Is This Fund Worth the Fee?

published 5 May 2008

I have a Roth IRA with Fidelity Investments and would like to know if I can invest in the newly reopened Dodge & Cox Stock with money from my Fidelity account.

It's a good news-bad news story. Yes, you can buy Dodge & Cox Stock (or any of the other Dodge & Cox funds) if you have a Fidelity brokerage account. But you'll have to pay a $75 transaction fee to purchase the fund, no matter how much you're investing (there's no charge for selling). If you invest the minimum $2,500, that's 3% of principal. If you invest $50,000, that's 0.15% of principal.

Dodge & Cox doesn't participate in brokerage firms' no-transaction-fee programs because its fees are so low. Funds usually pay brokers 0.25% to 0.35% of their assets to participate in these arrangements. With a low management fee of 0.50% a year (and low overall expenses of 0.52%), Dodge & Cox would either have to surrender half of its management fee or tack on a 12b-1 fee (for marketing expenses) to participate in NTF programs.

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Of course, you can invest directly with any no-load family, such as Dodge & Cox, and avoid both a sales charge and a transaction fee.

Dodge & Cox stock would be a good addition to your portfolio. A member of the Kiplinger 25, the fund has a superb long-term record. Over the past ten years through May 2, Stock returned an annualized 9.5%, an average of almost six percentage points better than Standard & Poor's 500-stock index.

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As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.