- No load funds have better long term prospectives than load mutual funds
- Both fund types may charge a 12b-1 marketing fee, but no load funds usually have a lower marketing fee
- A mutual fund cost calculator can help you compare costs between funds
When it comes to investing in mutual funds, the long term prospectives of the funds you choose are important. Which is better for the long term investor, no load funds or mutual funds? Comparing these two fund types can point out any advantages and disadvantages each type of mutual fund may have concerning a long term investment, so that you can choose the mutual funds which are best for your investment goals and needs. A mutual fund cost calculator can help you compare the costs of investing in each fund, and the funds prospectus will allow you to determine the mutual fund expense ratio and any 12b-1 marketing fees, as well as any load fees or commissions. All of these will have an impact on the long term earnings and stability of the fund.
Comparing the long term prospects of the two types of mutual funds can help you determine which fund type is best for you and your long term investing needs. Load mutual fund have load fees which must be considered, and these fees will bring down the earnings and investment value because they are fees which are paid to a broker as a commissions or sales incentive. These fees do not have any effect on the way the fund performs, but they do have an affect on the future earnings you will see. Load fees can occur at the front end or when the investment is sold, and it can bring down the future prospects for a fund. A front load fee takes the fee right off the top of your investment capital amount before your money is even put into the fund. This means that your investment value starts out smaller, so you do not get earnings from the load fees you pay. It may take some time for the value of your investment to get up to the value of your initial investment amount before the load is deducted. This means potential earnings on the investment that are not realized, and this hurts the long term prospects of front load mutual funds because it deducts capital that could be used to make future earnings bigger.
Back end load mutual funds do not take load fees from your capital before it is invested, these fees are charged if you sell the investment within a specific time period, usually a period of years. They are charged to the back part of the deal, when you sell instead of when you buy. This may seem like a good deal because your entire investment capital starts working for you, but back end load mutual funds are still not as good for the long term as no load funds are. If the fund you invest in starts doing poorly, you may face fees if you attempt to move your capital to a different fund or investment method which is doing better. This can affect the long term earnings of your investment because you either pay a substantial percentage of your capital to change or stay with a fund that is not doing well.
No load funds are the best option when it comes to long term investing prospects. These funds do not charge any front or back load, and they will usually have lower fund operating expense ratios as well. True no load funds do not charge a 12b-1 marketing fee which exceeds one fourth of one percent of the net assets of the fund, and there are never any sales incentives or broker commissions. If the fund starts doing poorly you can change to a different fund without paying a big portion of your investment capital as a penalty.
