AboutWarren Boroson Expertise Author of "Keys to Investing in Mutual Funds" (Barrons), "Ultimate Mutual Fund Guide" (Probus), "How to Pick Stocks Like Warren Buffett" (JKLasser), and "The Reverse Mortgage Advantage" (McGraw-Hill). Former financial columnist for Gannett News Service.
Experience Author of 20 books; winner of 1996 Personal Finance award from Investment Company Institute and Washington University. Formerly on staffs of Money and Sylvia Porter's Magazine. Had a radio program (on WEVD) about mutual funds and a newsletter, FundDigest.
Expert: Warren Boroson Date: 5/30/2007 Subject: Mutual Fund share types
Question Which would you choose (and why?)?:
My wife and I are in our early 30's and have Roth IRAs. She also has a pension through her job. In our IRAs, we have been advised to purchase C shares while in her pension she is advised to purchase A shares (of various mutual funds). WHICH SHARE TYPE DO WE CHOOSE!?! Specifically, the IRA guy suggested AICCX. Meanwhile the pension guy suggested a different fund completely (AEPGX), or at least the A shares of the American fund (AIVSX). Pension guy also said that C shares are not for younger people. Is this just an opinion or is the IRA guy just maximizing his fees? Thank you very much for your time.
Gregory
Answer First, why buy load funds? The American funds are top-notch, but maybe you should be buying good funds on your own -- and sparing yourself the sales charge. Vanguard, Fidelity, T. Eowe Price and other families have plenty of excellent no-load funds. Check Morningstar Mutual Funds for recommendations.
With regard to A versus C shares, here's what Don Phillips of Morningstar write:
"They should buy the A shares if they plan to hold these shares for the long term, which I'd assume they will since they are young and saving for retirement. The A shares carry an upfront charge of around 5.75 percent, but they typically charge O.75 percent less per year on an ongoing basis. If you plan to hold the shares for just a couple of years, the C shares will be cheaper. But for a couple in their early 3Os, who have a time horizon of more than thirty years, the C shares will be much, much more costly. The pension guy is the one to trust."
