Taylor  -  Which  NO-LOAD  fund(s)  could  be  used  to  achieve  consistant  dividend  growth  like  CAIBX  that  you  advocate.  You  mentioned  EADIX  but  this  is  a  load  fund.  There  is  EDICX  which  has  a  deferred  load  if  sold  within  1  yr.  plus  the  E.R.  is  very  high.

Hi.........

There is no no-load open ended fund with 'exactly' and 'specifically' the very same objective.  Some have looked at more traditional balanced funds where like Caibx you reinvest the CGs and take the yield. There though you have the problem of a lower initial yield, less consistent div growth and more reliance on LTCGs than a Caibx.......

I have been told Tibix is available at Fidelity with no real minimum if it's purchased on line. Tibix is a 'more aggresive' caibx, and it has the same objective........

t

I have been told Tibix is available at Fidelity with no real minimum if it's purchased on line. Tibix is a 'more aggresive' caibx, and it has the same objective........

t

[/quote]

Hi everyone. 

Yes, Fido offers TIBIX, but there is a $75 transaction fee.  B shares of the AF family are available for consideration too, although the e/r is somewhat higher.

Regards,

Dave 

Note that tibix really is NOT for taxable accounts............

t

Lets not let marketing professionals fool us with alphabet soup.

You can put lipstick on a pig and its still a pig!

A load is a load is load, A, B or C!

With a loaded fund, they get the commission in the end.

Good Luck

Brian

Right and wrong........

A good investment is a good investment, and a bad investment is a bad investment..

======================

The 'load' excuse can be a smart excuse when one is talking about a bad investment, but can be a ridiculous excuse when one is taking about a good one.........

The longer one intends to hold a good investment, the weaker the load excuse for not buying it is........

 ====================================

Lipstick on a pig more describes a mediocre investment that happens to be no load.

t

t,

I could not agree with you more.  I think its foolish to screen out a fund simply because it is loaded.  I certainly was not calling CAIBX a pig!  That would be heresy!

It just seemed like some comments in this post made it seem like the other share classes were load free, albeit with higher expenses.  I assume most people can figure out the mechanics and understand that the higher expense is due to the larger 12b-1 trail fee (read load!), and then again some people dont dig that deep. 

I just wanted that to be clear.

Best to you.

Brian

Actually for someone wanting to hold for an extended period of time, there's very little difference between B and A shares (at least for AFs)......

C shares would be for shorter term investors..... 

t

Yes we agree again, because AF are ethical enough convert B shares to A shares after they have "recouped" the load through the higher expenses.  They need to get the load to compensate the advisor,  but apparantly have no desire to rape people.

[quote user="hurleyhuckster"]

 I think its foolish to screen out a fund simply because it is loaded. 

[/quote]

Although a fund should not be discarded from consideration simply due to load.  Lets face it, it sure does create one hell of hurdle to overcome, and should usually be avoided.

Brian

 ... It just seemed like some comments in this post made it seem like the other share classes were load free, albeit with higher expenses.  I assume most people can figure out the mechanics and understand that the higher expense is due to the larger 12b-1 trail fee (read load!), and then again some people dont dig that deep. 

I just wanted that to be clear.

Best to you.

Brian

[/quote]

Brian,

I was referring to the B shares of Capital Income Builder, and what I stated is the truth.  I never said there wasn't a "load,"  but hell, if one considers a 12b-1 fee to be a load, then almost every retail mutual fund that exists is a load fund.

As Taylor stated, and as I've stated in previous threads, the AF B class is a good alternative to the A class if one is in it for the long run.  Plug the numbers into an Excel spreadsheet.  The numbers just might surprise you.

Additionally, many so-called "no-load" funds use excessive trading tactics that end up costing shareholders a lot more than the 12b-1 fees.  It's known as high turnover, and it costs shareholders more than they realize. Given otherwise similar performance, I'll take the low-turnover loaded fund over the high-turnover no-load fund. It'll cost less in the long run.

The B shares of Capital Income Builder are anything but lipstick on a pig. 

I wanted to be clear too, but I'm probably not.

Regards,

Dave

RELAX Dave!

I am not interested in a pissing match, only the sharing of knowledge.

Your defensiveness seems to be narrowing your blinders!

Show me where I disagreed with anything t stated.  You appear to be arguing with yourself.

