Gretchen Morgenson Underdoes Herself

January 20th, 2008

In today’s column, one the our best watchdogging financial journalists takes an odd analytical tack—toward not terribly important news.

She gets all excited about the returns calculator provided by FINRA (Financial Industry Regulatory Authority)—as she should. It has a database of the funds, so you can easily pull post-fee returns comparisons and graphs for different funds. It even creates a bar-chart comparing returns on up to three funds. Very nifty.

But—after pointing out somewhat obliquely that only an idiot would invest in load funds (“the bulk of mutual fund investors wisely choose no-load funds”)—she proceeds to compare returns on different classes of shares within load funds. Example:

If the Franklin Large Cap Value fund returned 5 percent annually for
seven years and you invested $10,000 for the period, the A shares would again generate less. An investor in the A shares would have $12,065; a holder of B shares would receive $12,241 and the C class would produce $12,250.

Over seven years, C shares beat A shares, 23% to 21%. Hardly something to write home (or the Times) about.

But if you compare the best-performing share class to a no-load ETF covering the same asset class—let’s choose the Wilshire Large-Cap Value SPDR—the differences get interesting. The seven-year return would be $3,876—39%.

So thanks, Gretchen, for pointing out this nifty calculator. It will undoubtedly have great value to load-fund investors, by demonstrating to them their own innumeracy.

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