smittyrunr & kferg,
Guess what would have happened if you decided to invest more a month after your first year of investing with first command? You would have had to pay another 50% load on the extra money you invested a month. Were you ever told that? I'm glad they will not be selling the 50% loaded funds anymore. I posted this a couple months ago, but I will post it again so you can understand there is a big difference in cost with paying for First Command verses investing directly with a no load fund company. The fund numbers I used were from a couple of months ago, but still relevant.
Lets look at AIM Summit, which has recently been sold to new FC clients. It has an expense ratio of 0.99%. Summit will have a 50% front end load for the first year.
Now let’s compare Summit to the Vanguard 500 index fund with an expense ratio of 0.18 and no load. We use the Vanguard 500 index comparison since it is a large cap fund as well. I will use 0.2% expense ratio instead of .18% for Vanguard so we can use the software from the link below. We will also need a few other assumptions.
1. Both funds will be made into an Roth IRA (so no taxes at the end)
2. We plan on only contributing $3,000 this year. The full amount will go to the Vanguard fund. You will only get to contribute $1500 to the AIM Summit because of the 50% fee.
3. Every year we will contribute $3000 to both IRAs (I know the contribution goes up the next few years, but lets keep it simple)
4. Lets assume that the S&P500 composite index (not to be confused with Vanguard 500 index fund) will do as well as the stock market average since 1926, which is between 10% and 11%. Let say the SP will average 10.5% to be safe. We will make 10.5% our average return for both funds.
5. Assume an inflation rate of 3%
6. We will invest for 40 years.
So what is the result?
AIM Summit will be worth $1,636,109.
The Vanguard 500 index will be worth a whopping $2,024,947.
The difference is $388,838!
The 50% load and higher expense ratio is a high price to pay for investing through FC for the long term and this is only one fund!!
The difference would be greater if you invested more every year and had a higher initial investment! Check out the link below and play with the numbers. You have to do the calculations twice. Once for the no load fund. Then cut that in half and do the calculation for the 50% load fund.
http://www.superstarinvestor.com/ga...orbes.com/tools/calculator/fund_expense.jhtml
But wait, I have one more thing to add. Large Cap Index funds have performed better then the majority of actively managed funds. Summit is an actively managed fund. The chances of beating the market are slim and the chances of Summit beating Vanguard S&P 500 are close to nil when you factor in expenses. The Vanguard 500 index is not trying to beat the market.
Summit has done worse than the S& P composite index an average of 3.45% for the last 10 years. Vanguard 500 index has only done .07% worse on average the last 10 years. You will start with less investment principal with FC and will probably never catch up to someone with the Vanguard 500 index. Remember, it is hard to outperform the market. It will be an uphill battle for Summit as well as other FC funds to beat Vanguard 500. Let us do the calculation again considering how the two funds have done in comparison to the SP 500. This time we will have Summit average 7.12 % a year (10.5-3.45+.07). Our 40 year return for Summit will become $738,675.
Subtract the difference with what you would have made with Vanguard 500 and you would get $1,286,272. That is a very high price to pay for investing long term with first command.
FC’s Summit and Fidelity Destiny have performed worse than the market and their peers. I wonder why FC sold such bad investments?
So the moral of the story is this. You can’t control how the market will do, but you can control costs!
References: John C Bogle: Common Sense on Mutual Funds & Morningstar
You don't need to hire an investment advisor to be a successful investor. If you want an advisor consider someone without a conflict of interest. FC agents make their money off commissions. There is always a chance they might sell you high cost products you don't need. Why not hire an advisor who charges by the hour or charges you a percent a year. These two will not make money on what they sell you. Their motivation will be to make you more money so they will make more money. Also just because many higher ranking officers used First Command does not mean that they are experts in finances. Most people do not know much at all about investing.
Guess what would have happened if you decided to invest more a month after your first year of investing with first command? You would have had to pay another 50% load on the extra money you invested a month. Were you ever told that? I'm glad they will not be selling the 50% loaded funds anymore. I posted this a couple months ago, but I will post it again so you can understand there is a big difference in cost with paying for First Command verses investing directly with a no load fund company. The fund numbers I used were from a couple of months ago, but still relevant.
Lets look at AIM Summit, which has recently been sold to new FC clients. It has an expense ratio of 0.99%. Summit will have a 50% front end load for the first year.
Now let’s compare Summit to the Vanguard 500 index fund with an expense ratio of 0.18 and no load. We use the Vanguard 500 index comparison since it is a large cap fund as well. I will use 0.2% expense ratio instead of .18% for Vanguard so we can use the software from the link below. We will also need a few other assumptions.
1. Both funds will be made into an Roth IRA (so no taxes at the end)
2. We plan on only contributing $3,000 this year. The full amount will go to the Vanguard fund. You will only get to contribute $1500 to the AIM Summit because of the 50% fee.
3. Every year we will contribute $3000 to both IRAs (I know the contribution goes up the next few years, but lets keep it simple)
4. Lets assume that the S&P500 composite index (not to be confused with Vanguard 500 index fund) will do as well as the stock market average since 1926, which is between 10% and 11%. Let say the SP will average 10.5% to be safe. We will make 10.5% our average return for both funds.
5. Assume an inflation rate of 3%
6. We will invest for 40 years.
So what is the result?
AIM Summit will be worth $1,636,109.
The Vanguard 500 index will be worth a whopping $2,024,947.
The difference is $388,838!
The 50% load and higher expense ratio is a high price to pay for investing through FC for the long term and this is only one fund!!
The difference would be greater if you invested more every year and had a higher initial investment! Check out the link below and play with the numbers. You have to do the calculations twice. Once for the no load fund. Then cut that in half and do the calculation for the 50% load fund.
http://www.superstarinvestor.com/ga...orbes.com/tools/calculator/fund_expense.jhtml
But wait, I have one more thing to add. Large Cap Index funds have performed better then the majority of actively managed funds. Summit is an actively managed fund. The chances of beating the market are slim and the chances of Summit beating Vanguard S&P 500 are close to nil when you factor in expenses. The Vanguard 500 index is not trying to beat the market.
Summit has done worse than the S& P composite index an average of 3.45% for the last 10 years. Vanguard 500 index has only done .07% worse on average the last 10 years. You will start with less investment principal with FC and will probably never catch up to someone with the Vanguard 500 index. Remember, it is hard to outperform the market. It will be an uphill battle for Summit as well as other FC funds to beat Vanguard 500. Let us do the calculation again considering how the two funds have done in comparison to the SP 500. This time we will have Summit average 7.12 % a year (10.5-3.45+.07). Our 40 year return for Summit will become $738,675.
Subtract the difference with what you would have made with Vanguard 500 and you would get $1,286,272. That is a very high price to pay for investing long term with first command.
FC’s Summit and Fidelity Destiny have performed worse than the market and their peers. I wonder why FC sold such bad investments?
So the moral of the story is this. You can’t control how the market will do, but you can control costs!
References: John C Bogle: Common Sense on Mutual Funds & Morningstar
You don't need to hire an investment advisor to be a successful investor. If you want an advisor consider someone without a conflict of interest. FC agents make their money off commissions. There is always a chance they might sell you high cost products you don't need. Why not hire an advisor who charges by the hour or charges you a percent a year. These two will not make money on what they sell you. Their motivation will be to make you more money so they will make more money. Also just because many higher ranking officers used First Command does not mean that they are experts in finances. Most people do not know much at all about investing.
