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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.
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Thursday, May 15, 2008
Congress Defies Bush, Passes Farm Bill
Associated Press
Congress sent the White House a huge election-year farm bill Thursday that includes a boost in farm subsidies and more money for food stamps amid rising grocery prices.
Bush has threatened to veto the $290 billion bill, saying it is fiscally irresponsible and too generous to wealthy corporate farmers in a time of record crop prices.
But Congress disagreed, passing the bill by overwhelming margins in both chambers -- enough to override a veto. The Senate vote was 81-15, a day after the House approved it with 318 "yes" votes.
About two-thirds of the bill would pay for domestic nutrition programs such as food stamps and emergency food aid for the needy. An additional $40 billion is for farm subsidies, while almost $30 billion would go to farmers to idle their land and to other environmental programs.
Agriculture Secretary Ed Schafer again criticized the bill after Tuesday's House vote, saying it has the wrong priorities.
"It does not target help for the farmers who really need it, and it increases the size and cost of government while jeopardizing the future of legitimate farm programs by damaging the credibility of farm bills in general," he said.
Congress has only overridden one veto, on a water projects bill, during Bush's two terms.
Congressional negotiators met for weeks in an effort to come closer to the White House on the amount of money to be paid to wealthy farmers -- one of the chief sticking points with the administration. But drastic cuts to subsidies were not possible, lawmakers said, because of the clout of Southern lawmakers who represent rice and cotton farms that are more expensive to run.
"This bill has reform in it," said Senate Majority Leader Harry Reid. "Could we have done more? Perhaps. But if we'd done more we wouldn't have gotten a bill."
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