I would love to discuss further the share classes, 12b-1 fee, and comparisions, but unfortunately your not fostering that positive environment, its a shame, because the results might very well surprise YOU!

Have a nice weekend.

 Brian

Dave,

Let me try this again, giving you the benefit of the doubt.  Sometimes here in cyberland it is easy to take things out of context.  I stand behind everything I wrote.

I am guessing the pig expression is what set you off.  After that, it just seems you did not read my posts carefully enough, since you infer much that I never stated.

The pig comment is well known expression and was not directed at any particular fund, fund family or person.  It was just meant to mean one can try to cover up the nature of something, without changing what lies beneath.

I agree with your comments about choosing funds, show me where I stated otherwise.

Your facts are lacking somewhat in regard to 12b-1 fees, atleast to the best of my knowledge.  No-load funds can not charge a 12b-1 in excess of 0.25%, although the vast majority of them charge no 12b-1 at all.  (Vanguard, T-Rowe, Dodge & Cox)  The 12b-1 fee funds the trail fee that goes to the advisor on record, call it what you want, but me thinks thats a load and I am sure most would agree.  A-shares kick back a 0.25% trail fee where B and C kick back a 1% trail fee.  You need to carefully review the prospectus, look at time periods of contingent sales loads, time to conversion and do the math for yourself.  You will see they are pretty much getting the same darn load as if you bought A shares and paid up front.  Do the math, didnt you ever wonder why the CDSC for B is 5% decreasing yearly to zero.  Its just like annuity surrender charges, its structured all around the sales commission.  People who think if they just wait it out to avoid the CDSC are just kidding themselves.  When the load equivalent to A shares is finally "recouped" they convert to A shares.

Pay now or pay later.

Sorry for jumping on you in previous post, but your reply really annoyed me as you seemed to by trying to pick a fight about things I never said.

I only post here to learn, help and to share knowledge.

The very best to you.

Brian

Al,

Please correct any mis-information in my above post.  It is all to the best of my knowledge factual, but only stated as my opinion, based on what I have researched in the past.

Everyone,

I have some thought regarding buying a load fund over a no-load fund.  The load is meant to compensate an advisor.  You should typically only buy a load fund if you can benefit from an ethical advisor.  However, there may limited circumstances when a DIY'er may choose a loaded fund.

It might make sense if a fund is unique that it can not be found elsewhere, and no other fund or funds can fill this spot in ones portfolio.  So on this point, I say YES!

As far as the low turnover argument, although I agree with Dave, I find that argument somewhat weak.   Ofcourse, if all other comparable funds are high turnover, then the load might make up for itself on a comparision basis.  However, in most cases, I would think a comparable, low turnover, no load fund could be attainable.  On this point, I say MAYBE.

Finally, as we all know you can not buy past performance, so this should NOT be a reason to buy a loaded fund.  The expectation that a loaded fund will consistently outperform a comparable no load fund in excess of its load is laughable.  Although we may be able to point to a few lucky funds, who knows this in advance, and will it revert to the mean eventually.  Dataminers, have at me!  On this point I say NEVER!

A load is a serious drag on an investment portfolio.  If purchasing a load fund you should have a compelling reason.  Purchasing because of past performance or because it is pushed on the internet is lousy strategy, IMO.  And I dont give a crap what flavor of the alphabet were talking about. 

I am grateful to Taylor for drilling the following into my head, "Know WHAT you own, and WHY you own it". 

These are just my opinions and I welcome comments to help me learn more and possibly change my point of view.

I also would like to hear others thoughts on when it may be appropriate for a DIY'er to purchase a loaded fund.

Good Luck

Brian

No-load funds can not charge a 12b-1 in excess of 0.25%

[/quote]

Is this true of load funds, too? 

[quote user="hurleyhuckster"]

The 12b-1 fee funds the trail fee that goes to the advisor on record, call it what you want, but me thinks thats a load and I am sure most would agree.  A-shares kick back a 0.25% trail fee where B and C kick back a 1% trail fee. 

[/quote]

So does this mean that an advisor continues to make 0.25% off a portfolio of A shares? 

fees associated with "A" and "B" shares mentioned in this discussion were originally established to help folks like me sell more shares if funds.  Now the justification is the ongoing help and service rendered to clients.  The SEC is going to rule on 12B-1 fees and there feasibility at some point after much ongoing back and forth discussion.

