TRL Blog

Archive for July, 2009

Let’s say all you ever invest is $2,000 a year in an IRA, and you put that money in a loaded mutual fund with a 5 percent commission. (The difference between loaded and no-load funds is explained in Step 6.) Five percent of $2,000 a year is $100. If you start your IRA at the age of twenty-five, by the time you turn sixty-five that $100 that you did not need to spend invested at 8 percent a year would have added up to $25,905. It seems to me that the one who will eventually be loaded is that broker who is selling everyone these funds.
By the way, this calculation does not include the charges incurred every time you sell the loaded fund you’ve invested in in order to buy another one. If you were to do this just OflCC every ten years for the next thirty years, assuming that your funds grew at the rate of 10 percent, you will have paid another
$15,593 in commissions on just the principal, not including the $25,905 you could be saving on those commissions. Over $40,000, and you did not think it was such a big deal?