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joyfulguy

Do you (perhaps unaware) pay for service that you aren't getting?

joyfulguy
17 years ago

Some sellers of mutual funds are employees of their sales company, but some are paid partially or entirely by commissions on the mutual funds that they sell.

If the person who sold you your mutual funds was paid by commission, usually part of the service at that time covers financial planning.

Every mutual fund management company levies an annual fee to pay for its expenses, in most cases a contractual percentage of the total fund under management (probably from 0.5% to about 4%), that is deducted from the central fund rather than paid from the account of each account holder. Details of this would have been provided to you when you received the company's prospectus when you bought the funds. Or you can ask for a copy, now, if you wish.

In many cases, part of that annual expense is paid to the original salesperson's company, to compensate the sales person for her/his ongoing service to the clients.

If the person who sold your mutual funds to you was a commissioned person, has that person provided you with ongoing reports of the operation of the fund, and offered regular discussion of your financial situation, if you desire such?

If you aren't aware of the full payment situation covering your salesperson's situation, you should be: ask.

And if that salesperson is receiving ongoing compensation relative to your fund purchase - s/he shoud be providing you with ongoing financial planning.

As it is unusual for stock market averages to grow at an annual rate over 10%, averaged over a number of years (and often somewhat less) it does seems as though, when fund managers often are taking 10 to 20% of that growth, that is a fairly hefty percentage of the growth that they are getting - and they get paid their full amount, even if there is little or no growth.

Which is a major reason that quite a number of investors, with a substantial amount of assets, have chosen to learn how the markets work and invest directly, buying stocks directly on their own, and putting the mutual fund managers' fees into their own pockets.

Assuming, of course, that they succeed in developing a growth rate similar to that achieved by the fund managers that they used previously.

Good wishes to you and yours.

ole joyful

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