The difference between good and great

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I’ve been trying to wrap up this onslaught of mutual fund posts for a week now and every time I try and get away, they keep pulling me back in.

The truth is there is so much to write about on the topic, that I keep coming up with new ideas for posts.

In an article I wrote about mutual fund hidden fees last week, I mentioned three tools that I find to be very useful. After that post, I decided to review, in depth, 2 of the 3 tools mentioned: the Kiplinger Fund Finder and PersonalFund’s Mutual Fund Cost Calculator.

I left out the FINRA Mutual Fund Expense Analyzer because I felt like it’s a watered down, less accurate version of the PersonalFund calculator. And I only wanted to examine, what I thought was, the best of breed.

Comparing the results

So instead of reviewing the FINRA Analyzer, I thought it might be cool to compare the 2 different calculators, input the same information and talk about the differences in the results.

The fund I examined with the Personal Fund and FINRA calculators was ALFIX. The following is the information that was used in the illustration:

ALFIX
$50,000 investment
9% annualized return
10 yrs out

(click to enlarge PersonalFund calculator)

Included below is an image of the results from the FINRA calculation. For the FINRA image you will see I inputed the same information as above. I also included another randomly selected fund (KAUFX) and an ETF (DIA) as well, just to compare the different costs.

(click to enlarge FINRA Analyzer)

Personal Fund results

The PersonalFund calculator is a lot more thorough at uncovering the true costs of a mutual fund. It really digs to the core of the fund and uncovers the hidden costs that are not so easy to find. The hidden costs listed only in the SAI (Statement of Additional Information).

According to the PersonalFund calculator, in 10 years the value of ALFIX is $89,525.

FINRA results

What you are seeing in the FINRA calculator is a watered down version of what the estimated costs of ownership are. They do not include the fund’s estimated trading costs included in the PersonalFund calculation. They are more or less illustrating the costs that a mutual fund details in the fund prospectus ONLY.

According to the FINRA analyzer, in 10 years the value of ALFIX is $111,606.

In conclusion

In it’s footnotes, the FINRA analyzer, states that it does not reflect certain other fees. I would assume they are referring to the trading fees, which are so important to understanding the true cost.

For that reason, I think the FINRA tool can be a bit misleading, accounting for the $22,081 difference between the 2 calculations. I’d stick with the PersonalFund calculator…

Tags: FINRA fee Analyzer, Hidden fees, Mutual Fund Cost Calculators