Financial Product Sales: Actions Needed to Protect Military Members Page: 13 of 28
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by year 15. However, if a purchaser of one of these plans stops making
regular investments earlier, the effective sales charge can be much higher.
For example, halting payments after 3 years results in an effective sales
load of 17 percent of the amount invested.
Figure 2: Mutual Fund Sales Load as a Percentage of Investment by Year
seememesen ems memsemes .
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
m Traditional plan load
Contractual plan load
Source: GAO analysis.
At one time, contractual plans were the only way for small investors to
invest in mutual funds as in the past many mutual funds required large
initial investments, which prevented them from being a viable investment
option for many individual investors. However, today, other lower-cost
alternatives exist for small investors to begin and maintain investments in
mutual funds. For example, many mutual fund companies now allow
investors to open a mutual fund account with a small initial investment,
such as $1,000, if additional investments-including amounts as low as $50
per month-are made through automatic withdrawals from a bank
checking or savings account. According to a recent study by the mutual
fund industry association, over 70 percent of the companies offering S&P
500 index mutual funds in 2004 had minimum initial investment amounts
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United States. Government Accountability Office. Financial Product Sales: Actions Needed to Protect Military Members, text, November 17, 2005; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc292981/m1/13/: accessed May 19, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.