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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.
Home / Markets / Industries / Transportation
Wednesday, May 21, 2008
American Airlines Cuts Domestic Flights by 11%
FOXBusiness
AMR Corp., the parent company of American Airlines, announced plans to drastically cut back on the number of flights in 2008, retire aircraft, lay off workers and tag on additional fees to passengers to help the airlines deal with the soaring cost of oil.
American Airlines (AMR) said Wednesday it would reduce flight capacity by 11-12% from a year ago and would retire 75 fuel inefficient aircraft.
American had previously expected fourth-quarter capacity to fall 4.6% from the same period in 2007.
“The airline industry as it constituted today was not built to withstand oil prices at $125 a barrel and certainly not when record fuel expenses are coupled with a weak U.S. economy,” said AMR Chairman and Chief Executive Gerard Arpey in a statement.
American Airline shares were down 11% in early trading on the New York Stock Exchange mid-morning.
The majority of the aircraft American Airlines plans to ground will consist mostly of Boeing MD-80s and Airbus A300s. American will also ground 35 to 40 regional aircraft as well.
On top of the capacity reductions, American said it would start charging passengers after June 15 a $15 fee for the first checked bag on all American and American Eagle flights. They are also increasing fees for various other services as well, the airline said.
The airline industry has been in critical condition since the beginning of 2008 since oil has rocketed past $100 a barrel. Four regional carriers have all shut down their operations and the legacy carriers are seeking to merge with one another to keep from filing for bankruptcy.
American said rising oil prices have increased its expected annual fuel costs by nearly $3 billion since the start of the year.
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