No-Load Mutual Fund Guide

Mutual funds collect money from many different investors, and then place that money under the control of a fund manager who purchases investments based on the objective of that fund. Some funds charge a percentage, or load, on money that you invest, that is used to pay a broker or other agent who sells the fund. A no-load mutual fund does not charge such a percentage fee to pay a commission.

Self-selecting

When investing in no-load mutual funds, you may have to do more of your own research and select the funds that you wish to invest in. Where no-load funds do not involve a sales professional who can help you make decisions, you need to educate yourself as to what your investment philosophies are and find the funds that meet your criteria.

Fee-based Financial Advisor

If you are not comfortable selecting your mutual funds on your own, you can employ a fee-based financial planner to help you choose your no-load fund investments. Advisors are available with many different skill and experience levels, and anyone can call himself a financial advisor. Fee-based advisors may charge per hour or by a percentage of the total amount you are investing and may offer other services as well.

Family of Funds

Many no-load mutual fund companies offer many different mutual funds with different investment philosophies and objectives within their company, also called a family of funds. With many of these companies, you can move your investments between the different funds in the family with a modest fee, or in many cases no fees. You may incur capital gains taxes by selling shares in certain funds when transferring money.

Expenses

Even without the sales load, no-load mutual funds of any type have expenses. These are reported as a percentage of the total assets, and pay for items such as the salary for any of the fund managers or administrative expenses. In addition, some funds tend to trade more heavily than others, which means that these funds will pay more in fees related to trading securities.

Other Fees

Some no-load mutual funds charge a sales fee, which is a percentage of the initial investment, but instead of being paid as a commission, the money is retained by the fund company to cover sales-related expenses. Also, no-load funds can charge fees called 12b-1 fees. These fees are charged as a percentage of the assets of the fund, and may also be used to pay brokers who sell the funds, as well as to cover the cost of advertising and marketing.