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Save more for retirement with a certain kind of fund 2010-03-26 Retirement planning is getting a lot harder, it seems, but one trick may be worth keeping in mind. Even retirement-focused savings vehicles like target-date funds were pummeled by 2008's market downturn. And while the stock market rebounded nicely, many retirement portfolios haven't recovered the value they lost - meaning that a number of retirees and near-retirees are still feeling pinched. But a study conducted by Texas Tech University and the University of North Carolina reveals how investors can generate more income. The key, university researchers say, is to focus on funds that have a redemption fee. While it may sound ridiculous that fee-bearing mutual funds have better returns than those without, redemption fees are unique. They discourage short-term investors from trading in a fund; with mutual funds, heavier trading activity results in higher administrative costs and lower returns. And the benefit of redemption fees is substantial: According to researchers, funds with the fee had returns that were as much as 3.27 percent higher each year. Over decades of investing, that difference could be enormous. "Long-term investors should seek out funds that impose fees on short-run redemptions," Professor Michael S. Finke said.  |
