When it comes to stock market trading it PAYS to have more knowledge than the rest of the pack. Pure gold can be harvested in each profitable trade that you accomplish. But when you don’t know what you are doing stock trading can become a very difficult and life consuming business. You can lose a lot of money and time. Valuable time of your life.

Stock trading can resemble the closest thing to a get-poor-fast system when you don’t implement a proven stock trade strategy.

Even when there are traders that can make more than $5000 on a single trade, it’s not unusual for a novice stock trader to lose $1000 in less than 3 minutes from the comfort of his own home, or waste a lot of family time thinking about the stock he should trade for tomorrow "according to the charts and the stars" and other confusing technical analysis trading indicators, like if every passing hour he devotes in this manner will guarantee him success.

As an online stock trader your homework is all about learning and testing different online trading strategies that can help you take advantage of stocks and at the same time protect your profits.

Just always keep in mind that a good stock trading strategy is simple and practical. Complicated stock systems will always make you slow in your decision making process or confuse you right from the start.

Success in online stock trading comes when you know how to choose among the best stock opportunities and by following your buy and sell signals with ease and simplicity. Once you learn to master your trading decisions, you can aspire to produce consistent profitable results.

Sharp Trades helps day traders & investors choose stock trading opportunities in a practical way every day at http://www.SharpTrades.com

It is commonly accepted that there are four stages of a trend. These stages make up a cycle and each cycle has smaller cycles contained within them.

It doesn’t matter whether you like to trade with 5-minute charts or monthly charts. Each market will be in some stage of the cycle as you are observing it.

Before you even think about getting into a trade you should have some idea of where the market is in the cycle. This will help you avoid making the wrong entry. For example, if you have identified stage two of the cycle it doesn’t make sense for you to be short in an up stage.

Stage One

The start of the cycle (stage one) is where there is very little happening and the market is generally flat. At this stage the market is normally oscillating in a certain range. As this stage ends you often see a breakout of the previous range. The breakout can often be explosive particularly if it has been in consolidation for a long period of time. For markets that can measure volume an increase of volume is an early indication that the breakout is real.

Stage Two

Stage two is after the breakout has occurred and we begin to head North. Depending on the force of the move the market may rally and not come back to the breakout point or it may come back and test that area.

The second point to note is that the moving average began to turn up after the breakout giving further support to the beginning of the cycle.

Stage two continues making higher peaks and higher valleys and may come back to test the moving average a few times.

Stage Three

Stage three is the final thrust of the cycle. You may notice a spike or a double top formation as the trend begins to run out of steam.

Stage Four

This is the final stage of the cycle and perhaps the most interesting. Depending on market conditions some traders may now go short.

Stage four can be difficult as the market may either go into consolidation again or continue down.

So how can this help your trading? Well, the first thing to do before you enter a trade is decide where in the cycle you are. If you are at stage two then it could be dangerous to go short. It could also be dangerous to enter short if stage two had been building for a long time. Remember the market can’t go up for ever.

On the other hand if we were entering stage four you wouldn’t want to be long. Just by identifying the different stages of the market it can help you lock in profits, make better judgments decisions on whether you should be in the market at all and perhaps give you clues for entry and exits.

For a FREE report on HOW TO TRADE FAST, enter your email address at:

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With so many different companies offering such a wide variety of stocks and bonds, it can be difficult to keep track of which ones are good investments and which ones will cause you to lose money. If you aren’t sure how to tell the good stocks from those that aren’t so great, or simply don’t have the time that you’d need to keep track of all of the different stocks so as to know when it’s time to buy or sell, you might want to consider hiring a stock market analyst.

A stock market analyst is an individual, sometimes as a part of an investment firm, whose job it is to watch the changes in the market and keep track of which stocks and bonds are performing well and which ones aren’t.

If you think that you might be interested in hiring a stock market analyst but aren’t sure how you would go about doing so, then the information below should help you begin your search.

