IRA Investment in closed funds

I recently transferred money from a CD IRA to various American Funds
mutual fund accounts, and just received the account purchase
information in the mail. It appears that all of the funds I invested in
(upon the advice of my bank financial planner) are closed funds, and
the investment price is higher than the market price. For example,
"American Balanced Fund A" --the market value on 4/15/05 was $17.37 and
my investment share price on the same day is $18.43, apparently
referred to as the "public offer price". Is this a bad thing since the
public offer price is higher?

Re: IRA Investment in closed funds

soul wrote:
> I recently transferred money from a CD IRA to various American Funds
> mutual fund accounts, and just received the account purchase
> information in the mail. It appears that all of the funds I invested
in
> (upon the advice of my bank financial planner) are closed funds, and
> the investment price is higher than the market price. For example,
> "American Balanced Fund A" --the market value on 4/15/05 was $17.37
and
> my investment share price on the same day is $18.43, apparently
> referred to as the "public offer price". Is this a bad thing since
the
> public offer price is higher?

Probably because your bank "financial planner" had a boat payment
coming up.

Re: IRA Investment in closed funds

"PeterL" <> wrote in message
news:
>
> soul wrote:
> > I recently transferred money from a CD IRA to various American Funds
> > mutual fund accounts, and just received the account purchase
> > information in the mail. It appears that all of the funds I invested
> in
> > (upon the advice of my bank financial planner) are closed funds, and
> > the investment price is higher than the market price. For example,
> > "American Balanced Fund A" --the market value on 4/15/05 was $17.37
> and
> > my investment share price on the same day is $18.43, apparently
> > referred to as the "public offer price". Is this a bad thing since
> the
> > public offer price is higher?
>
> Probably because your bank "financial planner" had a boat payment
> coming up.
>

Put less facetiously: the difference in price is a "load" that usually
covers the commission of the "advisor" who sold you the fund.

You can usually get equivalent funds without a load but you have to buy
them, yourself, from the fund company or a broker.

You most likely signed a document stating that you read and understood the
terms of the transaction. Did you, or did you trust the person at your
bank?

-herb

Re: IRA Investment in closed funds

It reflects the 5.75% sales commission you paid for the fund. The salesman
gets about 1/2 of the commission and the mutual fund company gets the other
half. Do the math (17.37 - 18.43)/18.43 = 0.0575

Is it a bad thing? Yes, since you are starting out with a 5 3/4 % defect.
However if the salesman ( financial planner) is an astute advisor and can
produce superior results the commission might be justified. Did you ask him
for his track record?


"soul" <> wrote in message
news:
>I recently transferred money from a CD IRA to various American Funds
> mutual fund accounts, and just received the account purchase
> information in the mail. It appears that all of the funds I invested in
> (upon the advice of my bank financial planner) are closed funds, and
> the investment price is higher than the market price. For example,
> "American Balanced Fund A" --the market value on 4/15/05 was $17.37 and
> my investment share price on the same day is $18.43, apparently
> referred to as the "public offer price". Is this a bad thing since the
> public offer price is higher?
>

Re: IRA Investment in closed funds

"Marlowe" <> wrote in message
news:nLZ9e.10133$

> However if the salesman ( financial planner) is an astute advisor and can
> produce superior results the commission might be justified. Did you ask
> him for his track record?

It seems to me that the maxim about past results being no guarantee of
future performance applies to advisors as well as to funds. Some mutual
funds will have superior records as a matter of chance, and likewise some
advisors can have a good run due to chance. Just as a superior track record
on the part of a fund manager in itself does not justify a large MER, so
also a superior record o the part of a financial advisor does not in itself
justify a big commission.