Buying mutual funds: This money-saving tip often overlooked by mainstream press
This post shares a tip that may help you avoid hefty sales charges when buying mutual funds.
Background
If you buy mutual funds outside of your company 401(k), you should know that broker-sold funds typically have sales charges -- which are denoted as share classes (for more on share classes, this is an excellent article from Morningstar).
For example, PIMCO's least costly class for their All Asset Fund is the Administrative Class. The Administrative Class has no upfront or backend loads (i.e. sales commissions), coupled with PIMCO's lowest annual fees.
There is however one problem: PIMCO requires a $5 million minimum purchase for this class. So for ordinary investors like you and me, PIMCO directs us to Allianz -- a broker -- where we can purchase Class A shares which command a 3.75% upfront sales charge. In some cases, there's a better way...
Here's a way to get Administrative pricing coupled with a low minimum
Rather than paying Allianz 3.75% to broker the transaction, I purchased PIMCO All Asset through my Vanguard brokerage account. Buying through Vanguard allows me to purchase PIMCOs Administrative Class shares for only a $35 commission. The minimum purchase level is also reasonable -- something like $1,000 - $5,000 depending on whether or not the fund is held in a retirement account.
In other words, when you buy PIMCO through Vanguard with a $1,000 - $5,000 minimum, you get the same class (read: sales charge) as you would if you purchased $5 million directly from PIMCO.
Note: If you wish to dollar cost average, Vanguard allows you to schedule periodic purchases for an additional $3.00 per transaction.
Caveat
You will need to check with Vanguard (or other fund supermarket) to determine whether or not they sell a particular fund. My fund holdings are limited to PIMCO and Dodge & Cox. All of my funds were availablte through Vanguard with no loads.
As a side note, at least one of my funds was NOT available through Fidelity. So you may want to shop around.
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