I inherited all of this(yes I am very grateful) and am trying to understand it.

The statement says: Primary Investment Objective-Conservative Appreciation.

I know the original owners didn't have any input on what was done....as long as it increased, they didn't care.

This statement comes from a well known brokerage( I think this is what it is called) and they are buying different mutual funds. All of them are class A and Type C.

From what I have read, if it is a class A, the money up front has been taken so there isn't any need to sell unless the fund is doing poorly. I just don't want them to buy any more front load funds, but than how are they to make any money? I think I am OK with staying with them if they were to invest the money a little wiser. My worse fear is if I take too much control, I could do worse. I am laying low until I undersatnd more what is going on.

As you can read, I am really, really new at this and need a nudge in the right direction. I have been doing lots of reading on the internet, but there is just so much to know!

I apreciate any help you can offer. Zoey

They can make money in a variety of ways, depending on who they are. If they are indeed a brokerage, then they make money every time you buy or sell. In which case they might try to convince you to buy or sell for reasons that benefit them more than they benefit you.

You might be better off finding a financial advisor who you pay solely for advice, especially if the amount you're paying doesn't depend on the specific advice you get. That way it's less likely that there's a conflict of interest.

Regardless of what you do, you need to answer a few questions for yourself: (1) Is this money in a taxable or tax-deferred account? (2) What do you want to eventually do with the money? (3) What time scale are you talking about? Months? Years? Decades? (4) What's your risk tolerance? In other words, are you willing to take the chance that you might lose in order to increase the chance that you might gain?

Whatever the original owners might have wanted, it's yours now and you have the opportunity to decide what to do.

Here is a link that might be useful: What kind of advisor do you have?

You say "if it is a class A, the money up front has been taken so there isn't any need to sell unless the fund is doing poorly."

There is a problem with this viewpoint: Once a fund has started doing poorly, it's already too late. In particular, you don't necessarily know whether the downturn is temporary or permanent. If you sell after it has gone down, you have just locked in your losses. If you don't, you might lose more. What to do?

The real answer, I think, is to have a long-term plan before you start. That way, you will know why you are holding the fund or funds in question, and you will know whether there is a reason to change strategy.

Thanks, Alphcat for the link. I had checked it out already when you linked to it on another post. It is what has gotten me to think about all this. It is pretty overwhelming if you have never done anything like this before.

I believe everything is tax deferred...I will double check on this. We are talking years as far as investing and the most gain with the least amount of risk. I know, that's what everyone's objective is :-) I definely don't want to loose what I already have.

If it isn't a brokerage that is doing the investing, what else would it be called? I agree, that a financial advisor is what I need. I looked in the phone book and all seem to be connected to a brokerage and I figure they would just tell me anything to woo me to their side. Thanks!

It could be a brokerage, or a mutual fund company.

Whatever they are, if the money is tax-deferred (your statements should clearly say IRA or something similar in that case), then there is no problem moving the money anywhere you like. Just be sure you arrange for a "trustee-to-trustee" transfer, so that the money moves from where it is now to where you would like it to be without ever passing through your hands.

Of course, that is assuming you decide to move it. I have no idea if you should nor not--not only do I not know your situation, but I'm not a financial advisor. The most I can do is tell you about things I've learned, places I've learned it from, and things you might want to think about. The rest is up to you.

Incidentally, as you said, "the most gain with the least amount of risk" is a desirable notion, but one that does not have a single answer. You might think that buying T-bills is the safest alternative, because they're backed by the full faith and credit of the US government, but they generally don't pay enough in interst to keep up with inflation for the long term, so you are virtually guaranteeing that in real terms they will be worth less in 20 years than they are today.

In that sense there is no such thing as a risk-free investment. That's part of the reason that your time frame is so important. If you want to spend the money in 5 years, you will want to adopt a different strategy from what you would do if you want to hold on to it for 40 years.

