Why Pay 12b-1 Mutual Fund Fees?

Most funds no longer charge 12b-1 mutual fund fees but they are still around. These were originally permitted by the SEC to allow marketing to new investors.

These represent a small sales load that adds up over the years. The 12b-1 charges originally were used to pay fees for the distribution of funds by brokers. But they still persist even when brokers are not involved; they are ostensibly used for sales and marketing.

My suggestion: Avoid mutual funds that charge them. Those fees become significant deductions from your accumulated holdings over the years. (See the Earl J Weinreb NewsHole® comments.)

High Frequency Trading a Problem?

Small investors benefit from a reduction in trading costs, High-frequency trading helps, despite much of the notoriety it’s getting in the media and the SEC..

Among costs are the bid-ask spread. A wide spread means a mutual fund, for example, must pay significantly more to acquire a stock than it could sell it for.

High- frequency trading has reduced this cost by narrowing spreads, Generally, wide spreads are seen as inefficient, with buyers and sellers having difficulty agreeing on an accurate price. Narrow spreads mean the market is working better.

Another transaction cost arises from the fact that a fund's huge trades can drive prices up or down by tipping the balance of supply and demand. High-frequency trading has helped reduce "market-impact" cost by making it easier to break big trades into many little ones while transacting them very quickly,

Trading costs from spreads and market impact have been cut in half over the past decade, From 0.5% of the trade amount for big company stocks to 0.25%. For small stocks, trading costs have dropped from 1% to 0.5%. In addition, high-frequency trading helps bring out hidden liquidity. (See the Earl J Weinreb NewsHole® comments.)

Mutual Fund Fees Can Be Too High

I have written about the need to keep mutual fund costs low; Cost comparisons are the best method around for determining the best ones to choose.

Aside from seeking low management fees, avoid funds with special classes that charge sales commissions or “loads.” Though apparently small charges, they prove huge when taken into account over the years.

Some are imposed, or not, when advisers are involved. But I am completely against the use of advisers for most investors as their costs eventually prove higher than clients realize. (See the Earl J Weinreb NewsHole® comments.)

Making Credit Card BalanceTransfers Too Often

Should you transfer your current outstanding credit card balance to another card because of lower charges?

You may be easily tempted, especially if you have good credit, and those offers are frequently in the mail.

But remember, you may be hurting your credit score, should you take the bait too often

When you make lots of credit card transfers it appears you may be applying for fresh credit. That may hurt your credit card score (See the Earl J Weinreb NewsHole® comments.)

The Dollar Factor For Investing Overseas Instead of The U.S.

Investing overseas is done for investment diversification. The investor wants the benefits of growth opportunities globally. Those prospects may appear to be better to him than possible domestically.

But remember, currency moves are always involved. Will the dollar be getting stronger or weaker? If the dollar gets weaker, such investments become more valuable as translated currency works in favor of the U.S. investor. (Travel overseas becomes more expensive.)

However, should the dollar get stronger, the reverse is true. Investments become less valuable as translated currency works against the interests of the U.S. investor. (See the Earl J Weinreb NewsHole® comments.)

Maxing Out Credit Cards And Scores

Take down the maximum amount of credit your credit card permits, but it does not help your credit score. So do so only in an emergency.

It’s nice to know that your credit permits you a certain liberty, but don’t take extreme spending binges.

Of course, if you don’t use your card at all, or only occasionally, you may be dropped or the maximum available credit may be reduced.That’s because credit card companies are getting more sensitive about account activity.

Despite public misinformation, credit card companies do not do as well as it may appear. They have written off much bad debt. (See the Earl J Weinreb NewsHole® comments.)

Another Government Error: Allowing 401k Annuities

Annuities are already tax deferred. So why would the U.S. Treasury even consider their use in a tax-deferred retirement program?

Even with some modifications that add “target” fund securities investments tied to investor age with minimal investor attention required, we note an ironic twist.

Fixed-income annuities are directly hurt by inflation, inflation caused by the very Treasury suggesting and approving the measure. American investors will be severely hurt by cynical government promoting inflation. (See the Earl J Weinreb NewsHole® comments.