The verdict is still out (for me) on this one:

I have 250K invested across various American Funds.  I am going to be a long term investor in Capital Income Builder (20 years) with no Redemption until after Year 20 (if that).  What is the best option for me ?

Class A CAIBX --> 2.5% Sales Load with 0.58% Oper Exp

Class B CIBBX --> No Load with 1.35% Oper Exp (upto end of Year 8) , then 0.58% thereafter

Class C CIBCX --> No Load with 1.39% Oper Exp (upto end of Year 10) , then 0.58% thereafter

 I have already gone and done the calculations on the FINRA side.  What I want is the opinion of this forum.  Perhaps this can help others with this same quandry.

 - Thanks.

AAK732...

With a 2.5% front load it seems like an easy decision to me.  First, over the next eight years you would be paying over 6% more within your expense ratio for B shares.  With the front load you would be paying a one time load on the initial investment, but with B shares you would be paying the extra expense ratio on the increase as well during the first eight years. 

Secondly, I'm not sure  whether the reinvested dividends and capital gains from B shares are reinvested in A shares or B shares, but that might make a big different in and of itself.

I have no idea how C shares work so I will let someone else answer that one, but I would bet A shares with a 2.5% front load would win that race too.

helmut 

AAK732...

I would go with the 2.5% option for the reasons that Helmut has pointed out. There is also a good chance that the E.R of the fund may further drop by a few basis points down the road.

I believe the divvys and cap gains are reinvested into the same share class as far as I know.

For the C shares, they convert into F shares after about 10 years from what I understand.

Use the following URL and click on the link how the share classes differ below the fund selection.

 http://www.americanfunds.com/funds/details.htm?fundNumber=7

Hope this helps.

 Wayne.

Ok, for a 2.5% percent load --> go with "A" shares.

Now, what if I fall under the 250K limit, and now qualify for the 3.5% Class "A" Load ?

 Which Class of shares is better  (A, or B) ?

Hi,

Some of the bond funds ASBAX for example carries a 2.5% load. You could simply buy that and wait a couple of months before converting to CAIBX.

It is perfectly legal.

Using this scenario, my earlier view still stands. You do have to weigh market risks though. ASBAX is the newest bond fund offering with very short term duration.

W~.

because the American Funds allows no "B" share contributions when the account is above $100,000.00 in total value so why that is an issue is strange to me.  Almost all, if not all, load funds cut you off at $100,000.00. 

 

"C" shares are only appropriate for those with a short term horizon.  "A"shares are definitely the way to go with a 20-year horizon. 

 

With my clients I frequently use Short Term bond fund and then move the money to equity or bond funds.  No  time frame for a waiting period as one can do it the next day, next week, or next month.    Saves client money--less for me--within IRA great way to dollar-cost average on a weekly basis.

[quote user="AL Lindquist"]

With my clients I frequently use Short Term bond fund and then move the money to equity or bond funds.  No  time frame for a waiting period as one can do it the next day, next week, or next month.    Saves client money--less for me--within IRA great way to dollar-cost average on a weekly basis.

[/quote]

Al,

Thanks for the information.  Coming from you, it makes it "official."

But you said, "within IRA great way to dollar-cost ....," will it also work in a taxable account as well?  I don't see why not.

Thanks again.  Sorry about "saves client money--less for me." :-)

Justin

sorry as 2.00% for me works nicely and seems fair.  Works just as well in non-IRA accounts except you get the "loss" or "gain" which means some work at tax time.  I believe the American Funds tells the shareholder whether each transaction is a gain or loss so it could be very easy at tax time.  Have clients doing the taxable weekly exchange which works well in such volatile times.

Al,

Thank you.

Justin