What are No Load Mutual Funds?

Posted on April 23, 2009 @ 3:14 am
by Terry K. Venova

What do you do when you want to invest but you no nothing about choosing and investing in stocks or bonds? Simple, you invest in mutual funds. Mutual funds are a way to invest in a wide variety of stocks, bonds, and/or other investments, without having to spend the time or needing the expertise to research.

Mutual funds are pretty easy to understand. Everyone pools their money into a much larger investment. A fund manager does all the research and work to choose investments to invest in that are correctly diversified. They then use the pooled in money to invest in what they chose.

There are different types of mutual funds. Some funds charge fees and others don’t. A load fund will charge you a commission fee because they claim to get you a higher return on your investment.

Load funds will normally charge a fee based on the rate of return. If the fund were able to earn a return of 12 percent and they charged 2 percent, you get end up with a total return of 10 percent.

No load mutual funds do not charge you a commission fee. If you earn 10 percent on your investment, you receive 10 percent on your investment. This is what makes no load mutual funds that much more appealing.

Are load mutual funds superior to no load funds because they charge a fee? Nobody can guarantee a higher return. The stock market is all up to chance and to say this is misleading. Honestly, even if they are able to earn a higher than average return, the fee will probably just cancel it out anyway.

If you invest in no load funds, you get the entire return, which can mean more money. If you really think a load fund can earn you more, than go for it. Otherwise, it might just not be worth it.

You could choose load or no load, it’s up to you. Just keep in mind that one is not always better than the other. If that was the case, there wouldn’t be a choice. Look for the best mutual fund to invest in.

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