- No load funds never involve any broker commission
- A mutual fund cost calculator can help you determine which funds do not involve any hidden commissions
- 12b-1 marketing fees are legitimate fees that can be used to include broker commission that are hidden with loaded funds but not no load funds
No load funds never involve any broker commission.
A mutual fund cost calculator can help you determine which funds do not involve any hidden commissions.
12b-1 marketing fees are legitimate fees that can be used to include broker commission that are hidden with loaded funds but not no load funds.
When it comes to commissions, there is no comparison between loaded funds and no load funds. No load funds charge no broker commissions at all, while load funds do. Broker commissions may be included in any 12b-1 marketing fees that are included in the mutual fund expense ratio, because some loaded funds may hide these commissions in this fee. A 12b-1 marketing fee is a legitimate no load mutual fund expense as well, when it is used for advertising and marketing the fund to the public and is not used for broker commissions or sales incentives.
Load fees are just another name for broker commissions, and these will be paid according the share class designation. No load funds do not have these share class designations because there are no commission costs. Class A shares have an upfront load fee, which is usually at least five and a half to six percent. This means that for every ten thousand dollars you invest, five or six hundred dollars is taken off the top before you even invest your capital and is given to your broker instead. Class B mutual fund shares involve a back end load, which means you will pay a broker commission if you do not hold the investment for the minimum time period, which is normally a time span of several years. If the fund starts to perform poorly and you decide to get out, this type of broker commission can be very costly if you have not held the shares long enough to avoid the back end load. With Class C mutual fund shares, a commission is constantly charged in a method also called a level load fee.
Unfortunately not all brokers are honest and up front about the broker commission that they may receive if you invest in a specific fund. You may think that you are using a financial advisor and that the transactions involve no broker commission or load fees, but this may not be the case. A broker may advise you to use certain mutual funds simply because they will pay the broker a higher commission, and this does not benefit you. Instead you end up paying higher costs and have less investment capital working for you. Legally a broker is required to disclose any conflicts of interest between your investments and the benefit the broker will receive, but this is still a gray area somewhat and is easily sidestepped by unscrupulous brokers and sales people. With no load funds there is never any worries about these issues because there are no broker commissions at all paid. Instead you choose which mutual funds to invest your money in, and you put all of your money to work right away with no fees being deducted.
A mutual fund cost calculator can help you compare fund expenses and costs, to determine which mutual funds are right for you. The mutual fund expense ratio and the 12b-1 marketing fee percentage can help you evaluate whether the fund is actually a no load fund or simply a back load fund trying to pass off as a no load fund while still paying a broker commission. If the 12b-1 marketing fee percentage is more than one fourth of one percent in relation to the net assets of the fund, it is not truly a no load fund and instead is paying the commission to the broker out of the marketing fees charged to each shareholder. Look at all the expenses in the mutual fund expense ratio, to determine whether they are necessary of just a way for the fund and managers to make money. No load funds do not involve any broker commission, so if you are comfortable making your own investment decisions these funds are the way to go.
