by Archie M. Richards, Jr., CFP^®
October 29, 2001

Investors feel increasing need for brokers to lead them by the nose. Since 1990, for example, purchases of no-load mutual funds have declined from 31 percent of all fund purchases to only 20 percent today.

The trouble is, brokers like to get paid. When you buy a broker-sold mutual fund, you're usually offered choices as to how the commission is charged. They're called A, B, and C shares. Here's a rundown:

• A shares: These charge the commission one time up front. Depending on the fund, the percentages vary from 3 to 6 percent. If the fee is 5 percent and you invest $10,000, only $9,500 goes to work in the fund. But the percentage is reduced if you invest (or intend to invest within the first 13 months) a larger amount, say, $25,000 or more. If this is so, you should certainly acquire A shares to obtain the reduced percentage.
• B shares: Again, the commission gets paid up front. The fund organization pays the commission from its own money and gets refunded later on by charges against your fund shares. Extra fees are charged each year for about seven years. Monies you withdraw also incur back-end charges. These start at 5 or 6 percent and diminish by one percentage point a year until they reach zero. As a general rule, B shares are a bum deal.
• C shares: The fund organization again pays the commission up front and gets refunded later. But with C shares, the refund takes the form of higher fees, usually 1 percent a year. These continue indefinitely. If you intend to hold the fund for only three years or so, buy the C shares. (But listen, why are you buying stocks for only three years? If a bear market is going on and pessimism about stocks is rampant, okay, three-year stock investments should probably be okay. But otherwise, money you'll need in three years should go into a money market fund, not stocks.)

B and C shares enable the salesman to keep a straight face when he says, "This fund has no front-end load." While this is technically true, B and C shares usually cost more. This stands to reason. The fund organization pays the commissions and gets repaid later. In effect, it makes a loan, for which it wants interest. Who pays the interest? You do, out of your mutual fund holding.

For long-term investments, buy A shares. Better still, ditch the broker and acquire no-load funds.

Back in 1969, a public uproar arose because about 155 Americans with incomes over $200,000 used tax -free municipal bonds and other legal means to cut their income taxes to zero. The alternate minimum tax ("AMT") was enacted to assess money from those whose taxes were considered too small in relation to their income.

Among other things, the alternate minimum tax disallows personal exemptions. Neither can you deduct state and local taxes or the interest on your home mortgage.

You figure your tax both the regular way and the AMT way. Which one do you pay? Why, the higher one, of course.

The tax may originally have targeted only a few people. But subsequent changes and enormous increases in income caused 853,000 people to pay the alternate minimum tax in 1998. If the rules aren't adjusted, more than 6.7 million taxpayers will be skewered in 2005. Plus, the AMT creates such complexity that even tax experts don't know whether they're coming or going. Tax complexity suppresses investment and cuts employment.

The wretched AMT should be tossed into the scrap heap.

The U.S. has over 8,000 tariffs, some of them exceeding 100 percent. Poor people are penalized for the crime of charging American customers low prices. Trade barriers cost U.S. consumers approximately eight times as much as they benefit U.S. producers.

United States duties are about twice as high on the products of poor countries as they are on the products of rich countries. As a result, million of people in poverty-stricken nations can't find jobs.

And we wonder why so many people hate America .