Someone like  myself actually receives .25% annually (divide that by 4 as it is paid out quarterly) wheter "A" or "B".  The cost for "B" shares for someone in Fundamental "B", as an example, is about 76 basis more than "A" shares.  Now actual performance shows "A" shares scored higher by 85 basis points last year; +13.55% to +12.70%.

Either "A" or "B" is the cost of working with someone.  That is the choice folks have and if they prefer to be on their own, in this free market, they can go to a myriad of other fund families.  I can honestly tell you that most folks do not zero in on costs.  I was on a conference call yesterday with trust folks at a large Philly firm that managed trust account for a client of mine.  She has an account with me and family trust set up years ago in Philly.

Yesterday we discussed the in and outs of the trust with client, sister of client, lawyer, and financial advisor.  This 4 way call was very pleasant and informative.  The financial guy got on the line and discussed the market and their 60/40 approach to this account.  Nobody discussed the cost.   Neither sister, one here and one outside Philly, asked about the cost of what was happening.  Now I did not bring it up as I was dealing with trust document and the ins and outs.  Never has either sister ever to my knowledge asked about cost.

So "A" or "B" you pay and you should expect to pay if you want to work with someone.  It would not occur to me that there is a free lunch somewhere.  I suspect most folks figure someone is paid somehow.  Personally for "B" shares most folks I work with are not freaked out by 85 basis points for Fundamental.  I meet in a week or so at 9:00PM with a lovely family of twin boys who are in bed by then.  That is when we review their account and the feasibility of adding on to the house and other non investment questions they have.  I get home by 11:30PM. 

There ain't no free lunch!

Hi Al -

A board like this is biased towards do it yourselfers.  If we weren't, we wouldn't be here.

I agree with you that most women, especially older women, won't ask you about costs.  Not all of course, but most.  I think it has to do with the way we are socialized.  I do ask about costs, but I wouldn't call myself a typical woman in that respect.

I am in American Funds because I got in at a time when I didn't have the time to research this stuff myself so an advisor was helpful then.  I don't feel I need one any longer, but I like my American Funds investments so I am staying with them. 

I am trying to run some numbers to help me to understand if the front-end load has that much of an impact over the long haul.  My gut instinct is that it doesn't as long as the expense ratio of a fund is low and with American Funds, the expense ratios are reasonable.

I agree, too, that you deserve to be paid for the advice you give to others.

The cost for "B" shares for someone in Fundamental "B", as an example, is about 76 basis more than "A" shares.  Now actual performance shows "A" shares scored higher by 85 basis points last year; +13.55% to +12.70%.

[/quote]

I am a little confused, Al.  Did you mean to say B shares in your last sentance above?  I thought the difference in performance was due to paying the front end load and the ER difference, nothing more.  So typically, when only looking at one year, shouldnt the B shares score higher?

Al has made a great point in the past for B shares over A.  He helped me to better understand this.  They can come in pretty close over the long haul.  You may make out better either way depending upon the market, this is correct, right Al?  Its the whole having more money working immediately as oppossed to the higher "temporary" ER until conversion. B-shares especially make sense when paying FULL load. 

Al is one advisor, the best I can tell from knowing him only from this board, that deserves MORE than he probably recieves through AF commissions.  Your a true class act Al, and never want you to take from my thoughts that you dont deserve what you get $.  I am one who thinks many people DO benefit greatly from an advisor like you.  Your clients are lucky to have you.

KCallie,

Load funds are not restricted by the 0.25% cap on 12b-1, if they were, a hell of lot of them would be breaking the rules!

Naturally, the effect of load diminishes over the long term, that is just math and not magic.  However, the drag is still there and very real.  Ofcourse, we are talking about this in the context of DIY'ers.  When it comes to needing an advisor, as Al says, there aint no free lunch and you have to expect to pay for Al's time, gas, and for him to really care.

Yes the trail fee is the gift that keeps on giving year after year and grows with your assets.  According to Al, its only 0.25% no matter what share class A or B.  That makes no sense to me.  Ofcourse, Al should know better than most how AF works.

I did dig pretty deep way back when into this subject.  I found an excellent extensive paper, that I wish I had held onto, that to the best of my knowledge, explained the B & C share as allowing for bigger trail fee.  This only makes sense, how else is the non-existent front end load to be made up for if shares are held long term?  Ofcourse, I could be mistaken between the C & B shares, it was a year ago, and I sometimes forget things as its like information overload sometimes.  The paper was not specific on AF and that could also be the problem. 

