- Load funds involve broker commission, and this can lead to conflicts of interest for the broker
- Mutual fund expenses can help you determine which funds are really no load funds
- No load funds are the best way to invest for most people, and paying for professional investment advice does not have to mean buying loaded funds, this advice can be found in other ways
Load funds involve broker commissions, and this can lead to conflicts of interest for the broker.
Mutual fund expenses can help you determine which funds are really no load funds.
No load funds are the best way to invest for most people, and paying for professional investment advice does not have to mean buying loaded funds, this advice can be found in other ways.
Comparing load funds and no load funds means looking at all of the different factors involved, not just the load fees involved. Loaded funds charge a load fee which is actually a broker commission, and this fee can be five percent or even more of your capital for investing. A front end load fee takes this percentage before your money even starts to work for you, while a back end load charges when you shed the investment. Looking at the mutual fund expenses and expense ratio can help you determine whether the fund you are evaluating is a true no load fund or not. The same is true of commission free sock. Unfortunately, some mutual funds slip in load fees that may not be apparent, such as a high expense ratio and 12b-1 marketing fee percentages which are used for sales incentives and broker commissions. If you are going to use no load funds, you will save a substantial amount, but you will also need to be the one to do all of the research and investment option evaluating without any professional advice.
The biggest benefit of loaded mutual funds is supposed to be the advice that comes with the hefty fees. This may not always be in your best interests though, if you use a broker who has conflicts due to higher commissions or sales incentives from certain funds and investments. A broker is supposed to disclose any agreements, holdings, or investments which may cause a conflict. Some brokers may not always be honest though, and this can cause you to get advice which benefits the financial interests of the broker instead of your interests. Some brokers may try to pass off back end load funds as no load funds, because of higher broker commissions. Many investors have made this common mistake, and it has cost them plenty when they liquidated their investment. Commission free stock may also be misrepresented at times, when there are actually back end commissions or loads, to benefit the broker instead of the investor. This makes it questionable whether load fees are even worth it, because you may not get the most beneficial investment and financial advice for your money.
If you are not comfortable comparing mutual fund expenses and no load funds, you do not have to use load funds as the only option. You can pay a professional financial advisor to advise you on the best investment options and mutual funds for your situation. This step may cost you some upfront, to pay for a few hours of time, but this step can eliminate and conflicts between your interests and a brokers and may actually be less expensive than using loaded funds, especially if you are investing large amounts. If you choose a fund with a five percent up front load fee or broker commission and invest one hundred thousand dollars, this means five thousand dollars right off the top for an hour or two of time. A financial planner will cost you a fraction of this cost, and may give you better advice as well.
When it comes to mutual funds, no load funds are the wisest way to invest your capital. Do the research, and learn anything you are not sure of. If you still are not comfortable without having a professional advise you, set up a meeting with a financial planner and let them help you with available investment options instead of paying high broker commissions and load fees that may eat up a large chunk of your capital. The mutual fund expense ratio should be no more than one fourth of one percent of the assets for true no load funds with no hidden fees, and this includes any 12b-1 marketing fee. Load fees are usually too high, and the advice you get for this amount may not be the best available.
April 15th, 2009 at 6:28 pm
See, I disagree. I thought the help I got with these types of funds was really helpful. Maybe I was just lucky but if you know nothing about these funds, advice is well worth the money.
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