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Posted by Steve M on December 10, 2006, 9:36 am
An Investment Consultant recently contacted me regarding my current
retirement portfolio (held by a large firm). This company offered a
free evaluation and of course has come back with a proposed
re-balanced portfolio. Two funds they have recommended, a Large Blend
and a Small Blend, have redemption fees of 2.00. The Large Blend has
an expense ratio of .37 while the Small Blend expense ratio is 1.30.
Other funds I have purchased in the past have modest expense ratios
and no redemption fees (DODBX for one).
The Investment Consultant told me the reason she is recommending these
funds is to reduce my holding in Financials, increase IT, and move .10
to International Equities. The good news, though I haven't seen it
in writing anywhere, is I will not be charged any fees or commssions
for this re-balancing.
Is there a rule as to what is reasonable for these redemption fees?
Both funds have outperformed their category average and have
comparable YTD returns on the funds they are replacing.
Thank you.
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Posted by emailforian@gmail.com on December 14, 2006, 9:14 am
> Is there a rule as to what is reasonable for these redemption fees?
Yes, there is. The rule is anything over 0 is too high. Go to
Vanguard, or Fidelity, or T Rowe Price and you will see that they offer
a wide variety of very excellent low cost mutual funds with low expense
ratios, and in most cases, the funds have NO redemption fees or 12(b)1
fees, or front end loads or back end loads, or any other junk type
fees. I would highly recommend the first fund family on my list...
Vanguard. The reason the advisor (salesman) is recommending those
funds is because he (or she) is getting a commission to sell them, and
the fund has to recoup that commission somehow, so they get it back in
high fees such as redemption fees and expense ratios.
Do yourself a favor, figure out your asset allocation, and go to
Vanguard and select those funds that are appropriate for you. Or, a
simple yet very effective solution is just to pick the appropriate
target retirement fund and put all of your money there, and Vanguard
does the asset allocation work for you.
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