The battle between load
funds vs no-load funds has raged on for decades. Before we shed some light on this often
heated topic, lets differentiate between the two.
Load funds are considered have
a sales charge. This charge can be when
you first make your investment (often described as a front-end loaded fund) or
upon surrender (withdrawal) of your investment.
This is characterized as a back-end sales charge. If this sounds different to you it’s because
the back-end charges are virtually ancient history now. Nevertheless, I bring them up because some
investors may still have these types of mutual funds. The loaded funds come in different classes.
They are A, B and C shares. More about
that later.
One very important concept
to keep in mind is that ALL funds, be they loaded funds OR no-load funds have a
management fee. Many investors are under
the impression that when they buy a no-load fund, they pay nothing. This is not true. All funds carry an investment or management
fee. These fees can range from just
under 1% to as high as 2.5%. The average
management fees usually run between 1.5% – 1.75%.
Now for more information
on the No-load funds. This type of
mutual fund has no sales charge nor any surrender charge. Yet again, please keep in mind, they do incur
a management fee. This fee is explained
in the Summary Prospectus, which I highly encourage you to read and then
question a professional on its’ contents.
The no-load fund is generally offered by a fund company without a certified
financial to sit with you and guide you through the details of your
investment. I will emphasize they do
offer investment people who will be happy to speak with you over the
phone. For some this is all the desire
and that’s fine. For others, they may
feel this is lacking.
In our group, we offer
both loaded and no-load funds. Our
no-load funds are called Separately Managed Accounts. We will discuss this in future articles.