- No load mutual funds save you money because there are no load fees involved
- No load index funds perform just as well as load index funds
- No load funds can help you invest wisely
Investing in no load mutual funds and no load index funds may be a very shrewd investing strategy in the year 2009. No load funds, including no load tax free funds, offer many benefits and advantages. Investing in load mutual funds and other load funds just means that you are giving the person selling you these funds a commission. The load is very similar to a commission, and it goes to the person bringing in your investment capital when you invest in any type of load funds. The load fees do not cover the costs of the fund management and financial advisers, because these key fund personnel are paid out of the assets of the fund instead.
Another reason to choose no load mutual funds is the fact that load funds generally charge expenses which are higher than no load funds. This includes all expenses that the funds will deduct from their assets, regardless of whether load fees are paid by the investors or not. A study was done that included a few thousand funds, and this study proved that load funds charge higher expenses as well. In the study, no load equity funds had an average expense rate of one point one percent, but load equity funds had an average expense rate of one point six percent. This means that using no load funds can help you see a return around a one half percent higher at least. This is an amount that will be charged every single year, and over the life of your investment can be quite an additional amount in expenses.
Mutual funds will perform the same whether you pay a load fee or not. A no load index fund will perform just as well even though you did not pay a load fee. The load fee has nothing to do with financial advice concerning the fund, it is simply the way for the broker or sales agent to get a share of your investment money. Using no load tax free funds and no load mutual funds will save you money that can be invested instead. Load funds have a wide variety of load fees now. There are front end load fees, back end load fees, some funds which charge both, and sometimes even hidden load fees that are not immediately apparent. The average returns for both types of funds are very close, with load funds possibly earning a few extra tenths of a percentage point at times, but this is outweighed by the costs of the various load fees.
When you pay a load fee, you are allowing someone else to determine the right investment for you, and that person may not always have your best interests in mind. Some brokers may receive commissions and rewards for selling funds managed by their brokerage or firm. This would seem to be a conflict of interest but it is frequently done. You could end up with an investment that performs poorly, while the broker who collected the load fee gets a free trip or other perk for selling brokerage managed funds. No load mutual funds may require you to choose your own investment avenues, but you will save a substantial amount of money. If you paid a load fee of one thousand dollars, over twenty five years worth of compounding interest would make this fee eleven thousand dollars. If you feel that you need investment advice, make an appointment and speak with a financial advisor. Let them advise you on the best investment options to meet your needs. Then you can find no load index funds and no load tax free funds to put your investment capital in without paying any unnecessary load fees.
