A Mutual Fund Share Class Discussion

There is a tremendous amount of money invested in mutual funds in the United States. In some cases people own mutual funds for their personal investments. In other cases people own mutual funds in their employer retirement plan, whether it be a 401k, 403b, Simple or Sep IRA, etc. I’ve found that the majority of people whom I meet, whether clients or otherwise, don’t know the difference between A, B, C, and other less common share classes. I find that odd considering the investor is often the person who must choose which share class they own and therefore should have at least a basic knowledge of each. However, many people leave that decision to their advisor and don’t learn the differences until after their account has been open a while or worse, when they need money and find out they are subject to some sort of deferred sales charge. Let me elaborate below so that, in the future, you know exactly what you are buying and why:

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Are Exchange-Traded Funds Really Ruining the Market?

In my opinion, no, that’s ridiculous. As I wrote in my book back in 2007, I believe ETFs are one of the best financial innovations to hit the market in decades, perhaps since the mutual fund made its debut. ETFs allow investors to own broad, diversified portfolios at low annual costs. That’s what mutual funds offered back in the day but people ultimately realized that some fund expenses weren’t so low and the performance wasn’t so hot. I believe ETFs offer a solid way to own a passive portfolio which covers a broad cross-section of the market. Couple that with the fact that they are transparent, trade on exchanges like stocks, and are tax-efficient. Now to clarify, when I refer to ETFs, I am referring to large, popular indexes such as the S&P 500* which do not employ leverage. Please read on to hear some professional opinions about how ETFs may have contributed to market volatility:

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Understanding the SIMPLE IRA Plan

In the world of small business retirement plans, there are many options. Some plans give the employer sole authority to make contributions, others are contributed to by employees only, and some are a hybrid of the two in which employees make contributions and employers can make matching payments or make random contributions to the plan. The SIMPLE IRA is an interesting option for small and mid-sized businesses (up to 100 employees) which allows a mix of employer and employee contributions. Some would say IRA plans like the SIMPLE are becoming obsolete as the 401k vehicle has become more flexible but that’s not entirely true. 401k plans still have more onerous rules on business owners in terms of tax reporting requirements and the fairness surrounding contribution levels. For that reason many people stick with plans like the SIMPLE IRA which have lower contributions limits but are easy to administer and achieve the goal of socking away tax-deferred funds for retirement.

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