| > | | | | Serving the Interests of Long-Term Shareholders. |
| While searching for the best no load mutual funds, | | | | Some mutual funds impose short-term trading |
| some mutual fund investors often tend to focus | | | | fees to discourage frequent trading of mutual |
| exclusively on mutual fund fees and expense | | | | fund shares. Frequent trading disrupts efficient |
| ratios. Is this always a smart way to select | | | | management of the mutual fund and increases |
| mutual funds? | | | | operating expenses. A short-term trading fee can |
| Metrics such as price/earnings ratio and dividend | | | | therefore actually be beneficial to long-term |
| yield on the S&P 500 index, a commonly | | | | shareholders if the fee is rightly treated by the |
| used proxy for the U.S. stock market, are hardly | | | | mutual fund company. |
| at bargain levels. This has lead several market | | | | Fidelity Spartan Total Market Index Fund (Nasdaq: |
| pundits to predict single digit annual returns for | | | | FSTMX), for example, follows the practice of |
| domestic mutual funds over the next decade. | | | | returning short-term trading fees collected on |
| While pursuing the search for the best mutual | | | | shares held less than 90 days to the mutual fund |
| fund, some mutual fund investors tend to focus | | | | itself rather than passing on the benefit to the |
| exclusively on fees and expense ratios. The | | | | mutual fund company. By having this short-term |
| rationale is that by choosing mutual funds with low | | | | trading fee structure, this no load mutual fund |
| fees, investors will have more of their capital | | | | seeks to contain its operating expenses. Such |
| invested. Also, no load mutual funds with low | | | | fees are therefore aligned with the interests of |
| expense ratios will pass on more of the returns | | | | long-term shareholders of this mutual fund. |
| they earn to their shareholders. | | | | Passing on Savings from Scale Economies. |
| Is shopping for the lowest fees and expense | | | | The operating expenses incurred by a mutual |
| ratios a smart way to select mutual funds? Not | | | | fund are a combination of fixed and variable costs. |
| always. The answer depends on the type of | | | | As the asset of a mutual fund increases, the |
| mutual fund you are evaluating, the time you can | | | | fixed cost gets spread over a larger asset base. |
| devote to evaluating and managing your mutual | | | | Therefore, the expenses incurred to operate the |
| funds investments, and the type of cost incurred. | | | | mutual fund as a percentage of the fund’s |
| Investing in the Best No Load Index Mutual Funds. | | | | assets should trend lower. |
| If you believe markets are generally efficient and | | | | A mutual fund that places the interest of |
| prefer to invest in an index mutual fund to | | | | shareholders first must pass on the savings from |
| achieve an index-like return, shopping for the best | | | | scale economies to the shareholders. The trend in |
| index mutual fund based on low fees and a low | | | | a mutual fund’s expense ratio therefore |
| expense ratio makes good sense. The portfolio | | | | serves as a metric of how seriously a fund takes |
| manager of an index mutual fund endeavors to | | | | its fiduciary responsibility. |
| invest the fund’s assets to track the index | | | | Key Points. |
| as closely and cost-effectively as possible. Larger | | | | 1. If you are searching for the best no load index |
| index funds have an advantage in that they can | | | | mutual fund, shopping for one with low fees and |
| spread their operating costs over a larger asset | | | | expenses makes perfect sense. |
| base. | | | | 2. If active management of investments appeals |
| Some of the interesting index mutual fund options | | | | to you, fees and expenses are just one of |
| currently available include no load index mutual | | | | several important factors to consider. |
| funds like E*Trade S&P 500 Index Fund | | | | The ability and investing style of the portfolio |
| (Nasdaq: ETSPX), Fidelity Spartan 500 Index Fund | | | | manager are at least just as important as fees. |
| (Nasdaq: FSMKX), and Vanguard 500 Index Fund | | | | 3. The types of fees a mutual fund charges and |
| (Nasdaq: VFINX) with expense ratios of 0.09%, | | | | how the fund uses the fees provides clues as to |
| 0.10%, and 0.18%, respectively. | | | | how seriously a mutual fund takes its fiduciary |
| Investing in Actively Managed Mutual Funds and | | | | responsibility. |
| Strategies. | | | | Mutual funds that impose fees to contain |
