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Load and no-load funds explained

No-load funds may save you money.

The difference between load and no-load funds is basically that the no-load funds do not charge you a commission on your mutual fund transactions. In order to understand this difference more specifically, you will need to understand what mutual fund commissions are, and how they are charged.

When you are looking at a front-end or back-end load mutual fund, you should first find out what the commission rate is. Most mutual funds will have a percentage commission. This percentage can vary between a tenth of a percent and 5-10%. Obviously, you will want to go with a mutual fund that has a lower commission percentage since this is the money that you will be spending on the mutual fund manager and not on your actual investment.

The commission is charged in addition to the ordinary fees that you would have to deal with if the mutual fund had no load. Generally this commission fee is taken directly out of the amount of money that you have invested. If you are investing in a front-end load mutual fund, then the money will be charged when you first buy into the mutual fund. If you are investing in a back-end mutual fund, then the commission will not be taken until after you sell your fund shares.

On the other hand, a no-load mutual fund will not have the commission fee. However, there may still be fees for opening one of these mutual funds, especially if you are opening the mutual fund through a separate bank or brokerage. Just make sure that you ask exactly how much the mutual fund shares are going to cost you after all fees before you make your final decision as to whether or not you want to buy into it.

There are several different theories regarding load and no-load mutual funds. The reason that some funds charge commissions is that these funds are generally considered to be some of the best funds to invest in. However, after several years, there is not much difference between load and no-load mutual funds. As a result, the best advice is usually to avoid load mutual funds. You might as well save the commission money and invest it.