Find Local Analysts

The first step in hiring a stock market analyst is finding one to hire. You can often find listings for market analysts or investment services in your local phone directory, and many analysts are likely to advertise in the financial section of local newspapers and other financial publications. You might also try searching the internet for information about financial analysts in your area.

Once you’ve found the analysts that are closest to your area, it’s time to begin investigating the services that they offer and finding the one that’s best for your investments.

Compare Prices and Services

Obviously, stock market analysts are going to charge for their services… after all, it’s how they make a living. You should take the time to see how much the various analysts in your area charge, and find out exactly what services that price covers. Some market analysts might have several different packages at different prices, offering different services for different amounts so as to cover a variety of different service needs and financial limits.

Take some time to compare the prices that each analyst charges and the packages that they offer, and when you’ve decided upon the one that offers the most services that you desire for the best price begin checking to see how good they are at their job.

Check References

Taking the time to check references and to see if your potential analyst has any major complaints against them can help you to avoid having to repeat your search in a short period of time. In most cases, you’ll find that businesses such as stock market analysts will have customers who are more than willing to allow the analyst to use them as a reference because of good experiences that they’ve had. If they don’t have any references that you can use, take a little time to ask around and see if you can uncover any good or bad experiences that others have had with them in the past.

Though it may seem like a lot of work, you want to make sure that the person that you hire will be able to do the job that you’re hiring them for.

Making Your Decision

After you’ve done some checking around and gone over the information that the analyst has given you again, it’s time to make your decision. If it seems as though they’ll do a good job in advising you on your stock choices, go ahead and hire them… if not, you should continue your search until you can find the one that will.

You may freely reprint this article provided the following author’s biography (including the live URL link) remains intact:

About The Author

John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

"Every day the bull market continues, brings us one day closer to the next bear market."
Jeff Bryant, HomeTrader Trainer

"Should I be trading the long or short side of the market now?"

"Should I wait a couple of months until the market looks better?"

These are a couple of the questions my students have been asking me lately. Despite Jeff Bryant’s words of wisdom above, we can’t predict the future, and Jeff would certainly be the last person to try to do so.

I can’t say which side of the market to trade or whether to trade until after the event. And we can’t trade the past, only the present. If we wait until we "know" what the market is doing, it will be too late.

My answer is always the same: The best time to start trading is when you have developed your [trading] system, proven that it works by backtesting it over historical data and are confident you can trade it correctly.

And the best direction to trade is to trade both sides of the market. Your long system will trade stocks that are rising and should keep you out of falling stocks if it is designed properly. Your short system will trade falling stocks and keep you out of rising stocks.

That way, it doesn’t matter if the market is bullish or bearish or if different sectors are going in different directions – you will always be trading the right direction.

But that does not mean you have to start with both a long and short system if you feel that is too much to begin with. Develop, test and start trading one system in the direction you are most comfortable with.

Actually trading the system should only take a few minutes a day, which will leave you enough time to develop a system for the opposite side of the market. So it need not take very long to be in a position to trade both directions and then it won’t matter whether the bull market continues or a bear market starts.

And what is the market doing? During November, the All Ordinaries rose again and recouped the losses of October and challenged the record high of September 30th, but did not break it.

Does this mean the bull market is over or is it continuing?

The answer remains: We don’t know what is going to happen and we don’t need to know what is going to happen if we have a tested mechanical system that dictates all our trading actions. If you don’t have this yet, or if you are not confident in the system you have, go see your trading trainer and sort it ASAP.

You do have a trading trainer, don’t you…?

Michael Grossbard is a trading Trainer for HomeTrader - Australia’s leading stock market education centres. We focus on teaching you how to create wealth through the share/stock market using a customized trading plan or system that is right for you, your situation and your goals. Visit our website and register for your free introductory DVD "Learn To Make Money On The Stock Market" at http://www.learnshares.com.au

It seems that there are more and more scams and dishonest deals in the news every day… and it may appear that no one is safe. Many people put off making investments that could make a lot of money down the road because of the fear of stock market scams, but with a little bit of care and common sense they don’t have to.

