Mutual Funds and Load Fees

Load Fees and Mutual Funds
1. Do you think it is worth paying the initial load fees mutual funds sometimes require? Why or why not? Please explain your reasoning.
It is not worth paying the initial load feeds that are at times necessitated by mutual funds. The initial load fees are disadvantageous to investors largely for the reason that it negatively impacts their capability to earn more money from the mutual funds. For instance, if a mutual fund carries an initial load fee of 6.25 percent, it implies that the broker will obtain $625 for every $10,000 that is invested in the fund. The inference of this is that the investor is left with $9,375 to begin with. The implication is that the investor has to find a way of earning back this amount of $625 that was given to the broker in order to break even. Moreover, the investor ends up losing the compounding of the initial load amount paid as the financial market rises. These amounts can progressively rise to become significant in a number of years, and in the end negatively impact the returns generated from the investment (Bold, 2011).
Another reason why payment of the load fees is not worth is for the reason that it can cause the investor to feel confined and stuck in a particular investment. For instance, when an investor purchases a load fund and wishes to sell it, there might be the instance of the broker selling yet another load fund, which implies that the investor may be forced to pay another commission. As a result, rather than selling the load fund, the investor may be forced to remain with the mutual fund for a lengthier period than initially required. In the same manner, the investor may be forced to remain in the similar fund so as to evade the payment of another amount of load fees. However, this causes the investor to be restricted to the available choices and the prospects of obtaining the suitable and ideal mutual fund (Bold, 2011).
2. What overseas market do you think provides the best opportunity for investing in their stock market? Would you invest in an International Fund or in a mutual fund that invests at least partly in foreign securities? Why might foreign securities, bonds or shares, be more attractive?
The European overseas market provides the best opportunity for investing in their stock market. The European market is considered to be stronger, have newer legs in comparison to the U.S stock market and also offers diversification. Not only are the stocks in the European market generating quicker growth in profits as compared to stocks in the United States, the foreign corporations are trading at significantly cheaper valuations as compared to their counterparts in the United States. Earnings amongst European companies are growing considerably faster and the market offer diversity as it is significantly impelled by numerous different sectors, comprising of the telecommunications, financial services, and industrial sectors (Lim, 2017). I would invest in an International fund or a mutual fund that invests at least partially in foreign securities. In accordance to Greenberger (2017), the United States does not dominate the world stock market anymore. In actual fact, its market share of the international stock market capitalization progressively and gradually deteriorated from 2002 to 2007. The investment in such a fund would be beneficial for the reason that research studies have incessantly demonstrated that investing in a combination of United States and foreign stocks has generated better returns and with minimal risk compared to solely investing in the United States market.
Most of all, foreign bonds, securities, or shares might be more attractive because they constitute more than 50 percent of the stock market prospects in the world. In addition, the can offer an extra layer of diversification for the profiles of the investors and at the same time decrease risk whilst offering similar or higher returns. Including foreign stocks to the investors’’ portfolio may have a number of benefits with regard to diversification and, conceivably, lesser volatility, but in a long-term period, and this is bound to give rise to greater returns in the end.



References
Bold, A. (2011). Why Investors Should Avoid Load Funds. US News. Retrieved from: https://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2011/03/01/why-investors-should-avoid-load-funds
Greenberger, I. (2017). Why Invest In International Equity Mutual Funds? Investopedia. Retrieved from: https://www.investopedia.com/articles/mutualfund/08/international-equity-mutual-fund.asp
Lim, P. J. (2017). Worried About U.S. Stocks? Put Your Money Here Instead. TIME. Retrieved from: http://time.com/money/4955301/europe-stock-market-cheaper/