Again, this is all to the best of my knowledge and I welcome any other information. 

I educated myself, learned, and moved on from this topic a long time ago.  However, now I am feeling tempted to re-find this paper.  In any case, it is still a moot point.  Lets say the trail fee is 0.25% for both.  Who really cares, your still paying the 0.75% higher 12b-1 fee for holding B shares, so it does not really matter where it ends up, net effect to investor is the same. 

Not enough hours in the day.  Its Saturday morning and unfortunately, I have to go to work today to fund my own 12b-1!

Have fun everyone.  Check back later.  Might have to light a fire tonight, in my woodstove not on the forum! 

Brian

can be a bit tricky and I have no idea of what you are using, but one thing I do with clients is the following:  Let's assume folks stay with the American Fund for 10-years.  Let's assume it cost 2.50% "A" shares to buy Fundamental if you buy Short Term Bond first and then switch to FI.  Works great in an IRA.  Assume the expense ratio with FI stays at 60 basis points--if we do 10-years then 0.25 (250 basis points divided by 10) + 60 basis points gives us a cost of 85 basis points. 

Is 85 basis points worth the fund and working with someone?  Your choice!  Life ain't too complicated and if you really work with an advisor (you ask for meetings--you ask for imput if you have 401-k or 403-B--you are somewhat aggressive) it can work nicely for you.

My imput yesterday (just understanding the trust and being able to explain it) was well worth it to this client.  One thing she says to me all the time is; "you explain things so I can understand--the trust folks talk over my head and make me feel I am imposing by asking questions."  Find someone you are comfortable with and there is a good chance you can have a good relationship.

Brian,

In my forced dealings with brokers far more unethical and incompetent  than someone like Al, whom I would easily and gladly pay the load for, on belhalf of family members, friends and our 403b's, I have had to run the numbers and examine results, over long terms, when the individuals didn't listen.

My conclusions are that A shares are the best buy although the numbers seem to come out the same when you run the spreadsheets over a long enough time period.  The gap is caused by how the amounts are computed.  On A shares, I pay upfront and have access to things such as reduced amounts for large investments but all of my capital gains and dividends are reinvested load free and I do not pay the "load" on growth of my assets.  It's the one time, up front reduction in the amount invested.

On B shares, I pay the additional amounts on all assets over a 5-8 year time period.  So I'm paying a "load" on dividend and capital gains reinvestments and growth of NAV.

A shares 5.75% on 10k.  I invest 9.5k

B shares 1% on 10k through the e.r.  At 10% av annual return in year 7, I'm paying 1% on 20k.  I've now paid a load of about $800 but it was hidden and I didn't see the upfront ding like with A shares so that I may have believed I was paying no load.  And I just see the growth that I had, not the fact that the A shares made 11%.

Companies like American and Franklin funds came to the B shares very late in the party since they knew the  numbers but finally had to offer them to compete with the likes of some high volume well known brokerages.  The SEC finally started making noises about the practices and the fact that there were people who had been with brokerages for more than 20 years and had no A shares b/c they always turned bad in year 7 and were replaced.  Now C shares, which never convert, are the choice du jour and what is pushed if you won't agree to an account with a 1-2% annual fee on all assets.

Roberta 

Hi Brian:

"I have some thought regarding buying a load fund over a no-load fund.  The load is meant to compensate an advisor.  You should typically only buy a load fund if you can benefit from an ethical advisor.  However, there may limited circumstances when a DIY'er may choose a loaded fund.

It might make sense if a fund is unique that it can not be found elsewhere, and no other fund or funds can fill this spot in ones portfolio.  So on this point, I say YES!"

The problem is, I have never seen that occur.  I don't see any loaded funds out there that can fill a spot in one's portfolio any better than an unloaded one.

As a young investor, your absolute main focus should be on asset allocation, diversification, and costs.  This is what will lead a DIY accumulator to financial success.

Lets take the venerable CAIBX.  Look at its long term record.  For an accumulator, adding money every month, you will constantly be paying that load on new money and the higher ER on old money even after you have overcome the original load.  Whatever your gains are over any period, they will always be 5.75% less than they would have been.

