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URL:  http://boards.fool.com/i-own-both-and-have-also-ran-the-numbers-on-both-23057205.aspx

Subject:  Re: Best way to invest in a ROTH IRA Date:  9/20/2005  5:03 PM
Author:  mph0804 Number:  47650 of 76419

I own both and have also ran the numbers on both assuming a 5.75% front load for the american funds and a 0.31% annual fee for the vangaurd. Assuming you get the same annual return on each (I'll use 10%) the break even point is about twenty years. If your wife holds the american fund for more than twenty years (which she may since she's young like myself) she'd be better off with the front loaded american funds, if not go with vangaurd. The biggest issue with front loads to me is their tendancy to make you stay in a lousy fund you should sell since you've already paid the load, and its hard to say if a fund will be lousy in the future.

When she gets 20 years from when she thinks she'll need the money then she should start investing in no load, low fee fund. I will say again I own both american and vangaurd funds and like them both so I am about as unbiased as it gets.

Here's the breakdown on $10,000 invested in each ($9,425 after the 5.75% load)

initally: american $9425, vangaurd $10,000...ouch
5 year: american $15,179.06, vangaurd $15,879.44...bigger ouch
10: american $24,446.02, vangaurd $25,215.66...still hurts
20: american $63,406.69, vangaurd $63,582.96...almost better
30: american $164,460.62, vangaurd $160,328.63...daddy likes!

P.S. sorry if I mispelled the V fund, I was in a hurry. And for a quick and dirty way to do the break even analysis divide 5.75% by 0.31% to get about 19 which is really close to the 20 year break even number.

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