Q: Your reply to the "investor" who claimed that a broker had told him that "no-load funds do not really exist--it's a misconception" was good as far as it went.
However, I think you should have made some effort to help the reader understand what the broker really said. Obviously he wasn't telling your reader that no-load funds don't exist. Any idiot would know that they do. But that's what this "investor" heard, and everything else the broker said came out as "blah-blah-blah." You could have helped the reader by explaining that the broker was in effect saying: "There's no free lunch. Yes, no-load mutual funds don't have a sales charge, but they get their money in many cases with higher management fees or 12b-1 fees, which are used for advertising, promotion, etc. This is expressed as a percentage of your return, so over time, it's possible you could end up paying the no-load fund more in charges than if you'd gone with a broker-sold fund."
You missed an opportunity to not only be fair to the broker, but also to make a point with this investor that listening is a very, very important part of the investment process. By panning the broker, you ended up endorsing no-load mutual funds. Is that what you wanted to do?
A: You're so bright you've obviously forgotten that time in your learning curve, perhaps when you were 2 or 3 years old, when the mechanics and terms of investing weren't second nature to you. For many people, however, most of what they hear about personal finance sounds like blah-blah-blah.
It's up to brokers, if they are consulted, to use simple, clear language and not to make stupid statements like "no-load funds do not exist." That is indeed what our reader heard, and he was honestly wondering if it was true. If that makes him an idiot in your eyes, so be it.
I've heard the "misconception" argument before from brokers, and it's not a compelling one. No-load funds aren't the only ones with annual expenses; broker-sold funds tend to have significant ongoing charges as well. Indeed, smart investors look for funds with below-average annual costs, since all those fees cut into overall returns.
As for endorsing no-load funds, I'm happy to do so--for investors willing to take on the task of setting up and monitoring their own portfolios. I invest in no-loads myself and aim for funds with annual expense ratios below 1%.
People who need help with their portfolios may prefer to consult a broker. They will end up paying commissions in the form of loads to buy their funds. In exchange for paying those fees, they should get a broker's help as well as straight talk about the role of commissions--not a lot of claptrap about "misconceptions."
People Issues and Women Issues
Q: At a recent meeting of university-educated women in Washington, it was apparent that many of us had little experience or knowledge about managing money and investing. In trying to find courses on money management, however, the few that I have found geared toward women are usually tailored to those going through a divorce, or are one-day seminars with a broker trying to sell his or her services. Could you please direct me (and other readers who are in a similar predicament) toward some resources?
A: Women's investment seminars can be cozy, intimate affairs where women feel comfortable asking questions about money. Or they can be overpriced tea parties full of condescension and infomercials for investment advisors. It can be hard to determine which is which from the outside--especially now that every broker and mutual fund in the country has suddenly figured out that men aren't the only ones interested in their financial futures.
You can continue to investigate women-only seminars, but a better tactic might be to seek basic financial education for people, not classes specifically geared to men or women. Your local university probably offers a series of courses in personal finance.
Chances are what you need to know about investing is the same as what men need to know, only more so. You're likely to live longer, earn less and have more gaps in employment, so you will need to save more. You're more likely to be conservative in your investments, so you'll have to listen even more closely to the information about risk. You're more likely to be in financial peril if you divorce or become widowed, so taking charge of your finances is even more important.
You may have to confront internal messages that tell you personal finance is too hard for you to understand or that investing is beyond you. This is not a female-only condition; many men have the same fears. Just remember that money management is not neurosurgery, or even freshman calculus. It may seem baffling at first, but keep at it and you will soon begin to understand what you need to know.
Times staff writer Liz Pulliam answers questions submitted--or inspired--by readers on a variety of personal finance issues in this column. Questions can be sent to her at firstname.lastname@example.org or mailed to her in care of Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053. For past Money Talk questions and answers, visit The Times' Web site at http://www.latimes.com/moneytalk.