It’s possible to easily avoid most stock market scams, if you take the time to do a little bit of research before making your investments and avoid the lure of “fast money.”

Here are some basic tips that can help you to avoid stock market scams and keep your money safe and secure while enabling you to make the investments that you want to make.

Know the Source of Your Information

A common source of stock market scams comes from spam e-mail, often in the guise of unreleased information or secret stock tips. Even if the claims in the e-mails or communications were legitimate, it can be very dangerous to act on any “unreleased” or “secret” information. Insider trading, or trading made by those who know about financial news within a company before the public knows, is illegal, and using insider information as the basis for your stock trades can get you fined and possibly even earn you some jail time.

Even though most anonymous e-mail tips don’t count as insider information, it can still be dangerous to act upon any information that you receive in this manner. If you want sound stock advice, hire a market analyst or read the financial sections of major newspapers or websites.

Research the Stocks You Want

If you find a stock that seems interesting but you aren’t sure if it’s legitimate, take the time to do a little bit of research on both the company that issued the stock and the performance of the stock in the market. Most financial websites offer free stock tracking and performance histories, so take advantage of the information available to you and know what you might be getting yourself into. If you aren’t able to find much information on a stock that seems like a great deal, remember the old adage that if something seems too good to be true then it probably is. When dealing with stocks that may not be legitimate, it’s usually better to err on the side of caution.

Find a Broker You Can Trust

Many people are afraid to invest in the stock market because they’re afraid that they’ll be scammed by a fraudulent stock broker. In order to avoid this, take a little bit of time to find a broker that you know that you can trust. Ask the advice of people who you know and trust, or failing that take some time and research brokerage firms in your area.

Another alternative is taking the time to look at online brokerages, finding those that have been reviewed positively by trusted financial and news websites.

Keep an Eye on Your Investments

One of the best ways to make sure that you don’t fall victim to a stock scam is to make sure that you keep a tight watch over your investments. Periodically check the progress of your investments, making notes and inquiries about anything that doesn’t seem right about your chosen stocks and bonds.

This will also help you to identify when it’s time to buy more shares or sell the ones that you have, and can assist you in learning which stocks and bonds are worth the trouble and which aren’t.

You may freely reprint this article provided the following author’s biography (including the live URL link) remains intact:

About The Author

John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

As the moderator of Daytraders, the net’s top real-time, live, chat room dedicated to stock trading, I receive many requests and questions on a daily basis. One of the most frequently asked questions I receive is, “What are the tools I need to day trade?”

Many subscribers want to know what broker to use, what kind of computer, how many monitors etc., etc.

So let’s cover a few of these questions.

Computers: The computer you choose today is not nearly as difficult a decision, nor as expensive, as it once was. Most everything you buy today is going to have the horsepower for trading and at a fraction of the cost it once was. With boxes as inexpensive as they are, you for sure don’t want to skimp. Yet, at the same time you don’t need an IBM mainframe either. I’ll not get into brand names because most, if not all, of the computers on the market today will do just fine. However, there is one thing you do not want to over look - memory. Many systems still come standard with just 512k of memory, especially laptops. I strongly suggest you get at least a megabyte or more of memory. Get as much as you can comfortably afford.

Monitors and Video Cards: Make sure you have a video card setup with the capabilities to run at least three monitors. Some people are running as many as 7 or 8, but for the most part you can get by with 3. I would suggest you get at least the 17 inch monitor, but of course, there are certainly larger monitors out there. Depending on your budget you can end up with as much viewing space as your local ten-plex theater. I suggest you don’t get that carried away. First of all, the more you hang on the system, the more sluggish it will run. Also, the more screen space you have, the more likely you will be to be opening up all sorts of windows that can only become a distraction.

Brokers: I strongly suggest you look into using one of these two day trading specialists: MBTrading or CyberTrader, with a strong personal bias for MBTrading. My bias is based simply on past experience. Keep in mind we are talking day trading here, not investing. For day trading, fast execution and customer service are the two most important considerations on which you need to base your decision. Commissions are really not as important as you would think. These companies are very competitive now, and the fee structures are not that varied any longer. Poor execution and inadequate customer service can cost you many times more than the savings you might realize by using the wrong broker.