The short answer is that you're right, brokers are not on your side. They benefit when you buy and sell through commissions and loads, and you end up just paying a lot of expenses to them. Try talking to a fee-only financial planner, meaning someone who charges by the hour for advice and doesn't get any benefit from what you buy. I've heard the Garrett Financial Planning Network recommended as a good place to start to find someone
http://www.garrettplanningnetwork.com/
They could help you figure out an asset allocation that's consistent with your goals for the money, and what's the best way to implement the allocation.

I'd also recommend you do some reading and learn about basic investment concepts. It's really not that hard once you get into it, and the more you know, the better off you are! Some good books are:

The Four Pillars of Investing - by William Bernstein
All About Asset Allocation - by Richard Ferri
The Only Guide to a Winning Investment Strategy You'll Ever Need - by Larry Swedroe
The Informed Investor - by Frank Armstrong

I think load funds are unnecessary and very expensive in a portfolio - there are lots of no-load funds out there that are better alternatives. I'm also a fan of index funds - knowing who is going to beat the market in advance is impossible, so why not just buy the market? (There's a reason why all the funds are required to say "Past performance may not be indicative of future results".) Otherwise you end up buying a fund when it's doing well, and then selling it when it starts doing badly, and you've basically bought high and sold low and lost money. And if it's a load fund, your broker is more than happy to sell and buy because he makes money no matter how badly you do.

I know it feels overwhelming, but this is something you can get handle on - hang in there!

Thanks, Alphacat and Silvercomet, this does seem very overwhelming. Seems almost impossible to learn everything in so little time. Your right, I do need an impartial financial advisor.

Alphacat, thanks for all your help. Your comments have certainly pointed me in the direction of things to know and learn.

Silvercomet, thanks for your book suggestions and the link to garret planning. I happen to have two within an hours drive.

Zoey

I get the impression from the foregoing discussion that you would be reluctant to mention the specific funds that your broker currently has you in, perhaps because that would involve revealing the name of the brokerage. This (completely understandable) reluctance makes it hard to talk about specifics.

However, that doesn't stop me from pointing you to a news article that talks about one of the alternatives. Well, five of them, really. The article is from July, 2006, and talks about five "lazy portfolios" -- that is, five simple combinations of mutual funds that require little effort to maintain.

These five portfolios returned between 9% and 16.8% in the year ending in 2Q06, as compared with 8.6% for the S&P 500 index. Moreover, over three years they returned between 12.5% and 18.7% per year (as compared with 11.2% for the S&P) and over five years they returned between 7% and 9.7% per year (as compared with 2.8% for the S&P).

I am not suggesting that you should be invested in one of these portfolios. However, I do think it would be worth finding out what the comparable performance figures have been for the portfolio that you have, because that will give you at least one estimate of what you've been getting for your money.

Here is a link that might be useful: Lazy portfolios

Hello Zoey,

Do you know whether the agency carrying on the business of your investments can sell only mutual funds, or do they sell stocks, as well ... i.e., are they a stocbroker?

Are you aware that there are a number of mutual fund management companies that charge no purchase/sale fees (you buy their products directly from them)?

As a Canadian, I am not familiar with the U.S. situation, but here in Canada a number of our large banks have an in-house stable of no-load funds - offered by their salaried staff.

Quite often the no-load funds have as good a track record as the load ones.

All mutual fund managers, in that they have expenses and like to be paid, charge a management fee regularly, called Management Expense Ratio (MER) lower for bond and dividend funds than for equity-based (i.e. shares of companies listed on stock exchanges) ones. U.S. based fund management companies charge lower rates than in Canada, as well.

Very few mutual fund managers have a better track record than has been developed by the stock market as a whole, despite their claims to superior skills. Part of the reason being the annual fees that they charge, usually between 1 and 2%, which is a substantial portion of the approximately 8% developed by the market as a whole, averaged over time.

As one poster mentioned above, some folks prefer to buy exchange-traded funds, rather similar to mutual funds, which simply buy a chunk of the market as a whole. Since there is little ongoing management involved, their fees are much lower. A person can also choose to buy certain portions of the market, e.g. oil and gas, minerals, gold, financials, retailers, transportation, utilities, etc.

