No Load Mutual Puts More Of Your Money To Work

2007-03-08 10:33:40

( Financial )



If you are ready to invest some of your money in a mutual fund, you face the decision whether to buy a load mutual or no load mutual fund. The choice can be difficult, especially since brokers and their sales people will try to steer you away from no load mutual funds.

As you know, a mutual fund is basically a pool of money from several investors that is managed by a fund manager to accomplish a defined investment objective such as income or growth. Your investment makes you a shareholder, meaning you own portions of the fund.

A load is supposedly the transaction cost you pay for buying into the fund. In fact, load is the commission paid to sales people who bring in your money. The load does not go into the money pool managed by the fund manager.

The fund manager does not earn money from commissions, but from management fees on the fund’s assets. You share in that cost no matter if you pay load or no load.

The load fee is commonly 5 percent of the amount you invest. In a no load mutual, you do not pay any fees and absolutely all of the money you intend to invest goes to work for you.

Your earnings potential will not be less in a no load mutual. All experts agree that the difference in returns between load funds and no load funds is too little to be significant. Remember that investment decisions of the fund manager are the key to earnings performance.

The sales commission has the effect of reducing the money you invest in a mutual fund. So, if a load fund and a no load mutual both earn equally the same, you will earn more as a no load fund investor because you have more money in the no load mutual funds.


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