T, A lot of companies try to be load and no load at the same time. Dreyfus and Fidelity are the most famous for their split fund families and Fido even has a separate group that is a hybrid with a 3% load. Those are called "the funds that did well last year." <G>
The reasoning is simple. No load funds are 15% of all sales and load funds are 85%. The story at one time was that load funds had lower expense ratios, but that hasn't been true for a few decades. They had lower expense ratios because they were much larger funds and boards of directors had break points on expenses. Today, the boards are mostly toadies and the break points on expenses are puny, to say the least.
Surprisingly, the class of funds that almost nobody besides life insurance agents sell, contract funds, have the best performance record for shareholders. Not that the funds do that well, but that the shareholders do that well. These are sold like life insurance. You agree to pay for a 10 year period and the payment comes to you each month like a regular bill. 50% of the first year's payment goes to commission, again, like life insurance, so if you stop paying, you have thrown half your money down the toilet. Which means that a much higher percentage of contract fund buyers stay the course than no load or load fund buyers. The load and no load funds offer a vague carrot, "stay the course and you'll probably make money." The contract has a concrete stick, "don't stay the course and you lose your shirt." Sad to say, the negative reinforcement works better than the positive. The most famous contract funds are Fidelity's Dynasty series. It's sort of dollar cost averaging with a gun to your head. |
