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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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Sunday, October 14, 2007
Working: Charity Begins at Work
Smart Money
It's awkward enough getting hit up for a donation by a colleague. But when the person leaning on you is your boss, there's no easy way to wiggle out.
It was Lisa Barrier's first day on the job at a New York law firm where she'd been hired as an associate. Her boss, the managing partner, accompanied by 10 of his staff, took her to lunch at a fancy midtown restaurant.
The lunch was social, but Barbieri was careful about what she ordered — "I didn't want to get a salad or anything that would get stuck in my teeth, and I didn't want to order anything that would require tongs." She was also careful about what she said. After all, she was surrounded not only by the boss but by a slew of associates and partners whom she'd either be working with or reporting to. "This was a group that would collaboratively decide my fate."
The conversation was what Barbieri expected — some talk of sports and other casual chit-chat — but shortly before the check came, she heard her boss's voice booming at her from across the table: "So, I'm putting in the order tomorrow for my daughter's Girl Scout cookies. How many boxes do I put you down for?"
"Three," Barbieri blurted out. "Peanut Butter Patties."
The question had put her in a tough spot. "What was I supposed to do?" Barbieri, age 35, says now, eight years later. "I didn't want to look cheap and order just one box. But I didn't want to order more than the partners because it would look like I was either sucking up or was just a pig. Three boxes was safe."
Getting hit up by your boss — whether it's for a few boxes of cookies or a sizable cash donation to his favorite charity — can certainly make for an awkward situation, and it's one that comes up often in the workplace. "Many bosses assume that because you work for them, you're going to give," says Stacy Palmer, editor of Chronicle of Philanthropy, a newspaper for nonprofit groups. "It puts a lot of pressure on people, particularly when the solicitation is face to face."
While payroll-deducted giving is down (participation has dropped from 47% to 35% over the past 10 years, according to one study), personal solicitation in the office is on the rise, Palmer says. "There are only so many ways to collect lots of little donations for things like walkathons." Expect to be hit up — and soon. Charities receive about 30% of their contributions in the last quarter of the year, says Daniel Borochoff, founder of the charity watchdog group American Institute of Philanthropy. "You're going to see more than average fundraising efforts in the office with the holidays coming up."
So what should you do when your boss comes calling? "It's good to pitch in every now and then and not be the ogre," says Peggy Post, co-author of "The Etiquette Advantage in Business" and wife of Peter Post, protocol guru Emily Post's great-grandson. Just don't let anyone strong-arm you into giving more than you can afford, she adds. But what if you don't feel like ponying up at all, particularly if the charity is not one of your favorites? Suggests Post: "Say, 'Thank you, but I'd rather not, and I'm sure you understand.'" If pressed, give a brief explanation, like that there are other worthwhile causes you prefer giving to. "Don't get argumentative or confrontational, and if they hand you materials about their cause, take them and offer to look them over."
Still, be prepared for some backlash if you give a flat-out no. Just ask 35-year-old Carolyn White, a former dispatcher for a moving-company franchise in Massachusetts. Every year, her office collected money for the United Way, the owner's pet project, and every year, White declined to contribute. Each time, when she didn't turn in a donation form, she'd get a visit from a human resources staffer, followed by one from a vice president. "They would come over and ask me where my forms were," says White, who now works as a dispatcher for a cable TV station in Manchester, N.H. "It wasn't a matter of whether or not I wanted to contribute. They asked how much of my salary I wanted to be deducted."
For two years, White got them off her back by simply standing up for herself. "I told them that I couldn't afford it on my salary, and if I was to contribute to anything, it would be to animal causes. I also think I made some remark that it was 'my money.'"
But resisting the higher-ups wasn't so easy the third year. That's because the boss, who was on the road a lot, happened to be in the office during solicitation time and caught wind that White wasn't chipping in. Eager to win an award from United Way for his company's generosity, he took White's lack of giving as a personal affront. "I remember getting the brush-off for at least two weeks," White says. "He'd come into the dispatch office and say hi to everyone but me."
It all left a rather sour taste in her mouth. "When you don't give anything, they make the biggest stink about it," she says. "I'm just glad that the company I work for now doesn't allow solicitation."
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