What is the difference between a load fund and a no load fund?

Asked By: Noeli Diekena | Last Updated: 23rd June, 2020
Category: personal finance mutual funds
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Load funds are mutual funds that charge a sales fee or commission. No-load funds usually do not charge any sales fee or commission, as long as you keep your money invested for a specified period, often five years.

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Likewise, people ask, what is the difference between a load and no load mutual fund?

A mutual fund load is a fee charged for the purchase or sale of a mutual fund. Funds that charge loads are generally referred to as "load funds" and funds that do not charge loads are called "no-load funds."

Subsequently, question is, what share class is a no load fund? Mutual funds that do not charge loads are known as no-load mutual funds. Some share classes of funds may easily be confused with no-load mutual funds. Typically, class B shares and class C shares do not charge a front-end load.

Beside above, what is a load or no load fund?

A no-load fund is a mutual fund in which shares are sold without a commission or sales charge. This absence of fees occurs because the shares are distributed directly by the investment company, instead of going through a secondary party.

Are no load mutual funds good?

Despite the fees and, by extension, the inferior returns, load funds can still be a good investment for inexperienced or very busy investors. Ultimately, it will be for you to decide whether the services you receive are valuable enough to justify giving up the higher returns of a no-load mutual fund.

35 Related Question Answers Found

Are Load Funds Worth It?

The load itself really isn't bad, but paying the load is bad. Mutual fund companies make money from ongoing management expenses, whether it's a no-load or load fund. While some things are worth paying more for, loads are completely unnecessary when it comes to buying a mutual fund.

What are the best no load mutual funds?

The Best No-Load Mutual Fund Companies
  • Vanguard Group, Inc: The Low-Cost Index Master.
  • Fidelity Investments: The Big Retirement Services Company.
  • T. Rowe Price: Solid Alternative to the Giants.
  • Charles Schwab: Discount Broker, All-in-One Fund Company.
  • How to Research and Find the Best No-Load Funds.

Can I buy American funds without a broker?

The F1 share class of all American funds is now available commission-free on the Fidelity and Schwab online brokerage sites. Presumably, American will eventually offer its funds through other discount brokerages. This is a big deal. The American funds offer a wide lineup of good funds.

What is an disadvantage of buying a no load fund?

He suggested that in a declining market, no-load funds were more subject to withdrawals (no costs to bail out for the panicky investor). As a result, the fund would need to sell assets into the declining market in order to have cash for those redeeming. So as a result, they would do worse than the market as a whole.

What is the advantage of buying a load fund?

Advantages of Load Funds. Although load funds charge a commission, they are still preferred by some investors over no-load funds. Investors pay a commission to the financial intermediary that conducts research on the most appropriate mutual fund to invest in and makes an investment decision on behalf of the client.

Can I buy mutual funds without a broker?

How to Buy Mutual Funds without a Broker? One can invest in mutual funds through online and offline mode. The popular modes of investing in mutual funds are demat and trading account, through a bank, online portals like Upwardly, independent financial advisors and directly with the AMC.

Should I buy Class A or C shares?

This benefits the investor because Class A shares have lower annual expense ratios than Class B shares. Class C mutual fund shares are best for investors who have a short time horizon and plan on redeeming their shares soon. Investors cannot convert Class C shares to Class A shares, which have lower expense ratios.

How do no load mutual funds make money?

How does a no-load fund make money? A no-load mutual fund does not have a sales charge, called a "load" in investment jargon, but that does not mean it has no fees. Investors who use a fee-based financial adviser to purchase no-load funds may also see a fee based on total assets invested.

What are load fees?

A load is a sales charge or commission charged to an investor when buying or redeeming shares in a mutual fund. They are determined by the mutual fund company and charged by mutual fund intermediaries in mutual fund transactions.

What is the most common type of load?

Quadratic torque
Quadratic torque is the most common load type.

What is a good expense ratio?

An expense ratio is the amount companies charge investors to manage a mutual fund or exchange-traded fund. A good low expense ratio is generally considered to be around 0.5% to 0.75% for an actively managed portfolio, while an expense ratio greater than 1.5% is considered high.

What is a load percentage?

Definition of a load
Load funds exhibit a "Sales Load" with a percentage charge levied on purchase or sale of shares. A load is a type of commission. Depending on the type of load a mutual fund exhibits, charges may be incurred at time of purchase, time of sale, or a mix of both.

Are C shares no load funds?

Other mutual fund share classes come with 12b-1 fees too but to different degrees. Unlike A-shares, class C shares do not have front-end loads, but they often carry small back-end loads, officially known as a contingent deferred sales charge (CDSC), just as class B shares carry.

What is a deferred load?

Deferred Load. This is also known as a back-end sales charge and is imposed when an investor redeems shares. The percentage charged generally declines the longer shares are held. This charge, often coupled with 12b-1 fees, commonly serves as an alternative to a traditional front-end load.

What is an upfront sales load?

A front-end load is a sales charge or commission that an investor pays "upfront"—that is, upon purchase of the asset. The percentage paid for the front-end load varies among investment companies but typically falls within a range of 3.75% to 5.75%.

Which is better front end load or back end load?

A front-end load means the fee (generally between 3% and 6% of the investment, or sometimes a flat fee, depending on the provider) is charged upon purchase of the mutual fund. A back-end load, also known as a contingent deferred sales charge, means the fee is charged when an investor redeems the mutual fund.

Is Vanguard a no load fund?

In most cases, investors buy no-load funds directly from the issuing investment company or a large investment firm like Fidelity, Schwab or Vanguard. This total stock market fund owns nearly 3,600 stocks from the large-, mid-, and small-cap universe. The fund closely tracks the CRSP US Total Market Index.