No Load Mutual Funds

The next time you're considering going out for dinner and a movie, you might want to reconsider how you spend that $100.  If you knew you could invest such a small amount in a mutual fund, would that make you want to spend your $100 differently?  If you've ever spent hours looking for a mutual fund you'd like to buy, and then found out the minimum investment was several thousand dollars over what you could afford to invest- you'll be happy and surprised to know that there are mutual funds that you can invest in for minimums as low as $100.

Instead of dealing with brokers that will allow you to make small investments in mutual funds with minimum transaction fees that seem to eat up most of your investment, you can invest directly with one of the low minimum mutual fund families.  Brokers are great when you have about $5000 to invest per fund, otherwise- your deposit is going to be eaten away by the broker minimum transaction fees. 

Why Buy No-Load Mutual Funds?

The term "load" as it pertains to mutual funds means a sales commission.  The sales commission (load) is paid to the mutual fund shares seller.  The money is not given to a person who handles the fund's assets or could otherwise consider the load as a reason to perform better. 

Statistics have shown that mutual funds with loads tend to do worse than no-load funds in performance calculations. Paying a load is unnecessary.  You can purchase mutual funds without paying a salesman commission- and it isn't going to make a difference in the outcome or performance of the funds you buy.  If you pay 5% of your investment as a load- you should consider that 5% of your money wasted!

If you do happen to find a mutual fund with a load that is performing really well, you are probably able to find a similar, no-load mutual fund that can be purchased cheaper.

When you purchase a mutual fund with a load, your total amount invested is actually reduced.  For example, if you are investing $10,000 in a 6% front-end load fund, the sales charge will be a full $600 and would result in your investment to the mutual fund being only $9,400.  No-load mutual funds allow the entire investment to be invested and compounded over the entire time period- where as a loaded mutual fund must first recover from the sales commission that causes a reduction in the actual investment.

Consider the effect of a load mutual fund commission over a period of 25 years.  By investing in a no-load mutual fund, let's say you avoid $1,000 commission.  Over 25 years, that $1,000 would be compounded at about 10%, and would be equal to $11,000!  Had you paid the $1,000 commission then, you would basically be paying $11,000 over 25 years in sales commission!