No Load Mutual Fund Benefits Explained

Free is always better, right?  Well, that is not always the case.  Sometimes free means a poorer quality product.  In the case of no load mutual funds, it turns out you get what you don’t pay for.  They aren’t of lesser quality because they are cheaper.  In this case, free is better.  If you had the choice to get a mutual fund that made your more money or less, which would you choose?  Assuming all else was constant, you’d choose to get more money.  With mutual funds, you can make this differentiation in many cases.

A load is essentially the fee charged for the privilege of investing in a mutual  fund.  All mutual funds have expense ratios (i.e. operating costs), but load mutual funds charge an extra fee that goes to pay the salesman’s commission.  No load mutual funds do not charge an extra fee.  Often they are index funds and simply include the stock in companies that are listed on a specific index.  For example, a DJIA index fund with no load doesn’t charge a fee and will put your money into the stocks on the DJIA.

Why is this better?  An index is an average of the stock market.  If you can’t do better than the average return, and few people can, why should you pay someone to do the same or worse?  If you’re paying a load, you’re obviously going to make less money in the long run than if you weren’t paying a load.  It’s just not worth the money.

Some people feel more comfortable letting the “professionals” take care of their money.  When they are charging you for nothing more than you would otherwise get, it is not worth your time or money.  Do your research before you do anything with mutual funds in general, let alone load funds.