FYI: For investors wondering if a sin stocks exchange traded fund would ever be reborn, the next best thing may have come to town Wednesday with the debut of the Spirited Funds/ETFMG Whiskey and Spirits ETF WSKY, -0.72%
Regards,
Ted
http://www.marketwatch.com/story/whiskey-a-go-go-make-a-toast-with-this-new-etf-2016-10-13-5464026/print
MarketWatch Article Two On WSKY:
http://www.marketwatch.com/story/bottoms-up-new-etf-tracks-the-global-growing-whiskey-market-2016-10-12/print

When a combined $58 million in lobbying dollars from the financial industry are targeted to the Senate Finance Committee ( for 2016 PACs and individual campaigns), I do not have to think very hard about whether money talks. Like another poster at MFO, it doesn't take much like this for me to become cynical. It is such an obvious affront.

As with most load funds, it looks like the no load R1 version charges higher expenses, mostly in the form of a giant 12b-1 fee, so long-term investors are still better off paying the load if they plan to stick around for a long time.

Part of that is correct, but you're looking at the wrong share class - it's F1, not R1.
All funds have costs associated with maintaining accounts, such as producing annual statements for existing investors, answering their questions, etc. Ultimately it is the investor who pays these costs, but the mechanics can vary from fund to fund.
For example, American Century funds have a single "all in" fee. You pay the management company a flat fee, and they cover all the expenses. For Ultra Investor class shares TWCUX , that's 0.98%. Some of that is going to pay the actual managers, but a fair chunk is going to pay for servicing the accounts (or to pay the NTF platforms to service the accounts for them). Since servicing institutional accounts is cheaper (less to do per dollar in the account), the institutional shares TWUIX charge an "all in" fee of just 0.78%.
There's no 12b-1 fee there, there aren't even "other" fees. But you're still paying a percentage for the servicing and for the NTF platform.
Most funds don't use an "all in" fee schedule. They may bury the servicing costs in "other expenses". Or they may list a separate line item for servicing fees. Usually that shows up as a 12b-1 line item. Whether the cost is called out or not, it's there, and you're paying it.
What matters is not whether there are separate line items, but how much your total expenses are. TWCUX (0.98% ER) is not a better deal than TIIRX (0.73% ER) simply because it has no "other" expenses. TWCUX has just internalized those expensees and you're still paying for them. TWCUX is not a better deal than TIIRX because it doesn't have a separate 12b-1 fee. It has just internalized the servicing costs and you're still paying for them.
TIIRX is the better deal because it costs less "all in".
Where you are right is that 12b-1 fees above 0.25% must be used for marketing and sales, not for running the fund, for maintaining existing accounts. That's money that isn't being used to help you, the investor. And that's why funds with 12b-1 fees above 0.25% cannot be called noload funds.
R1 funds, with 1.00% 12b-1 fees are not no load funds. And they're not the share class discussed in the M* article.

But what does that mean? The load drops to the bottom line of the investment advisor or they get used for other expenses that are normally collected through 12b-1 fees, right? And 12b-1 fees are supposed to be used for sales and marketing, no?

No. As explained above, a fund can market itself as a noload fund only if its 12b-1 fee does not exceed 0.25% and only if that fee is used for servicing accounts, not for sales and marketing. So the F-1 shares (0.25% 12b-1 fee) use the fee for servicing the accounts (i.e. they pay Fidelity and Schwab to service the accounts).
https://www.sec.gov/answers/mffees.htm

As usual for M*, not only don't they mention the giant 12b-1 fees for the R1 class, they actually go so far as to talk about how American Funds' fees are low in almost all cases- for the load bearing shares of course and without considering the load I believe.

They don't talk about the R1 class because they're writing about the F1 share class that retail investors can purchase noload without using an advisor. Matching fund against fund, AF vs. most other fund families, you'll find that AF funds, all in, are cheaper. Their A shares are cheaper than other load families' A shares, and their F-1 shares are cheaper than most families' noload shares, whether the family is a load family or a noload family.