I often make the somewhat silly analogy of “trying to trade with anything other then a fast, point and click day trading system like MBTrading or CyberTrader, is like trying to win the Indianapolis 500 with your family mini-van.” The other thing you need to be cautious of is people recommending “their own” discount broker. Most have never even seen an MBTrading or CyberTrader system. Suffice to say, the differences are drastic.

Quotes and Data Feed: Depending on which broker you choose, you may also need a stand-alone quote/data feed. I suggest you ask the broker you choose to make a recommendation here. They have worked closely with different data suppliers and should be able to tell you which one is doing the best job with their service. However, who ever you do choose, make sure you have real time charting, Level II quotes for both the NASDAQ “and” the Dow listed stocks.

News and other information: You don’t need to subscribe to every news service in the world. This is not only costly but is just going to fill your screen(s) with a lot of news you really can’t use. Remember, it is not your job as a trader to be on top of every stock move on every breaking news story. You only need to find a few stocks a day to make money on. This is also why I was cautioning against too much screen space. If you have the space, you are much more inclined to fill it with more information that needs digesting.

I suggest you subscribe to Dow Jones News. The best price is usually through your broker, and in many cases it is integrated right into your trading platform or data feed. I also suggest you subscribe to Daytraders.com (self serving as that may sound). Daytraders.com is monitored (by yours truly), and we cover as many breaking news stories as we can. We also make stock calls (Buy, Sell, Short, Scalp, etc.) including analysts’ actions, volume alerts, research alerts and many trading ideas (stocks) posted by the membership itself. The room is for professionals and is strictly monitored to eliminate inappropriate trading and off topic comments to insure professional behavior. Being a part of a group of savvy traders gives you the benefit of many pairs of eyes and ears.

I also suggest you monitor MarketWatch.com. It is free and does deliver some real time news. It also gives you a lot of trading ideas as well as in-depth stories on stocks that are in play for the day. The other free news service you will want to bookmark and keep handy is Yahoo Finance. It’s not real-time, but it has a wealth of research information along with delayed news. Other information at Yahoo Finance includes detailed quotes, 52 week highs and lows, float information, short interest, analysts’ opinions, upgrades, downgrades, stock screeners, etc.

You will also want to have your TV tuned to CNBC. A mere mention on the air can move a stock. This may give you any number of trading ideas, or explain why a trade your are in is reacting the way it is.

There are a number links at www.TraderAide.com that you will also want to bookmark and keep close. The NASDAQ page, for instance, has the pre-market and during market Radar which tells you what stocks are moving in real time. I find this extremely valuable in pre-market trading. The NASDAQ page also has halted stocks information, a daily calendar of economic events, Market Maker lists, and a plethora of other data. In addition, at TradeAide.com you will find links to many other sites that can be very helpful during the trading day. You will also find a link on how to set your Stochastic chart which will include a daily candlestick chart and a volume overlay. It is not the goal of TraderAide.com to give you a link to every site on the net that deals with the markets, only ones that will help you make money on a daily basis.

When you are setting up your data feed/quotes, keep it simple. A couple of market maker/level II windows are all you need, with the ticker (time of sales). You need a stochastic chart, a daily (one year) candlestick chart for price history and your news feed. You can open up a multitude of other screens and studies inside your data/quote feed, but too much information is just that, too much information.

Remember KISS!

Happy trading!

No permission is needed to reproduce an unedited copy of this article as long the About The Author tag is left in tact and hot links included. Questions and comments can be sent to Floyd at floyd@TraderAide.com.