Or one can buy a portion of the markets in other countries, e.g. Europe, S. America, China, India.

Do you have a major library nearby? You'll find a great deal of introductory material related to investing, plus information related to types of investments, and specific information related to individual issues.

Many library staff are quite knowledgeable about those matters, and are willing to spend time with you to help explain some of them.

I suggest that you start learning about some of the basics of investing, to begin.

Also, perhaps make a list of a couple or three of the funds that you've received and ask how to research their track record.

Do you have historic material relative to the recent history of the investments that you've received? Rather doubtful, as most executors of estates will just forward to you the investments that are to be given to you, without past records.

I doubt whether any of the records from the former owners would be available: I'd be interested in some of them, to find what the relative values have been, over a period. Plus how often the broker had carried out transactions.

Much of the reason to buy mutual funds is diversification, so that one need not make studies of, and frequent transactions depending on the action of various individual companies.

Good wishes as you start out on this fascinating journey of exploration.

Learning how money works is an interesting hobby - that pays well.

Many are scared off, fearing that it's too complex for them to understand.

But I say that it's a bit like Mom buying a loaf of bread, Junior comes in for supper, famished from all of that running around ... and stuffs a whole slice into his mouth at a time? He has alotoftroublechewing.

But - if he takes it a bite ... plus a slice ... at a time ... he can get through a whole loaf in about a week.

You have more than a week left of life, I hope!

Good wishes to you and yours.

ole joyful

You are asking me good questions...some of which I am not sure how to answer.

I appear to be about 80% invested in mutual funds and 15% in cash and money fund and 5% in taxable bonds. One of the mutaul funds is First Eagle FDS Inc (FESGX). The link at the bottom will take you to Etrade for the info. Let me know what you think.

This appears to be a good fund, but expensive

My main objective right now is to understand what I have, the expense of having it compared to what is gained. If someone could look at this fund and point out some key info(I know there is a lot),but just the highpoints that I could get started.

My library has two of the books that sivercomet rec. so I will be reading those plus the internet.

Here is a link that might be useful: ETrade

FESGX appears to be an interesting fund, with both good and bad points.

The good point is that it appears to have performed very well over the past 5-6 years, returning an average of 19.1% per year over the 5-year period ending 12/31/2006. If you could achieve those returns indefinitely, you would have no reason to consider leaving that fund, load or not.

Of course, as they always say, past performance is no guarantee of future results, and the bad news is that this fund is structured in a way that makes it somewhat difficult to guess about future results. The reason can be found in the fund's summary statement:

"Management searches the globe for undervalued common stocks, bonds, preferred and convertible securities and at times, real estate and gold-related investments."

In plain English, this means that the fund's manager(s) can do just about anything, which means that the fund's future performance depends entirely on its management skill. So, for example, if the manager decides to move on to greener pastures, you have no way of knowing whether the new manager will do as well. For that matter, you don't know whether the excellent returns so far are intentional or a matter of plain luck.

Moreover, it's hard to know what to do about combining this fund with other funds to ameliorate risk, because its managers say that they can potentially buy anything. So if you buy another fund -- say, a large-cap domestic value fund -- you may wind up with overlap between these two funds that overweights some companies and underweights others.

This is what is called a "class C" fund. If I understand such funds correctly, the fund comes with a charge (which I think is about 1% per year) that is used to compensate the people who sold it to you. You pay this charge every year, regardless of whether the fund makes or loses money.
So in order to hold this fund, you have to place a great deal of trust in the people who manage it. Not only do you have to trust that it will continue to be managed in a successful way, but you should also realize that if you try to diversify by buying other funds, you may not be diversifying as much as you think.

Please understand that I am not saying you shouldn't trust them. I am also not saying that you should. Rather, what I am saying is that it would probably be a wise idea to learn enough that you can confidently make up your own mind about the risks you are taking.

