Mutual funds can be a great way to achieve instant diversification in the stock market, but investors must remember that not all mutual funds are created equal. One of the biggest differences from one fund to another is the amount of fees you will have to pay as an investor in the fund. A mutual fund incurs expenses during operation, so there will always be some fees, but some funds are much more cost-effective than others.
The Difference Between Load and No-Load Mutual Funds
What is the difference between loaded mutual funds and no-load mutual funds? A load mutual fund charges a sales commission for buying shares in the fund. These charges can occur at the time of purchase, when you make the sale, or sometimes even both. How bad can the loaded mutual funds hit you in the end? There are some mutual funds that carry loads as much as 7%. Put that in perspective, a loaded mutual fund with a front-end load of 7% would take $7,000 of your money before you even get started if you invest $100,000. A no-load mutual fund is just as it sounds, free of any commissions or fees to buy or sell the fund.
No-Load is the Way to Go
As an investor you should realize that there are now plenty of options in the mutual fund world. A couple decades ago the environment was very different, but today there are numerous no-load mutual funds that perform extremely well. Some financial planners will try to convince you that mutual funds with a load are better performers in the long run, which is why they carry a load. Do not believe this for even a second! This is nothing but a pure sales pitch that is designed to pad their pockets. No-load mutual funds consistently have a higher total return on investment than load mutual funds, because those significant fees are difficult to overcome.
Which Online Brokers Have Plenty of No-Load Mutual Funds?
Successful mutual fund investing should always start with the purchase of a no-load mutual fund. This type of commission-free mutual fund will increase your total return immeasurably in the long run!