CAIBX has a 8.91% return over the last 10 years.  VG Global Equity fund has a 10.92% return over the same period.  Which was the better investment for a DIYer?

Don't be fooled by charts showing a $1,000,000 investment throwing off X amount of dividends and growing X amount with CGs reinvested.  You don't have $1,000,000 to invest at this point, and you are not planning on spending the income.  All you should care about is TOTAL RETURN at this stage.

I am convinced that Al is an honest and ethical representative of American Funds.  People out there really need his services and he should be paid for them.  But you, and most other knowledgeable DIYers don't.

If at age  58-59  you decide that living off dividend income  which is growing is a good strategy for you ( and I think it is a good strategy for almost anyone) then by all means consider taking that portion of your money and buy CAIBX.  Who knows, there may be an even better, no load version by then.

Just remember, on the day you retire, If you have more money in your nest egg than someone who invested in a load fund with growing dividends that you can't use as you accumulate, you can always buy his fund and have more shares and a higher income than he does.

Look for the best odds at the highest total return in line with your risk profile.

best,

Bill

to run the numbers is to simply use the hypotheticals provided by the American Funds.  They tell you everything in just a few minutes.  If we go back to miserable market years (1973 to begin) and run a 8 year hypo ("B" shares conver to "A" after 8 we see that with AMCAP (just an example) "B" shares give you $24,642.00 and "A" $24,564.00.  When markets are weak "B" works somewhat better because every dollar works for you up front. 

Comparing CAIBX to the Vanguard fund assumes they both have the same objectives.  I willl bet they don't!  CAIBX is quite unique and does what it is supposed to do and I assume the Vanguard fund does the same.  I just don't think they are set up to do the same thing thus a comparision might not be valid.  How does Vanguard Global Equity compare to Capital World Growth & Income which might have the same objective?  My year end Barron's shows WGI doing somewhat better for 5 years, but let's agree they are both fine funds.  I can show up on Sunday morning in the kitchen or you can work with someone on the phone--your choice--different strokes for different folks.

Bill & Roberta,

Thanks for your reply.  For the record, I was not planning on purchasing any load fund, unique or not!  I just thought it may make an interesting conversation and was wondering if anyone had any other ideas of why they feel purchasing a loaded fund was justified.  (Other than the need for an advisor!)  I totally agree with you, I think out of the myriad of funds to choose from, there are plenty of no-load funds to fill the need in ones portfolio.  Maybe for some people CAIBX is so unique that it makes sense, but not for me.  I think the idea of a fund being unique is a valid reason, but certainly not for me, not at this time.

Al,

You always seem to attempt to justify your work and the compensation you recieve.  I dont think it is necessary, most of us here (ofcourse I can really only speak for myself) understand this.  We know what a wonderful advisor and person you are :o)  It would take a fool to suggest that all people should invest on their own.  Some people really need this guidance.  Sure one could choose a "No nothing" portfolio of low costs, but IMO, the most critical role of an advisor is to keep the client on track AFTER the plan is established.  Take the DALBAR study for example.....need I say more on this?  Al, you are the MAN!

Regards,

Brian

Someone like  myself actually receives .25% annually (divide that by 4 as it is paid out quarterly) wheter "A" or "B".  The cost for "B" shares for someone in Fundamental "B", as an example, is about 76 basis more than "A" shares.  Now actual performance shows "A" shares scored higher by 85 basis points last year; +13.55% to +12.70%.

[/quote]

 Hi again Al,

I am still struggling with this a little.  While I was working today, thinking about it, I think the light bulb went off.

I certainly believe what your saying, you know inner workings of AF and its advisors much better than me, thats for sure.  However, I think your answer was a little misleading or atleast not telling the whole story.  Your answer made it seem like there was no front load being paid and you only recieve the same 0.25% like with A shares.  Thats just crazy, and this would create a real problem with ethical behavior.

I have to assume, this works like an annuity, that AF fronts you the "front load" althought the investor never pays this up front.  The contingent deffered sales charge (CDSC) ensures that AF recoups its costs if the investor bails early, just like a variable annuity.  So technically speaking, perhaps you only get the same trail fee no matter what share class, but the investor still pays the load (or pretty close), you get the same compensation (or pretty close), and AF gets there same share (or pretty close) either through CDSC or the higher 12b-1 fee, depending upon time frame of investment.

