Load and No-Load Funds: What Should I Know?

But what looks like a simple exercise in decision making really is more a reflection of the kind of investor you are.

The issue here really is the degree of service you want.

A load fund, for example, generally compensates a financial professional to spend time with you at the beginning of your relationship, learning about your objectives and suggesting an investment program, keeping in touch with you and answering any questions you may have. In addition, there are often choices as to how and when to pay the sales charge.

This is particularly handy for busy people whose idea of investment tracking amounts to little more than an occasional call to their broker.

No-load funds, on the other hand, may appeal to you if you like to take charge of your investments — if you like to immerse yourself in monitoring what they’re doing and don’t need help with allocating assets or selecting individual mutual funds.

If the profile of the no-load investor sounds like you, remember that a no-load fund puts more of your money directly to work than a load fund does.

But all funds, even no-loads, have management and expense fees. And not all no-load funds are the same.

Some actually charge a small load, or a 12b-1 fee. That fee, as much as ¹/2 of 1 percent of total fund assets, is used to cover advertising and marketing costs. You can determine whether your “no-load” fund charges something by scanning the fund’s expense-to-net-assets ratio, which shows how much of every fund dollar goes to expenses.

Knowing all the facts is one thing, but applying them to your individual situation is another. Don’t be afraid to ask for help in deciding whether load or no-load funds are right for you.

The value of mutual fund shares fluctuates with market conditions and, when sold, shares may be worth more or less than their original cost.

Mutual funds are sold only by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

© 2006 Emerald Publications