Floyd Snyder has been trading and investing in the stock market for three decades. He was on the forefront of the day trading craze that swept the nation back in the late 1990’s, both as a trader and as the moderator of one of the Internet’s largest real time trading rooms, http://Daytraders.com. He is the owner of http://www.TraderAide.com and Strictly Business Magazine at http://www.sbmag.org

The stock market can be a great investment tool, but many people find themselves unsure of whether or not to invest in the market because they are unfamiliar with some of the more common terms associated with market trading. If you are one of these people, don’t despair; below you’ll find several of the more common terms associated with the stock market defined so as to help you make sense of the investment news that you hear.

Stocks

Stocks are obviously one of the most commonly traded items in the stock market… they are the publicly sold and traded shares of companies. Each share of a stock is a portion of ownership in the company that issued the stock, and the stockholder is usually entitled to vote in stockholder meetings. Stockholders are also often given advance notice of upcoming splits, mergers, and the release of new stock shares.

Bonds

Bonds are similar to stocks, but are more often issued by governments than by individual companies. Bonds are issued with a specific date set at which they reach maturity, after which point they are cashed out and their current value is paid to the bond holder. The longer a bond holder owns a bond before maturity, the more money they have accrued in the bond and the more they get upon maturity.

Dividends

Dividends are additional payments that are made to stockholders after a particularly profitable quarter. Many people automatically reinvest their dividends, getting more shares of stock equal to the amount of the dividend that was paid.

Futures

Futures are traded along the same lines as stocks, but are purchased against the future cost of commodities. When the futures mature, money is made if the actual price of the commodities is higher than that which was paid for the futures and money is lost if the price is lower than that which was paid.

Index Trading

Groups of stocks based upon commodities or sectors of the market can be purchased and traded as an index; common indices include the diamond market, the gold market, technology sectors, healthcare, and other such groupings.

Trading on Margin

Trading on margin is similar to making stock trades with borrowed money… you can purchase the stock shares for a portion of the actual price, with the remainder due at a later date or upon sale of the stock. The broker which places the order must have your margin portion of the cost before placing the order, which is typically 50% of the cost of the stock.

Bull or Bear Market

Bull markets and bear markets are terms used to describe trends in the stock market. A bull market is one in which stocks continue to rise over an extended period of time, and is considered to be an optimistic market. A bear market is one in which stocks fall in price over an extended period of time, and is considered to be a pessimistic market.

Splits

Splits are a way that companies reduce the value of their individual stocks without reducing the value of their stocks as a whole. The most common type of split is a two-for-one split, in which each share of stock is divided into two shares… this doubles the total amount of shares, though the total amount invested remains the same and each individual share is worth one half of its previous value. Stockholders end up owning twice as many shares after a two-for-one split, though the total amount that they have invested remains the same.

You may freely reprint this article provided the following author’s biography (including the live URL link) remains intact:

About The Author

John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

For most of the history of the Mutual Fund Industry average annual turnover hovered around 15 to 20 percent. This means that 15-20 percent of the funds portfolio changed each year. Put another way, the average holding period for a stock in a mutual fund portfolio was 8 years. Starting in the late 1970’s and accelerating in the mid-1990’s, average annual turnover is now 100 percent. Put another way, the average holding period is now less than one year. So, while preaching that a steady, long term approach was appropriate for their customers, the industry has itself moved from a stock-ownership mentality to stock-rental mentality.

I am going to save for another day the discussion about how this makes it more difficult to achieve results commensurate with the enormous fees levied. Be aware that this is aspect is the biggest problem with a short-term mentality. However, there are quantifiable reasons to avoid high turnover.

How High Turnover Hurts You

I keep returning to this point. High fees and expenses are the primary reason that mutual fund performance lags their benchmarks. Some are more transparent than others:

1) Trading Commissions. This is not disclosed in the fund’s expense ratio, making it harder to compare the true costs among funds. You would think that a sizable mutual fund would be able to get competitive commissions, but in actuality, many of them pay far more than any individual can get, thanks to soft dollar arrangements.

