Date: Mon, 20 Dec 2004 04:06:09 CST
From: Will Trice 
Subject: Re: Load vs No-load Mutual Funds
Newsgroups: misc.invest.financial-plan
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Mark Freeland wrote:
> Will Trice wrote:
> 
>>>Actually, cost of ownership is inversely correlated with rate of
>>>return -- on average, the higher the cost of ownership, the lower
>>>the rate of return.  Of course, there are exceptions in individual
>>>funds.
>>
>>While it seems intuitively obvious that cost and rate of return should
>>be inversely correlated, is this assertion actually true?  I thought I
>>had read that the two were uncorrelated when looking at the actual
>>results of mutual funds, as a previous poster pointed out.  Of course,
>>I can't find the reference now when I need it...
> 
> I've cited several studies in the past documenting a moderate negative
> correlation in equity funds between expenses and returns.  Here's one
> such posting I've made (quoting from a Morningstar study that you can
> find in your library):
> http://groups-beta.google.com/group/misc.invest.mutual-funds/msg/67c29045e36bf809
> 

Ah, thanks for the enlightenment.  I looked up several of the references 
  in the thread you mention above.  Some of the papers have changed URLs 
but the two papers by Wermers can now be found at: 
http://www.smith.umd.edu/faculty/rwermers

I noticed that the 1997 Carhart paper cited by Wermers is also sited by 
  http://www.efmoody.com/investments/fundexpenses.html which was also 
referenced in the thread you mentioned.


>>I don't think that commissions show up in the expense ratio of funds.
>>Right?
> 
> Correct.
> 
>>This is why investors might think about turnover ratios even in
>>tax advantaged accounts.  For a fee, personalfund.com will tell you
>>what a funds transaction costs are.
>  
> As the CR report points out, you can find these data in documents filed
> by the fund.  For example, Legg Mason Value Trust was mentioned in this
> thread.  Its brokerage fees for the year ending March 31, 2004 were:
> $3,893,533 paid to outside brokers, and $90,800 paid to Legg Mason (not
> the fund).  This is in the Statement of Additional Information.  No need
> to pay more for the info.
> http://www.leggmason.com/funds/ourfunds/prospsai/equity.pdf

Good info here, too.  I hate paying for info that I can get for free... 
Thanks.

-Will