Hi @Charles,
Let's look at the other side of the coin (so-to-speak).
I am an AF shareholder that paid the "one time sales load" many years back before there were a good selection of no load funds. As I understand these no load (F1) shares are for wrap accounts where an ongoing account wrap fee is charged rather than a one time upfront sales load. In talking with my broker I was told I will be good to go (as in the past) with my self directed ira account which would be grandfarthered with no wrap fee charged. Now, I am thinking that is indeed a good deal. Although, I can not put new money into this account after April 2017 (retired now so that is not important to me) I will be allowed to do nav exchanges within fund families owned in this account. And, to, of course, sell fund shares and to take distributions as I have done in the past. Since, all of my funds within this account are set for their distributions to pay to cash, at this time, sales are not necessary. It is uncertain at this time if I can buy new shares with my fund distributions unless I set the account up before April 2017 for reinvestment of fund distributions. Since, I am retired I most likely will leave the funds distributions set to pay to cash. While, my son, who is still working, will leave his account set for reinvestment of fund distributions.
Also know, some American Funds A shares can be bought back of the 5.75% sales charge you reference.
I'm thinking I've got a good deal ... no ongoing wrap fee for me. From my perspective I've got the better deal over what new investors will be getting today who invest in F1 shares and have to pay ongoing wrap fees.
Skeet

FYI: For international funds to race ahead of domestic funds, you typically need a falling dollar and rising foreign markets.
This year, most international funds are misfiring on at least one cylinder. The average large-company foreign blend fund has gained just 2.38% this year, versus 5.87% for its domestic counterpart. You can blame either a strong dollar or weak foreign markets for the poor performance.
Regards,
Ted
http://www.investmentnews.com/article/20161011/FREE/161019984?template=printart

Exisiting AF shareholders who have paid 5.75% load should feel really good about this ...

Securities lending is indeed a part of the structure of most ETFs. While Vanguard returns all of the proceeds above its internal costs for this lending to ETF shareholders, so does Schwab, although in Schwab's case it uses an outside unaffiliated vendor to do the lending, which takes a cut of the lending proceeds. Schwab keeps none of these proceeds for itself. BlackRock is a different story, keeping a portion of the lending proceeds for itself, although the amount is small enough that 22% of Schwab's equity ETFs beat their benchmarks instead of merely tracking them. The financial risks of this lending is another story entirely and as your Forbes' article points out, Kevin, different fund companies have different policies on what they will lend.
Regarding the analysis in Deep Capture, I should add that its original author, Patrick Byrne is the CEO of Overstock.com, and a controversial figure himself:
garyweiss.blogspot.com/2016/05/overstockcom-ceo-patrick-byrne-loses.html

Keep Your Bonds, but Reduce the Risks JOURNAL REPORTS: FUNDS & ETFS
Some advisers are wary of using bonds in client portfolios. Here is why you still should own them and how to do it right.
As strong demand has pushed up bond valuations—depressing their already low yields—some investors and financial advisers are saying “enough” and are turning their backs on the sector.
Not so fast, say many bond professionals.
1. When bonds make sense...not just worry about yield. “If you own bonds for diversification, income isn’t something that you should [focus] on,” says Laura Thurow, head of asset manager research at Robert W. Baird & Co.
2. Know where risks may lie....In relation to Treasurys, junk-bond yields are roughly in line with historic averages, so they’re not in bubble territory, says Rob Balkema, who manages multiasset funds at Russell Investments.
3. Spread risk in a portfolio.. it is possible to balance them, says Kathleen Gaffney, who manages Eaton Vance Multisector Income Fund (EVBAX). She suggests dividing your bond portfolio into roughly equal parts, each dedicated to a particular type of risk
4. Diversify your sources ... Aviance Capital Management, in Sarasota, Fla., portfolio manager Jeff Walker likes preferred shares.... Convertibles also gyrate less than stocks, though they do move in sympathy with them, says Katrina Lamb, head of investment strategy at wealth-management firm MV Financial, Bethesda. Md.
5. Bonds at lower valuations
Investors who want to temper the risk of principal loss could put some money into bonds that aren’t trading at high valuations. One with potential for appreciation is the U.S. Treasury inflation-protected securities, or TIPS, sector, says Mr. Worah of Pimco.'
....core U.S. consumer-price inflation already has risen above 2%, and Pimco believes it is likely to stay there for a while.
“The factors that have been keeping inflation down, the commodity price correction and strength in the dollar, have faded,” Mr. Worah says. “TIPS are the cheapest government bond” and are worth owning by themselves, he adds.
http://www.wsj.com/articles/keep-your-bonds-but-reduce-the-risks-1476064923
Goldman Asset Likes Inflation Bonds Amid Best Rally Since 2012
Wes Goodman, Bloomberg
“We like them a lot,” Mike Swell, the co-head of global portfolio management for fixed income in New York, said in an interview on Bloomberg Television Tuesday. “Investors are catching up to what a lot of us in markets already know, that inflation is picking up.”
TIPS have returned 6.9 percent in 2016, heading for their biggest gain since 2012, according to Bank of America Corp. indexes. Nominal Treasuries have returned 4.3 percent this year.
http://www.bloomberg.com/news/articles/2016-10-12/goldman-asset-likes-inflation-bonds-amid-best-rally-since-2012
Goldman Sachs Infl Protected Secs R6 GSRUX
iShares Barclays TIPS Bond Fund (Etf) TIP
https://www.google.com/finance?q=NYSEARCA:TIP&ei=GLL9V6GcAYepmAHR_qf4Cg

