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Thursday, July 31, 2008
US GDP Expands 1.9% in Second Quarter
FOXBusiness
The U.S. Commerce Department said the nation’s economy grew at a tepid 1.9% annual rate in the second quarter of the year, primarily boosted by the $160 billion in stimulus checks sent out to consumers in May and June.
That figure, however, was below Wall Street economist expectations of a growth rate of 2.3%, according to data provided by Thomson Reuters.
The first quarter 2008 and fourth quarter 2007 gross domestic product growth rates were revised downward however, the Commerce Department said.
Fourth quarter GDP was revised to a negative 0.2% annual rate, while first quarter GDP was revised to a 0.9% annual rate.
GDP is the broadest indicator of a nation’s economy as total sum of all goods and services sold in a select period of time. It is also used by economists as the official gauge of when an economy enters or exists a recession.
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Some mutual funds want you to pay for the privilege of them (or your investment adviser) taking your money to invest. It's called a load, and it works like a cover charge to get into a nightclub. Luckily, there are such things as no-load funds. As the name implies, shares of these funds are sold without a fee paid to a broker or investment advisor.
The entire amount you invest in no-load funds goes to work for your returns. On the other hand, with load funds, right off the bat you're charged commission (not to mention other fees incurred over the life of the investment). Let's say, for example, you invest $25,000 into a load fund that charges a 5% commission. This costs you $1,250 off the top, bringing your actual investment down to only $23,750.
The often-cited horse race analogy argues against investing in load funds. Here's the logic behind it: Would you place a bet on a horse that had to start a race 200 yards behind the others? Well, maybe you would if you got a tip from a sketchy, trench coat-clad man in a dark alley. However, under most circumstances, it's not smart to put your money on that handicapped horse.
But some argue that at times that man in the trench coat (aka your broker) knows more about the horses than you do, and has a better shot at picking a winner. Also, sometimes these fees are unavoidable because some funds are available only through investment advisers.
Cost-benefit analysis can help determine when a load fund is worth it (in other words, when it will score you a load) and when it is better to "do it yourself" and avoid the fees. Load-fund fees range depending on share class and can cover a variety of costs, such as paper work and fund management.