2) Taxes. If a fund manager sells a position for more than was paid, the fund is obligated to pass that through to investors. If the holding period was less than one year, the gain goes into the "short term capital gains" basket. This is taxed as ordinary income. If the holding period was more than one year, the gain goes into the "long term capital gains" basket, which has a lower rate. So, if your fund has an abundance of short term capital gains, you are paying up to 250 percent more in taxes for short term gains than long term gains.

3) Spreads. Almost all stocks have a spread. When you see a price quoted with a bid (the price at which you can sell), and the ask (the price at which you can buy). The difference is the spread. On the most liquid stock, this amounts to pennies per share. On the lower-volume and international stocks, the spreads are wider. This can amount to a serious drag.

4) Slippage. This refers to the difference between the price that was received for a buy or sell order, and the price at the time the order was given. For funds with sizable positions, you can bet that heavy buying will raise the price, and heavy selling will lower the price. Even relatively small lots of 1,000 shares will move the market in the less liquid stocks, so imagine how this affects a multi-billion dollar fund.

None of these factors are figured into the expense ratio that was quoted in the prospectus or other marketing material.

How We Got Here

Many factors contributed to the rise of speculation among the stewards of your nest egg, some understandable, some nefarious.

1) The deregulation of commissions. The 1974 rule-change dropped the bottom out of the cost of executing a trade. This made short term trading more feasible, but it also created a need for Wall Street to substitute the lost revenue. They found it. In 1970, the average daily volume was 15 million shares. In 1990, it was 300 million. In 2000, it was 3 billion.

2) The rise of IT. Computer technology enables quants (the wall street term for a manager who makes trading decisions based on computer algorithm) to plug in a vast array of data points into their systems. The result is a whole lot more buy and sell signals.

3) Captive mutual funds trading through parent-company brokerage operations. This allows fund companies to pass some vigorish on to their corporate parent without disclosing it.

4) Soft dollar arrangements. Managers are showered with perks in order to direct more volume the way of brokerage houses.

What To Do

The body of academic studies makes one thing painfully clear. There is an inverse relationship between average annual turnover and fund performance. You would have to think that otherwise bright fund companies would know this, and adjust their fund management styles accordingly. Unfortunately, I think the evidence tell us that they do know about it, but that changing their style means less in their pocket.

Mark Brandon is the managing partner of First Sustainable (http://www.firstsustainable.com), a registered investment advisory catering to socially responsible investors. First Sustainable does not accept payment from sponsors of financial products.

An entire book could be written about the happy conspiracy between corporate managers and the investment community that pads both pockets at the expense of the everyday shareholder. In fact, one has been written. You should check out "The Battle for the Soul of American Capitalism" by John Bogle, the founder of the Vanguard Group. Bogle has been one of the few mutual fund industry luminaries that publicly decry the abuse taking place. It is an easy read. Check it out. Many of my top ten reasons are touched on in this book.

Over fifty percent of corporate America is owned by the top 100 financial fiduciaries. One would think that this alone would make them the most vigilant voices in the boardroom. In fact, few mutual funds demand accountability from management, and in many of the most egregious cases, they are guilty of downright aiding and abetting the fudging of numbers and the looting of otherwise good corporations. Why? Two glaring conflicts of interest prevent the industry from becoming the activists that they should become.

First, every company is a potential client for 401k and pension administration. Over half of invest-able assets are in defined contribution plans (401k, 403b, etc) or defined benefit plans (pensions). Company management gets to decide who handles these assets on behalf of their employees. Corporate managers who take a dim view of shareholder activism (and who does, except those that are abusing shareholders?) are unlikely to award this business to institutions who meddle too much. Management wants shareholders to blindly follow the recommendations of management. Shareholders who file corporate resolutions and offer up competing board slates are not likely to get a piece of the company’s investment assets.

The second conflict is similar to the first. So many of the mutual fund industry’s parent companies also have operations in investment banking. They are reluctant to raise hay because offending their management clients may result in their firms being left out in the cold when it comes to investment banking deals.

This is really a shame. Mutual funds have the expertise, the resources, and the position to demand accountability from management. Instead, management has used the diffusion of corporate ownership to increase their pay, fudge the numbers, cut sweetheart deals, etc. Bogle calls this a transition from "owners’ capitalism" to "managers’ capitalism".

