Mutual fund companies and investment brokers suggested to help you minimize transaction costs.
We suggest certain brokers and
mutual fund companies to help you minimize transaction costs.
The types of fees, loads and penalties charged by most brokers and mutual funds are designed to incent you to be a
buy and hold investor. They want you to stay put and their game is to make it expensive for you to switch from one investment to another.
- In contrast, following our investment advice will require you to be nimble with your portfolio. Most of our strategies will recommend some kind of change about once a month on average.
Because our strategies are more active, you will want to avoid transaction costs as much as possible. Any fees that you pay frequently could have a measurable effect on your portfolio return. In particular, you should avoid fees that are charged as a
percentage of the investment. In general, you should try to avoid or minimize:
- Upfront and Backend Loads
- Early Redemption or Short Term Trading Fees and Penalties
- Transaction Fees (on each transaction)
The brokers and mutual fund companies we suggest actually cater to investors that trade frequently. They understand your need to minimize transaction costs and do not penalize you for changing investments.
Three different approaches to minimize investment transaction costs
It is your decision, of course, what broker to use and which mutual fund company's investment funds you want to use. In fact, many of the index fund types we recommend are widely available. However, we provide the following information to assist you in making choices that will help reduce or eliminate the transaction costs you would experience following any of our strategies.
Keep Your Account at a Sugggested Mutual Fund Company: If you hold your account directly with either ProFunds or Rydex Investments ( two Mutual Fund Companies that specialize in catering to investors that trade index funds frequently) you will be able to buy and sell any of their index funds as often as you want without any cost whatsoever ... no Loads, no Early Redemption Fees and no Transaction Fees. We suggest Rydex and ProFunds because they have the right kinds of mutual funds needed for our strategies and because their fee structures do not penalize you for frequent trading.
Keep Your Account at a Suggested Broker and Invest in Mutual Funds from Suggested Mutual Fund Companies: You could keep your account with either TD Ameritrade or Scottrade – both are discount brokers that you can easily access online. Scottrade and TD Ameritrade only charge a small, competitive transaction fee and will not charge Early Redemption fees when you trade mutual funds from ProFunds or Rydex Investments .
Keep Your Account at Any Discount Broker and Purchase Exchange Traded Funds (ETFs): Unlike mutual funds, when you buy and sell
Exchange Traded Funds, you don’t have to worry about any Upfront Loads or Early Redemption fees. You only pay whatever transaction fees are charged by the discount broker for buying and selling stocks. If you have a reasonably large portfolio, the transaction fees charged by a discount broker to buy and sell ETFs will not be enough to materially impact your portfolio’s return.
Other Accounts
401k Plans and 403b Plans: Most employer-sponsored
401k plans won’t charge you when you shift your investment balances between their different fund options. In most cases, you should be able to follow either of our "Benchmark Series" strategies without incurring any transaction costs. However, check your plan's policies because some have instituted Early Redemption fees on their International stock fund options; and some companies may have instituted other kinds of fees and charges.
We know how to minimize investment transaction costs.
When we send out a
Trade Alert recommending a change in our Model Portfolio allocations, it will provide you with the appropriate
Ticker Symbol for the mutual fund we recommend.. In fact, our instructions will provide you with
three alternative Ticker Symbols. We will give you the appropriate Ticker Symbol for these alternatives:
No matter which alternative you prefer, you will be able to sit down at your computer and make the recommended transaction online in a matter of minutes.
