In general, yes, B-shares are not as suitable as A-shares if you invest over $100,000. For the vast majority of funds, you are through the first breakpoint. So, yes, for large trades, B's generally are not a wise bet. We agree.
But few people have more than $100,000 at any one fund firm. The ICI prints the stats each month. The median investor (defined as a family) has about $50,000 in total fund holdings. They are spread across 2 to 3 firms. Hence, the vast majority of folks have nowhere near enough money at one firm to hit the first breakpoint.
Nothing was cagey about the NYT article. There are over 1,000 load mutual funds where, below $50,000, the A-share NEVER beats the B-share; not in any time horizon and not in any market. The NYT article pointed out a few. In that article, and my 1,000-fund "nut," all CDSCs are applied. The writer was 100% on target.
And that assumes you hold past the B/A flip. If you don't -- and most people don't -- the B-share is again better than the A-share, even with the CDSC applied.
As you correctly note, American Funds is a rare breed. They did a fine job of constructing the shares. Their B's generally do not make much sense unless you hold for 6 or 7 years. They also run money well. Good shop.
The reason B's are better -- for small trades -- has to do with several factor. Your 12b-1 spread is just one of many. You must look at, among other things, the structures of the breakpoint and CDSC schedules, the 12b-1 spread, the B/A flip, and a few other factors.
Among the top 20 load fund families, several offer B's that ALWAYS beat the A's (at least on the equity side). In fact, the B's also ALWAYS pay the broker less but, again, under $50,000.
B's are not good or bad. The moral of the story was simply that you must do your homework, nothing more than that.
Hello.
In general, yes, B-shares are not as suitable as A-shares if you invest over $100,000. For the vast majority of funds, you are through the first breakpoint. So, yes, for large trades, B's generally are not a wise bet. We agree.
But few people have more than $100,000 at any one fund firm. The ICI prints the stats each month. The median investor (defined as a family) has about $50,000 in total fund holdings. They are spread across 2 to 3 firms. Hence, the vast majority of folks have nowhere near enough money at one firm to hit the first breakpoint.
Nothing was cagey about the NYT article. There are over 1,000 load mutual funds where, below $50,000, the A-share NEVER beats the B-share; not in any time horizon and not in any market. The NYT article pointed out a few. In that article, and my 1,000-fund "nut," all CDSCs are applied. The writer was 100% on target.
And that assumes you hold past the B/A flip. If you don't -- and most people don't -- the B-share is again better than the A-share, even with the CDSC applied.
As you correctly note, American Funds is a rare breed. They did a fine job of constructing the shares. Their B's generally do not make much sense unless you hold for 6 or 7 years. They also run money well. Good shop.
The reason B's are better -- for small trades -- has to do with several factor. Your 12b-1 spread is just one of many. You must look at, among other things, the structures of the breakpoint and CDSC schedules, the 12b-1 spread, the B/A flip, and a few other factors.
Among the top 20 load fund families, several offer B's that ALWAYS beat the A's (at least on the equity side). In fact, the B's also ALWAYS pay the broker less but, again, under $50,000.
B's are not good or bad. The moral of the story was simply that you must do your homework, nothing more than that.
Wayne.