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Question:


What is a no-load mutual fund?
-JessicaDean


Answer:


A load is a sales charge, typically five percent or so that a mutual fund provider pays to a financial adviser or broker who invests a client’s money in the fund. A no-load fund is one sold without this charge. Investors can find no-load funds – there are thousands of them – by doing research using websites like Morningstar.com. Once they have chosen a fund or funds that they think will suit their needs, they can invest directly with fund providers or through discount brokerages that typically offer funds for no or very low commissions.
 
Advisers, who are increasingly compensated through fees paid directly by clients rather than commissions, can steer investors into appropriate no-load funds too. However investors find no-load funds, they are better off buying them than vehicles with sales charges, especially in this era of weak returns in the markets. If you invest $1,000 in a fund with a five percent load, you’re putting only $950 to work. That means that you need to make a bit more than five percent just to get back to where you started. And there is no guarantee that the fund with the sales charge will perform better than a no-load fund with the same investment objective.
-Conrad de Aenlle



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