Questions-Answers on Financial Planning

Running head: FINANCIAL PLANNING
FINANCIAL PLANNING
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1
FINANCIAL PLANNING
Answer 1
Front end load- It is a commission or sales charge paid at the time of the initial purchase of an
investment. This load is deducted from the initial deposit in the fund, which is ultimately lower
than the money which is actually invested in the fund.
No-load- In case of no-load funds, investors don’t have to pay any commission while buying the
shares. To invest in no-load funds, the investors must deal with the company directly.
Contingent deferred sales load – some fund houses charge fees on withdrawals instead of the
purchase of shares. This charge is known as a contingent deferred sales load. This charge may
range from (1-5)% or depend on holding such shares before the withdrawal.
Management fees - management fees are charged by the investment companies that sponsor
mutual funds. It ranges 0.25% – 1.5% of funds asset value. The details of management fees are
disclosed in the prospectus of the mutual fund.
12-b fees – It is a distribution fee charged by the investment company to meet the expenses of
marketing a mutual fund or for paying brokerage.
Expense ratio – It is the amount charged by the companies from the investors to manage the
mutual funds. It includes operating cost and management fees (Gómez, Prado & Zambrana,
2019).
Answer 2
Different investors have different investment goals. Investment decisions are taken on the
basis of investment objectives which differ from person to person. The period for which a person
wants to stay invested is also a main factor.