I have an old mutual fund from 12 years ago (SLMCX) that was a front load (5.75%!)fund. It's expense ratio now looks pretty good (1.38%). I would like to purchase FOOLX, which is not a load fund, and has a slightly higer expense ratio of 1.43%. Since I have already paid the front load into SLMCX, is it better to keep that fund, even though I do not like it as much as I would like to have FOOLX? This is in a taxable account.
Sell SLMCX and buy FOOLX
Hold SLMCX - you already paid the big price as a front load!
Sell a little SLMCX and buy a little FOOLX
Click here to see results so far.
Click here to see results so far.
Sell SLMCX, do not buy FOOLX - Read: "All About Asset Allocation" by Richard A. Ferri - stick to Index Funds.
I know nothing about either fund so I won't comment on either nor will I skew the poll by voting in this ignorance. I assure you that the front load no longer has a place in your evaluation. You should ignore it since it's in the past; that's the case whether you paid the load twelve years ago or last week. You don't invest in the past, only in the future so evaluate only what's in your account now. You say nothing about how SLMCX has performed in the twelve years you've held it. Has it been and is it likely to be a good performer? Does it fit your plan? Does FOOLX fit your plan? Do you have a plan? KennyO
Well, from inception of FOOLX, we have annualized numbers:FOOLX 7.42%SLMCX 6.63%On the other hand, over the same period:IWM 12.16%QQQ 18.88%SPY 14.47%So much for the managed funds, although I am sure that there are some managed funds that have done better.
Well, from inception of FOOLX, we have annualized numbers:FOOLX has existed barely 3 years. Comparing returns over ONLY 3 years as the basis of an investment decision is not meaningful... IMHO.I consider any fund much over 1% expense ratio as pricey.
Comparing returns over ONLY 3 years as the basis of an investment decision is not meaningful... IMHO.Well, then what is one to do when 3 years is all you have? Look at the prospectus, which is basically a sales pitch?The fact is, I do not think I have ever held anything for 3 years. There have usually been sell points much sooner, either because of general market timing or because something begins to look bad.Personally, I think if a money manager cannot prove himself in 3 years, there is no reason to use him.
The front load fee is a sunk cost so you shouldn't base your future investment decisions off of it. If you have done your research and think any other fund will beat the one you are in, its probably best to sell and exchange.
The fact is, I do not think I have ever held anything for 3 years.That is the difference between you and I. My (by far) largest mutual fund investment, I bought in 2006. I have accumulated a minor amount of that fund since then, but have sold none of it.Since I hold longer, it is reasonable for me to look at longer term returns.OTOH, I do some momentum investing in different accounts. In those accounts, I could care less with returns longer than 1 year ago. Given your shorter term focus, shorter term look back is entirely reasonable.
I can't imagine paying more than a 1% fee. Mine average far less. Try an index fund. The fees make a huge difference over time.
The expense ratios are basically the same. Dont make any decisions based on sunk costs. Put your money in the fund you think will perform better in the future.
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