Investing is a wonderful way to grow your money, but the terminology with it can scare some people. Just by taking 5 minutes, you can learn some useful information on mutual funds. It can go a long way on your retirement investing decisions. 

Today I’m going to look into loaded and no load mutual funds.

Plenty of magazine offer 'advice', but the best way to invest is to learn yourself.

 

What is a mutual fund?

Wikipedia describes it as:

mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocksbonds, short-term money market instruments, and/or other securities.

 

What is a loaded mutal fund?

It’s basically a mutual fund with an extra sales cost. If you have a front load mutual fund, you pay to buy into the fund. If you have a back load, you pay when you sell your fund. A no load fund may have administrative costs, but it is not supposed to have a sales cost.

Does a loaded mutal fund benefit me?

The load is a commission that has no real benefit for you. The Fool.com observed:

….that there is no real difference historically between the performance of load funds and no-load funds in terms of year-to-year performance. In fact, according to the latest survey by the mutual fund data analyzer Morningstar, even excluding the drag on returns if the load were included in the calculation, no-load funds actually have a superior record to load funds over the last 3-year and 5-year periods.

This fact is also confirmed on the U.S. Securities and Exchange Commission’s site.

How can a loaded mutual fund hinder me?

The money comes from you, so you’re the one losing out. If you have a 5.75% front load instead of investing $300 a month, you’re investing $284.25.

That might not sound like a lot, but it adds up over time. There is also no proven advantage into getting a loaded fund versus a no load fund with the same performance level. in fact, over 85% of mutual funds don’t beat the market

Where can I find a no load mutual fund?

I would start off looking at Yahoo Finance Fund Screener to see what options are available.

Some brokerages you may want to look at include:

Investing doesn’t have to be as complicated as people make it out to be. You just have to take some time to understand the terms that brokers and investors use.

The more educated you are, the less likely you’ll get ripped off.

Some more information on mutual funds:

Photo Credit: theLastMinute