A No-Load Mutual Fund is basically a mutual fund in which the shares are sold without having to pay a commission or sales fee. This is because the shares are solely distributed by the investment company and not by any other secondary parties. On the other hand, a load fund is quite the opposite. One must pay a commission fee when the fund is purchased and when it is sold. It is also important to note that no-load mutual funds do involve fees for participating but these tend to be low.
Despite the fact that no sales commission is charged when purchasing the fund, all of the money invested is essentially working for the investor. For instance, if you were to purchase $7,000 worth of any no-load mutual fund, all of the $7,000 will be invested into the fund. This is a great advantage over mutual and load funds. However, if you buy a load fund that charges a front-end load (sales commission) of let’s say 5%, the amount that is actually invested in the fund is only $6,650. If the load is also back-ended, when one sells the shares of the specific fund, the $500 sales commission will come out from the proceeds.
How To Buy No-Load Mutual Funds
First of all, make a list of no-load mutual funds that are doing well. Search for lists on search engines or look on reliable investment sites like Charles Schwab. In addition, investment magazines and newspapers are a great resource to find no load mutual funds.
Next, research carefully the investments that each mutual fund has made. You should especially focus on the performance and the diversity of the investments.
I recommend you look for no load mutual funds with tenured managers. In other words, look for managers that have spent 5 years with the fund. You should also take the time to research any previous funds they have managed and how they have performed, especially during market downturns.
Prior to investing, determine which mutual funds match your investment objectives (goals), risk tolerance and buying power.
Once you have decided which funds you will invest in, I suggest you grab the mutual fund’s prospectus and have a read through it, just in case there are any hidden fees or 12B-1 marketing fees.
Ultimately no-load mutual funds are a great way to invest with their diversification and low commission fees, but as always be sure to read and more importantly unerstand all fees, timelines and fine print with the fee to be sure you are buying the right no-load mutual fund for you.
Related posts:
- Uncovering The Hidden Costs Of Mutual Funds Think you know exactly how much your mutual funds are costing you each year? Think again. The unfortunate truth is that many funds come packed with hidden mutual fund fees, fees that most consumers have no idea exist. But you...
- Money Market Mutual Funds Money market mutual funds are very conservative funds that invest exclusively, or primarily, in money markets. These guys are good at naming their funds right? If you aren’t familiar with money markets, they are essentially short term, very low risk...
- What Are Equity Mutual Funds? Equity mutual funds are professionally managed mutual funds that invest in stocks, with the objective of long term growth through capital gains, rather than strictly dividends (although dividends have historically been responsible for a good share of the long-term return)....
- Stock Mutual Funds Stock Mutual Funds Stock mutual funds are mutual funds that primarily invest in stocks (hence the name). As we know, mutual funds invest in a variety of securities which are then combined and divided in to shares for investors according...
- What are Bond Mutual Funds? Types of Bond Funds What are Bond Mutual Funds? Types of Bond Funds Bond funds are one of the more conservative professionally managed mutual funds around, in that they protect the invested principal and are invested in more stable debt vehicles, such as US...