Not disputing that you deserve your dough!  Just trying to understand the mechanics of the process!

I put this behind me a long time ago, I am not interested in deciding which class is best for me as I dont invest any new money in loaded funds.  This thread just re-kindled some interest in the topic.

I appreciate your participation in these conversations.

Hope this helping others better understand the alphabet soup.

"The truth is out there"

Brian

You say I am correct, then I got confused with the rest.

Ofcourse, the net effect to client is the same, regardless of where the 12b-1 goes or how the commission is derived.  By simply knowing the loads (font end and CDSC), time to conversion and ER, we know how to choose a share class, regardless of the inner workings. 

I dont want to beat a dead horse, but just pacify me with one more reply and I will be happy :o)  I just want to clarify since I originally thought the advisor got a 1% trail fee on B shares, and I want to get my facts straight, sorry I am anal!  (I think you were agreeing with me, I could not really tell)

A shares:  customer pays front end load (which advisor gets a portion of), then advisor gets 0.25% trail.

B-shares:  AF pays advisor up front the portion of the load they would of got with A shares, then advisor gets the 0.25% trail.  AF makes up the fronted money, with the higher 12b-1 fee or CDSC, which ever comes first.

Hence the advisor still gets the same commission, or pretty close.  Correct?

Its not Zero for advisor upfront and then only 0.25% trail for B shares.  Your one earlier reply seemed to imply this by ommission.

I just think it matters, atleast to me.

Sorry if I am asking you to divulge trade secrets here.  I wont tell anyone :o)

Thanks again for your patience.

Brian

the advisor gets less with the "B" share than the "A" up to $50,000.  The payout from the American Funds (initial load) is less on "B" than "A".  You get an initial up front payout on "B" and the 0.25% trail just like the "A".  Yes, the advisor gets pretty much the same commission and same trail.  Now some fund families will give a 1% trail, or certainly used to, as I almost exclusively use the American Funds group I know how they operate. 

Share classes are what work best for the client.  I see someone Saturday morning and it is for her Dad who is 83.  Now if we do three bond funds then "C" might work best as it need only wait 12 -13 months before he can take 100% of principal back at no penalty. At his age that might work best.  That topic I will discuss with the daughter and son-in law.

RELAX Dave!

I am not interested in a pissing match, only the sharing of knowledge.

Your defensiveness seems to be narrowing your blinders!

Show me where I disagreed with anything t stated.  You appear to be arguing with yourself.

I would love to discuss further the share classes, 12b-1 fee, and comparisions, but unfortunately your not fostering that positive environment, its a shame, because the results might very well surprise YOU!

Have a nice weekend.

 Brian [/quote]

Brian,

I am relaxed ... please do the same.  Please don't construe my response to you as an attack on you.  It is not. It was meant to head off the typical "never buy a loaded fund" responses that I figured would be forthcoming.  However, considering that mine was the only response suggesting B shares as an alternative, your response appeared to be directed at me.  And that's fine.

But I was not being defensive.  I was simply pointing out the facts.  Too many times people say "never buy a loaded fund" or some similar nonsense, and lipstick on a pig is basically stating the same thing.  Unfortunately, cliche statements like that do nothing but create misunderstanding, implying that a fund, or a fund family itself, is lousy.  As you know, many AF funds have served many investors well over time.

You can discuss 12b-1 fees, share classes, and anything else you'd like to discuss -- I'd be the last to stop you.  But I would NOT be surprised to find that, in certain circumstances, the cost of ownership is actually less with B shares than A shares, at least in the AF fund family.

A good investment is a good investment, regardless.  The challenge is finding the good investments.

To the OP's original question ... when no-load funds become available with the objectives, stewardship, and track record of a fund like CAIBX, then I'll be all over it. Until then, if a load fund serves my investment objectives, I'll buy it.

Regards,

Dave

You need to carefully review the prospectus, look at time periods of contingent sales loads, time to conversion and do the math for yourself.  You will see they are pretty much getting the same darn load as if you bought A shares and paid up front.  Do the math, didnt you ever wonder why the CDSC for B is 5% decreasing yearly to zero.  Its just like annuity surrender charges, its structured all around the sales commission.  People who think if they just wait it out to avoid the CDSC are just kidding themselves.  When the load equivalent to A shares is finally "recouped" they convert to A shares.

[/quote]

Brian,

No apologies are necessary. 

