Show the publicly accessible video and debrief with the following questions (answers provided in italics):
- What is the difference between a front-end load, a deferred sales load, and a no-load mutual fund?
A front-end load is a sales commission paid when purchasing fund shares. A deferred sales load is charged when shares are sold, subject to the fund’s terms. A no-load mutual fund does not charge a sales commission, although it may still have other expenses.
- How do investment fees affect the amount of money an investor retains?
Fees reduce the investor’s return. Money used to pay fees is no longer available to remain invested and potentially earn additional returns. Over time, recurring fees can have a substantial effect on portfolio value.
- What are dividends and capital gains, and how can they affect an investor’s taxes?
Dividends are distributions of company profits to shareholders. A capital gain occurs when an investment is sold for more than its purchase price. Dividends and realized capital gains may create tax obligations, depending on the investment, account type, and applicable tax rules.
- What information about investment costs can an investor find in a mutual fund prospectus?
A prospectus discloses the fund’s fees and expenses, including applicable sales loads, management fees, and other operating expenses. Investors can use this information to understand the costs associated with owning the fund and compare costs across funds.
- Why should investors consider both fees and taxes when evaluating investment returns?
Both can reduce the amount an investor ultimately keeps. Two investments with similar reported performance may produce different outcomes after accounting for their expenses and applicable taxes. Investors should consider the return they retain, not just the return reported before costs and taxes.