Mark Brandon is the managing partner of First Sustainable (http://www.firstsustainable.com), a registered investment advisory catering to socially responsible investors and the author of Sustainable Log (http://sustainablelog.blogspot.com).

If most people can not easily explain how they are getting charged for services, you can almost always bank on a rip-off in your midst. Such is the case with many mutual funds and their "fund classes". Just like when a corporation offers up shenanigans like "super-voting" shares, grab your wallet.

Get this. The same organization with the same portfolio and same manager can have "A" class, "B" class, and "C" class shares. In some extreme cases they can also have "D", "E", "Z", and more, but these are rare and we will not go into them here.

"A" shares generally refer to the shares that have a front end "load" or sales charge. This is normally in the 3-5 percent range. This means that 3-5 percent of your investment comes off the top before it is even invested. Your $100k investment just became $97k with a 3% sales load. This sales charge is often split with the financial adviser, mutual fund supermarket, or other intermediary who placed you in this fund. Oft maligned, load funds are not always the worst possible solution. In many cases, the ongoing management fee that is charged every year is often lower for the "A" shares. If you intend to hold the fund for a long period of time, then this might actually be the cheapest way to go. More on this later.

"B" shares waive the front end load, but instead employ a contingent deferred sales charge (CDSC), or a back end load. In plain English, this means that you are not charged up front, but if you redeem your shares from the fund, you may face a sales charge. The most prevalent CDSC’s are those that are reduced or phased-out over time, say seven years. If you hold the fund for seven years or longer in this example, you pay no front end or back end load. Why the complexity? The aforementioned intermediaries are likely to want their vigorish up front, so the fund obliges them, but wants to make sure they will get their money back from you. Placing these onerous restrictions enables the fund to at least cover their out-of-pocket expense for recruiting you. Again, "B" shares can be the cheapest alternative for a specific fund if you have a long-term horizon.

"C" shares have neither a front end nor back end load. However, it is likely that if a fund has this alphabet soup in the first place, the ongoing management fee is going to be higher than the "A" or "B" shares. Therefore, while every penny of your investment is put to work right away, over a long investment horizon, you may be paying more.

Which Class is Right For You?

With very few exceptions and for several reasons, the answer to this question is none of these classes are right for you. In fact, if you are presented with these fund options, you are likely getting hosed by your investment adviser. The reasons these classes exist is so that fund companies and advisers, two fiduciaries who are obligated to have your best interests foremost, can arrange how to split up your money. I am a firm believer that, in that circumstance, your interests will not be put first. By and large, the funds that employ these practices have a higher than average total expense ratio. I will always come back to the principle that the most reliable way of tweaking your mutual fund performance is to pick funds with low expenses and low turnover.

Most of the fund companies employing this method also have in-house advisory or brokerage services. Surprise, surprise. The real reason they love this method is that sales charges lead to immediate money for them. In theory, they are correct is saying that long-term horizons will make the loaded funds cheaper. However, let me be clear on this point, because I came from this culture myself. In a few months, or years, they are going to call you up again to advise you to switch funds, and ding you again. It sickens me. Really.

There Is A Better Way

To me, there are three superior approaches than buying class-laden funds, and only one of them involves a shameless self-promotion. First, there are dozens of well managed, low cost, actively managed funds. Your adviser will not mention these, because he does not get paid for selling them to you. Second, I keep coming back to indexing and index funds. They are mostly low-cost, low turnover, and class-free. The principle mentioned above explains why I prefer this method over the former. Third, folio investing offers the benefit of zero cost, long holding period, tax advantage, and social screening. First Sustainable’s program enables investors to, in effect, create their own mutual fund, based on their long term needs and social criteria.

Mark Brandon is the managing partner of First Sustainable (http://www.firstsustainable.com), a registered investment advisor catering to the socially responsible investor. First Sustainable refuses any compensation offered by sponsors of financial products.