@bee, Nothing to disagree with Dr. Byrne's points. Wall Street has always had political allies who were purchased with contributions. And too many of the folks on Bloomberg and CNBC are good looking teleprompter readers and at most journalists, and definitely not economists or financial experts.
And from the WSJ: "The ETF With the 0.00% Fee”
Use the top article on this SEARCH.
Kevin

FYI: U.S. stocks tumbled on Tuesday, with the S&P 500 and the Nasdaq on track for their worst day in one month, after Alcoa kicked off the earnings season on a dour note.
Regards,
Ted
Bloomberg:
http://www.bloomberg.com/news/articles/2016-10-10/oil-gains-burnish-asian-stock-prospects-while-yen-nurses-decline
Reuters:
http://www.reuters.com/article/us-usa-stocks-idUSKCN12B1CH
MarketWatch:
http://www.marketwatch.com/story/losses-on-tap-for-wall-street-stocks-as-oil-backs-away-from-highs-2016-10-11/print
USA Today:
http://www.usatoday.com/story/money/markets/2016/10/11/stocks-dow-tuesday/91888852/
IBD:
http://www.investors.com/market-trend/stock-market-today/stocks-down-nasdaq-gets-near-50-day-line-medicals-smacked-apple-still-firm/
WSJ Markets At A Glance:
http://markets.wsj.com/us
Sector Tracker:
http://www.sectorspdr.com/sectorspdr/tools/sector-tracker
Current Futures: Negative
http://finviz.com/futures.ashx

BobC, you wrote that the DOL rules do not apply to ordinary IRAs.
"DOL rule & regs. Remember they apply to 401k rollovers, not regular IRAs and personal accounts. "
That was just plain wrong. BICE may not apply to some vanilla IRAs, but that's not what the regs are about. The regs are about holding advisors of ERISA and IRA accounts to a fiduciary standard.
In fact, BICE is, as the 'E' states, a set of exemptions to the fiduciary standard. So if BICE doesn't apply to vanilla IRAs, that means that those IRAs are held to an even higher standard, i.e. one without exemptions.
"A number of attorneys will tell you that moving 401ks to level-fee accounts does not remove the BICE form ..."
Even ML agrees with that. BICE is required for moving 401ks, but only for moving the accounts and not not for maintaining the level-fee accounts once established. From the ThinkAdvisor article I cited:

Merrill says that it will not use the Best Interest Contract exemption “to service or support ongoing IRA brokerage account activity.” However, “when appropriate, we will use this exemption to recommend enrollments in our Investment Advisory Program from a retirement client’s IRA brokerage accounts, or rollovers from ERISA 401(k) plans.”

The original DOL proposal would have done away with commission-based accounts. If the big boys want everyone in wrap accounts anyway, and the big boys wrote all the rules, how did we get a final version that restored commissions?

When the DOL initially floated this proposal in 2010, it stated that fiduciaries could not be paid on commission. Since then, however, it has bowed to pressure and admitted commission-based schemes as long as the broker signs an agreement stating that the advice is given in the customer’s best interest.

http://ibd.morningstar.com/article/article.asp?id=718083&CN=brf295,http://ibd.morningstar.com/archive/archive.asp?inputs=days=14;frmtId=12, brf295
As far as level of detail goes, on the one hand, the regulations are not short; on the other they don't spell everything out to the penny (e.g. what constitutes reasonable compensation). Should the regs be even longer and more detailed, or shorter and potentially subject to more litigation?
I'll stick with Voltaire on this one - the perfect is the enemy of the good. Things will sort themselves out over time. Having a fiduciary rule is better than not having one.
http://www.goodreads.com/quotes/215866-le-mieux-est-l-ennemi-du-bien-the-perfect-is-the

FYI: These ignored dividend ETFs could give your portfolio some big-time income.
Regards,
Ted
http://www.kiplinger.com/article/investing/T022-C000-S015-3-dividend-etfs-you-completely-overlooked.html?rid=SYN-yahoo&rpageid=15565&yptr=yahoo

@msf I'm still interested in hearing about favorites of the members of this forum in the F-1class of American Funds, but since I'm a fan of 2030 funds and you mentioned PIMCO, I'll make another comment:
I've noticed that PIMCO RealPath 2030 fund has performed quite well over the past year (although it has performed poorly over the past 3 and 5 year periods). I'm certainly not going to make a purchase decision based upon 1 year performance, but can anyone help me understand what components of its portfolio have made it perform so well over the past year's market conditions?