Zoey,

When AlphaCat speaks of "large cap", that means a company with large capitalization - a huge company, with a great deal of assets ... think GE and other giants.

"domestic" means a company based and operating mostly/largely within this country.

A "value" fund is one whose manager seeks out companies where there is a great deal of basic value but are rather unpopular, thus prices of shares are lower than they should be. Such companies are solid and strong, more likely to pay dividends - and maintain their level, despite some short-term difficult times. Which often means that the share prices tend to slide less than average when markets take a downturn. One such (long-term successful) manager says that he likes to buy a dollar's worth of value for 40 cents. Sir John Templeton, initiator and long-time manager of another value fund, says that an investor can be right 60% of the time ... and still make money.

As contrasted to a "growth" fund - where the managers seek companies, often innovative ones, that are trying to grow, perhaps rapidly. Such companies tend to be short of cash, so are not inclined to pay income out to shareholders as dividends, but use them to grow the company.

When the gleam fades from the market ... such companies' share prices tend to drop more than average.

So the net asset value of a fund carrying a basket of such stocks, when they figure that value, as a total of the values of the shares of all of the stocks that they own at the end of each day, will drop more substantially, as well.

For folks with a low level of tolerance for uncertainty ...

... fingernail-chewing time.

But folks who trust that such a fund has performed well in the past, and barring some major changes (e.g. a skilled manager moving somewhere else) may shrug their shoulders and say that more than likely it'll recover, after a time. Short-term fluctuations in value of what they believe to be a quality mutual fund - or individual stock, for that matter - doesn't interfere with their sleep.

I have no information to offer about the value of the fund to which you referred.

People with substantial assets, or in-depth knowledge of the market, or who don't plan to need to liquidate that portion of their asset for several years often choose to buy individual quality stocks rather than using equity-based mutual funds. Given that the long-term average rate of return of the market tends to be roughly 8% or so, they prefer not to pay 1/8th - 1/4 more or less of that growth to a fund manager ... when most fund managers are unsuccessful at producing long-term growth rates higher than the market averages.

Don't let the apparent complexities of the various aspects of investing frighten you off - keep plugging, and you'll learn what's going on. A step at a time - as happens with most any journey not involving planes, cars or boats. O.K. - bicycles, too.

You'll find many knowledgeable people here, who don't mind answering questions. And those who may mind - just don't post.

ole joyful

P.S. In the investment game ... there are no stupid questions! Just people who haven't learned the answer to that question ... yet.

o j

Two more books you might find helpful. I found both of them at the library.

Tricks of the Trade-An insider's guide to using a stockbroker/Mark Dempsey

Brokerage Fraud-What Wall Street Doesn't Want You to Know
Tracy Stoneman+Douglas Schulz

The last book talks about the most common abuses in brokerage accounts and how to spot them. It is written by a former judge/attorney for the NASD and NYSE arbitrator.

Thanks everyone. You all are so kind. Today was a day of insightfulness...every click of the mouse took me to things I have no idea what they are. It is very overwhelming, but I am going to plug along. Dreamgarden has listed more books to read and the last one certainly has peeked my curiosity.

It is good to know that I have help here and I appreciate it very much. Zoey

I suggest you go to morningstar.com's mutual funds forum to read and ask questions. That forum and others there (Diehards, American Funds) helped me immensely when I was getting immersed while trying to help my mother.
I would like to comment that with load funds, the load does have a psychological result. When you buy a load fund, you really are dissuaded from changing your investment anytime soon because you want the fund to have time enough to make back what you paid out in the load. This can be very valuable because people can be really tempted to sell when times are bad or seem to be. Frequent trading is for people with money to play with or with crystal balls. So, to the extent that the load deters you from selling when you shouldn't, that is a good thing. (If it's a soundly managed fund.)
There is a lot to learn. Try to keep an open mind as you read more. You'll find quite passionate opinions on investing styles. Just know that there are differences of opinion.