| Mutual fund fees and expenses are just one of | | | | operating expenses and return fees to the mutual |
| several important factors to consider if you | | | | fund help protect the interests of long-term |
| believe portfolio managers can add value and | | | | shareholders. |
| out-perform the index through active | | | | 4. Mutual funds that put the shareholders’ |
| management. The portfolio manager’s | | | | interests first typically pass on savings from scale |
| ability and investing style are just as important. | | | | economies to the shareholders. |
| Therefore, seeking out the best mutual fund | | | | Notes: This report is for information purposes |
| based on just low fees and a low expense ratio | | | | only. Nothing herein should be construed as an |
| may not always be the right approach. It may | | | | offer to buy or sell securities or to give individual |
| just be a case of being penny-wise and | | | | investment advice. This report does not have |
| pound-foolish’. | | | | regard to the specific investment objectives, |
| Legendary investor Peter Lynch, who managed | | | | financial situation, and particular needs of any |
| the Fidelity Magellan Fund (Nasdaq: FMAGX) from | | | | specific person who may receive this report. The |
| 1977 to 1990, achieved returns well in excess of | | | | information contained in this report is obtained |
| the market averages even after accounting for | | | | from various sources believed to be accurate and |
| the fund’s fees and expenses. | | | | is provided without warranties of any kind. |
| So too has Bill Miller who currently manages the | | | | AlphaProfit Investments, LLC does not represent |
| Legg Mason Value Trust (Nasdaq: LMVTX). Even | | | | that this information, including any third party |
| after accounting for its relatively high 1.7% | | | | information, is accurate or complete and it should |
| expense ratio, this no load mutual fund has | | | | not be relied upon as such. |
| achieved compound annual returns of 18.6% for | | | | AlphaProfit Investments, LLC is not responsible |
| the 10 year period ending in 2004, well in excess | | | | for any errors or omissions herein. Opinions |
| of 12.0% for the Vanguard 500 Index mutual | | | | expressed herein reflect the opinion of AlphaProfit |
| fund. | | | | Investments, LLC and are subject to change |
| AlphaProfit, an investment research firm that | | | | without notice. AlphaProfit Investments, LLC |
| specializes in active sector investing, uses the no | | | | disclaims any liability for any direct or incidental |
| load Fidelity Select Funds to implement its | | | | loss incurred by applying any of the information in |
| investing strategy through its Core and | | | | this report. The third-party trademarks or service |
| Focus model portfolios. Although not the | | | | marks appearing within this report are the |
| lowest, the expense ratio of the no load Fidelity | | | | property of their respective owners. All other |
| Select Funds compares favorably with that of | | | | trademarks appearing herein are the property of |
| other sector fund offerings. AlphaProfit prefers | | | | AlphaProfit Investments, LLC. Owners and |
| Fidelity Selects for their comprehensive coverage | | | | employees of AlphaProfit Investments, LLC for |
| of sectors and industry groups. The AlphaProfit | | | | their own accounts invest in the Fidelity Mutual |
| model portfolios have significantly outperformed | | | | Funds included in the AlphaProfit Core and Focus |
| the market averages over time. | | | | model portfolios. AlphaProfit Investments, LLC |
| Ensure Your Mutual Fund Puts Your Interest First. | | | | neither is associated with nor receives any |
| Whether you prefer to index or take an active | | | | compensation from Fidelity Investments or other |
| approach to managing your investments, ensuring | | | | mutual fund companies mentioned in this report. |
| that your mutual fund is putting your interests | | | | Past performance is neither an indication of nor a |
| first is good investing practice. | | | | guarantee for future results. No part of this |
| Mutual funds charge different types of fees. By | | | | document may be reproduced in any manner |
| looking at some key factors pertaining to fees, | | | | without written permission of AlphaProfit |
| you can get a sense of whether the mutual fund | | | | Investments, LLC. Copyright © 2005 AlphaProfit |
| puts your interests first or merely seeks to line | | | | Investments, LLC. All rights reserved. |
| the mutual fund company’s pockets. | | | | |