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What Is a No Load Mutual Fund?

what-is-a-no-load-mutual-fund

ANSWER:

No load mutual funds are investments that are disbursed directly by the investment company in which no fees are associated such as commission and sales charge.

 

You have many choices when it comes to purchasing mutual funds one of which is whether to purchase a no-load mutual fund or a load fund. The difference between a no-load fund and a load fund is simple, one has fees, and one does not charge a fee upon purchase or redemption. If you are mindful of paying fees to invest then you may very well prefer a no-load mutual fund. You can purchase a no-load fund at NAV and not have to worry about a percentage of your investment being taken away by a front-end or back-end fee. Many mutual fund families offer both types of mutual funds. If you choose to purchase a no-load mutual fund, you will typically have to purchase them directly from the fund company because most advisors and brokers only sell load funds as the sales charge is their commission for selling the product on behalf of the company.

Advantages of No-Load Funds

Sales charges and expense ratios factor into the overall performance of a mutual fund. When comparing overall fund performance between two similar types of mutual funds, one being a load, and one being a no-load, a comparable no-load fund will typically beat a similar type of load fund based on the lower costs associated with a no-load fund. Noteworthy investor resources such as Morningstar and Barron’s have performed these types of studies.

Load Funds or No-load Funds

No-load funds are more self-directed than load mutual funds. You are paying a premium for load funds due to the access you are given, directly, to a financial planner or broker. When you purchase a no-load fund, you will be dealing directly with the company and their customer service staff. You will not have access to a specific financial planner and many customer service representatives are not licensed to give financial advice. No-load funds offer cost-savings, which can naturally lead to higher returns while load funds offer professional advice and representation at a higher price point.

 

Resources

Hube, Karen. “T. Rowe Price is laying the groundwork needed to profit from global growth..” Barrons. N.p., 12 Apr. 2010. Web. 9 Nov. 2010. <online.barrons.com/article/SB127086596328175051.html#articleTabs_panel_article%3D1>.

“Mutual Fund Fees and Expenses.” U.S. Securities and Exchange Commission (Home Page). N.p., n.d. Web. 8 Nov. 2010. http://www.sec.gov/answers/mffees.htm.

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