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Money Girl
075 MG Save on Mutual Fund Fees
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Contact us before canceling entire account to continue bill credits to credit, stop and balance and require finance agreements as do. ♪♪♪ This is guest host, Andrew Horowitz from the Disciplined Investor podcast. ♪♪♪ And today on MoneyGirl, a few quick and dirty tips on how to reduce the loads you pay on mutual funds using breakpoints. Let me ask you something. Are you tired of paying high sales charges every time you invest in mutual funds? Better yet, have you ever wondered why some people seem to be paying lower fees than you? If so, then you may be interested in a little thing called breakpoints. And if you have a good deal of money to invest, you should listen closely because this episode may just save you thousands of dollars. Breakpoints are discounts on sales charges that you get when investing large sums into what's called a load mutual fund. A load is the sales charge that some funds charge you for investing in their fund. Now, it's important to note that there are several ways to invest in mutual funds and just as many fee structures. They range from front-end load where you pay the fee up front to back-end load, where depending on how long you hold a fund, you will pay a fee when you take your money out and even true no loads where you pay no sales charges at all. While I recommend only no load funds for my clients, if you work with a full-service stock broker, you will probably be paying some form of commission when you invest, so if that is you, listen up. A group of funds distributed by one company is referred to as a fund family. Breakpoints exist to encourage investors to combine all of their assets into a single fund family in exchange for reduction of fees. And if enough money is invested, and by enough, it usually means over a million dollars. The sales charges are usually waived entirely. One note, sales charge breakpoints only apply to funds with a front-end load, sometimes called A shares. Remember, since you're charged a fee or a load at the time of the investment, it's considered front-end. Also, you can only qualify for breakpoints with investments in the same fund family. The good news is that there are ways to qualify for a breakpoint. First of all, the most common. The investment of a large sum of money all at once. For most funds, the breakpoint begins at $25,000. The more you invest, the more of a discount you get. But there are other tricks, too, besides just having a water cash. Another way to obtain a breakpoint is by combining accounts or making concurrent purchases. This is often done with immediate family members who all want to purchase investments at the same time or have similar holdings within the same mutual fund family. Fund companies can look at all the accounts as one investment amount and give everyone a breakpoint. Of course, each account is still separate, but you can use your combined buying power to qualify for the savings. There is also the rights of accumulation, also known as ROA. An ROA allows you to receive breakpoints on smaller, ongoing investments after the total surpasses the breakpoint level. For example, suppose someone already has $50,000 invested in a fund family, but they plan on investing $5,000 at a time for a few months. Investing only $5,000, this person typically wouldn't qualify for a breakpoint, since as we've seen, it will usually begin at $25,000. But since they already have so much invested, they're allowed to still qualify for the total level of their overall investment. Similar to this, there is the letter of intent that creates a contract of sorts. If you plan on investing a certain amount of money over a specified time, you can write a letter of intent to qualify for breakpoints. A letter of intent expresses your intent to invest some amount of money over some amount of time. This has to be initiated by you and the letters submitted to the company before you invest, but as long as the total is large enough and you do it within 13 months, you will qualify for a lower fee on each investment, even though the initial monies are not at the breakpoint level. So, for example, if you intend to invest $40,000 over the next six months and want to qualify for lower fees, you could do this by making an initial deposit that is greater than the breakpoint level or qualify several small deposits with a letter of intent. September is a great month for planning. We start thinking about the rest of the year, whether it's back to school, big year-end work projects, holiday plans, or travel. Planning ahead is crucial in life, especially when it comes to what happens when you're gone. Getting life insurance may sound daunting, but Policy Genius makes the process a breeze. With Policy Genius, you can find insurance policies that start at just $292 a year for a million dollars of coverage. Some options offer same-day approval and avoid unnecessary medical exams. Policy Genius's technology lets you compare quotes from America's top insurers in just a few clicks to find your lowest price. It's the country's leading online insurance marketplace. And if you ever need help or guidance, they have an expert license support team to answer your questions, handle all the paperwork, and advocate for you throughout the process. It's never too late to plan ahead. Go to PolicyGenius.com or click the link in the description to get your free life insurance quotes and see how much you can save. That's PolicyGenius.com. It's better over here. AT&T customers switching to T-Mobile has never been easier. We'll pay off your existing phone and give you a new one free, all on America's largest 5G network. Visit T-Mobile.com/carrierfreedom to switch today. Pay off up to $650 via virtual prepaid mastercard in 15 days. Free phone up to $830 via 24 monthly bill credits plus tax, qualifying port and trade and service on Go 5G next to credit required. Contact us before canceling entire account to continue bill credits to credit stop and balance and report finance agreements due. H5N1 bird flu is spreading in poultry and cows. It's rare in people, but bird flu can make you sick. If you work with poultry, dairy cows, wild animals, or withdraw unpasteurized milk, wear protected gear like coveralls, NIOSH approved respirators and eye protection, and wash your hands often. If you start feeling sick, seek medical care and tell them you work with animals. Learn how to reduce your risk at cdc.gov/birdflu, a message from CDC. Lastly, even if you want to move your money to a different fund, you can continue to qualify for breakpoints if you reinvest within the same mutual fund family. For example, if you withdraw your investment from one fund and wanted to change those assets to another within the fund family, you could do so without paying another sales charge, you'll carry over your investment, and if you continue to invest, you can still qualify by using one of the breakpoint strategies. Some tips, don't spread your money around into several different mutual fund families if there are good funds that meet your objectives within the fund family you are already investing. It probably won't be worth it in the long run because of the additional fees and expenses you'll pay up front. Also, resist splitting your assets into different types of share classes. If you must pay a load, pick either Class A, B, or C, and look at the prospectus to find which will be more cost effective. Usually, the more you invest, the better savings by using front end loads with breakpoints. When choosing a mutual fund family, you could request to see their breakpoint schedule in advance to make sure that they do offer breakpoints and that they are at competitive rates. If you ever feel like you've been ripped off, you can receive the breakpoints you should have or pushed into a specific load option that was not in your best interest. You can look to file a complaint with a brokerage company or representative. By law, they are required to keep a copy of all complaints on file and you deserve to get the best fee structure available. If they don't clear up your concerns, you can direct the situation to the SEC, also known as the Securities and Exchange Commission, or the NASD. The best way to avoid the situation is to get the broker's recommendation in writing and read the prospectus carefully. In the end, an educated investor is the best investor. Cha-ching, and that's all for now. Thanks for tuning in to The Money Girl. This is Andrew Horowitz sitting in for The Money Girl. I invite you to listen to my weekly podcast, The Discipline Investor, also available on iTunes. And if you are interested in learning more about mutual funds, go to iTunes.audible.com right now and download my best-selling audiobook and start on the road to becoming a disciplined investor. And don't forget this, more information in the transcript of the show notes on cutienow.com. As always, everyone's situation is different, so be sure to contact a tax or financial advisor before making important financial decisions. This podcast is for educational purposes only, and is not intended to be the substitute for seeking personalized professional advice. Thanks for listening. Canva presents a work-love story like no other. Meet productivity. She's all business. The Canva Doc is done. Creativity is more of a free thinker who will whiteboard brainstorm their worlds apart, but sometimes opposites attract, thanks to Canva. 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