Funny you should mention the target date funds. Prof. Snowball was quoted in the WSJ a month ago criticizing these funds for adding charges on top of the underlying fee expenses. "Extra premiums are 'generally a sign of greed,' says David Snowball ..."
See: http://www.wsj.com/articles/when-target-fund-fees-are-off-target-1473127500
What he missed was that the AF target date funds are built on top of the cheapest share class of funds (R-6, which even most institutions can't get). The extra premiums in the target funds are "other expenses" - the cost of their extra paperwork and administration. Then the F-1 shares add 0.25% to pay Fidelity and Schwab to offer them without commission. (I'd rather pay the brokerage commission, but that's another matter).
In contrast, Vanguard uses Investor class shares instead of Admiral or Institutional class shares underneath (thus reaping a similar incremental fee to cover administrative expenses). Fidelity has it both ways. With its actively managed target funds it plays Vanguard's game of hiding the target fund costs by using a more expensive share class for the underlying funds. With its index-based target funds it adds on the administrative costs explicitly, just as AF does. A little honesty there, at least.
Then you have PIMCO, which adds a management fee of at least 1/2% on top of the underlying funds fees in its Real Path 20xx target funds. Here's the prospectus. On top of that, on top of the 12b-1 fee that it adds to all but its institutional class, it has the audacity to add another 0.25% to its class D management fees, to hide the extra it's paying Fidelity and Schwab to offer the shares NTF, and maybe make a little more profit. Just what Prof. Snowball was talking about.
More than anything else, it's fees that soured me early on PIMCO; I've never understood why PIMCO, a load fund family, gets a pass.

Looking at a 5 year chart visually tells a cautionary story as well:
A 72% 1 year investment gain in GDXJ...
merely breaks even for a 3 year investment in GDXJ...
and is little consolation to a 67% loss to a 5 year investment in GDXJ:

FYI: Gold has gone gangbusters this year, rising with jitters about everything from a weak global economy to the possibility of a President Trump.
After gold's best first-half of a year since 1980, gold-related funds are piled atop the leaderboard for returns. The average fund that invests in stocks of gold miners has returned more than 70 percent in 2016, for example. Such glittering performance has drawn even more investors, and nearly $21 billion has poured into funds that buy either gold bars or the stocks of mining companies in the year to date through August, according to Morningstar. In 2015 investors pulled $2 billion out of those same funds.
Regards,
Ted
http://www.bigstory.ap.org/article/5f021dd9651a459b9faeae1b26aa89ed/after-huge-gains-even-gold-fund-managers-advise-caution

We have been working with clients for more than 30 years and have seen a boatload of changes in the fund industry. As one poster noted, advisors have been able to use F-1 shares for many years, but individual investors could not. But the fact is that fee-only advisors have been the ones using this option, not the commission folks. It is always frustrating for us to see a new client come in with their account statements that show 4-6 American Funds, with a ton of overlap, thinking they are diversified. What was their "advisor" thinking? Pretty obvious, seems to me. Also know that for years, American Funds were "top shelf" options in many commission-based brokerages, meaning the rep earned a higher percentage of the gross commission if she/he pushed those products to clients. Not sure if this still happens, but the fund companies paid the broker-dealers to get on that top-shelf list. While American Funds, by and large, have been an ok group, their numerous large cap US funds are pretty-much defacto index funds when you compare size, number of holdings, Beta, STD, and other measures. And they fared about the same as the S&P 500 in the 2007-08 meltdown. There are certainly much worse load fund families out there.

For an allocation fund whose performance has hugged the return of the S&P 500 for the past 10 years, go for the Bruce Fund (BRUFX). It's by far my biggest MF holding.

Don't you wish Bruce Fund offered a cash position? I have my H.S.A with Bruce and would like to park some of my money in a cash position instead of having to redeem shares when I need to pay for health related expenses.
I do love the Spartan website. Old School. I have automated my contributions by using the bill pay services offered through my bank's checking account and I have learned to tempered my enthusiasm for redemptions since the US mail is the only method available for receiving withdrawals.
I'm hoping all of these "old school hurdles" are too much trouble for the "above average high tech" investor to except and it remains the fund less traveled.

For an allocation fund whose performance has hugged the return of the S&P 500 for the past 10 years, go for the Bruce Fund (BRUFX). It's by far my biggest MF holding.