4 Reasons to Invest in a No-Load Fund

A no-load fund is offered directly from the issuing institution instead of passing through a secondary sales team. The main difference with a no-load fund is, because there is no secondary sales team, there is no secondary sales cost. Buying a no-load fund is like buying house name instead of brand name. The goal is efficiency, not luxury and funds deliver on this goal.

#1 Lower Sales Fees

When you buy a load fund, you pay a sales fee to purchase the fund, make changes in your holdings or even for the management of your holdings as long as you own the shares. In some cases, you pay a fee for all three of these things. As a result, you end up spending more money on advisers and investment house fees than if you went straight to the source.

#2 Higher Investment Principals

The money you spend on your sales charges would otherwise be directed into your investment; therefore, paying the fees results in a lower sum invested in the fund. For example, let's assume you are considering investing $10,000 into a mutual fund. One fund is offered directly from the bank, and a second fund if offered through a third party company, such as Fidelity or T. Rowe Price. T. Rowe Price tells you their fund is superior because they have experience and training that allowed them to analyze and pick the best fund. However, in order to buy their fund, you have to pay a 5.5 percent sales fee. You choose to go with the load fund, and you pay the $550 fee. The total sum you have invested is $9,450. If you had chosen the no-load fund, you would have the full $10,000 invested. 

#3 More Authority

When you use an advising agency, you are acting on the advice of another party instead of your own judgment. On the one hand, many people choose the load option for this reason. They trust the advisers more than they trust themselves. However, many investors are more concerned with the mutual fund manager's experience than the sales team's experience. They would rather pick the fund themselves and trust the fund managers as their primary investment advisers. In this case, a no-load fund gives the investor more authority.

#4 Equal Performance

None of these other factors would matter if the load fund actually did perform much better than the no-load fund. The added expense to invest in the load fund would be worth the higher returns. The fact remains, though, that the two options have shown fairly equal returns over many years of comparison. There is no evidence showing that load funds deliver the higher returns they promise. An investor, choosing a fund based on the manager's past performance and his or her own personal preference, will likely have just as much success as an adviser at a brand-name institution would have. This fact alone should be enough for most people to choose the no-load option. There is no reward for the extra price with the load fund. 

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