But, I'm not certain to what you refer regarding my lack of education regarding 12b-1 fees, so please elaborate.

In the meantime, please carefully review the SAI document.  There's more to a mutual fund than just the prospectus.

AF allows B-share conversion to A-shares without having to pay the A share load,  if you exchange during the CDSC period. (See page 47 of CAIBX's SAI document, which can be obtained on the AF website.)  Of course, most people probably don't know this because they don't bother reading the pesky SAI document (I can't blame them really -- Dodge & Cox doesn't even make it available on their website.  But they'll mail it if asked.)

Sometimes overall expenses can be reduced, including 12b-1 fees, by using the options given to them by the mutual fund company.

In a nutshell, expenses are expenses, whether they're 12b-1 fees or other management fees.  I think we can all agree that reducing ongoing fees, to a reasonable extent, is important.

Want to reduce 12b-1 fees even more?  Buy ETFs or stocks. 

And ... sorry I annoy you.  Just so you know, my wife agrees with you!    :^)

Regards,

Dave

Hi Brian,

We actually agree, which is not a surprise to me.  And I apologize that my comments were misconstrued.  That's my fault.

I should have said that many - not most - no-load mutual funds charge a 12b-1 fee, which I also consider to be a load.  It's just that I don't usually concern myself with the component portions of the ongoing expenses of owning a mutual fund.  To me, it's like going to the best steakhouse in town.  As long as I get a good meal, I don't really care that the restaurant took out a full page ad in the Yellow Pages.

I like to remind myself of Legg Mason Value Trust, which is a fund that I used to own back when I was even dumber than I am now. It's a fund that M* still likes, but, IMHO, I think it's one of the worst funds available to the retail customer. Legg charges 12b-1 fees, most likely in their attempt to convince people like me that 15 years of beating the S&P 500 is a good thing.  However, technically speaking, it's a no-load fund.  But given the choice of LMVTX and CAIBX (I realize their objectives are different, but one could pick any American Fund), many many people would choose LMVTX simply because it's "no load."  Yet it's ongoing costs of ownership is 1.69% annually, and possibly even higher due to excessive turnover.  But even if LMVTX didn't charge a 12b-1 fee, LMVTX would still stink on ice.  Lipstick and pigs comes to mind.

LMVTX is my reminder that choosing a fund just because it's no-load is not a good enough reason, at least in my view.  (Looking at photos of Bill Miller's yacht irks me too. (Of course, as Mel Brooks once said, "It's good to be the king!)

I also have to wonder how much churning would go on if the 12b-1 fee structure were changed.  I have to imagine that some advisers would figure out new ways to replace that lost income stream, most likely at the expense of the investor.

And I will also admit that I was somewhat perplexed when I first read AF's SAI exchange policy.  I'm not sure why they would allow that, but it's additional information that's good to know.  It's mind-numbing reading that mumbo-jumbo, but there's some pretty interesting stuff contained within.

Best regards,

Dave

Very Good Dave, I guess that settles it then. 

I certainly agree with all your thoughts.

Brian

Hey Dave,

I finally got a chance to look at the SAI for that little tid bit of info you provided about exchanging to B to A during the CDSC period without paying the A-share load.

I was a little perplexed (as you also said you were) as to why they would allow this.  Ofcourse, I was assuming one would not have to pay the CDSC too, I dont know why I assumed this, I guess I just took it as implied the way you stated it.

So after considering this, it is not really perplexing at all.  One will be stuck paying the CDSC for the exchange, hence AF still gets the load, so it makes sense that they would not also charge the A-share load.  So it really does not matter when you exchange.  Not sure if you caught that, so I wanted to share it with you.  It seemed like we both thought there may have been some kind of benefit or free lunch there and wondered why AF allowed it, yeah right!  It seems like the following verbage is just so people know that they will be paying the CDSC for an exchange, just like a sale for cash.  Again, nothing earth shattering, just a clarification.  Makes perfect sense.

From SAI:

Ofcourse, it would appear that the fool who converts after the CDSC period would really get hammered!

 If you exchange your Class B shares for Class A shares after the contingent deferred sales charge period you are responsible for paying any applicable Class A sales charges.

Why would anyone do this?

Why would anyone convert from B to A during any time period?

Not that I really care, doesnt apply to me. 

Just thinking out loud.

Brian