If you have been dealing with mutual funds for any length of time, you undoubtedly have faced the question of which is better: Load Funds or No Load Funds. If you are new to investing, "load" simply refers to the commission paid to the broker selling the fund. "No load" means there is no commission on the purchase or sale.
Most discussions in the past have centered exclusively on performance comparisons. Even rating services like Morningstar have occasionally chimed in with their opinion. However, rather than focusing only on performance, there are some other issues I consider far more important:
Who is selling load funds and why? Most load funds are being sold through brokerage houses, financial planners and Registered Representatives. With few exceptions, most of those folks operate on the basis of selling as much product as possible. They collect their commissions up front, as a back end charge, or both (usually in the range of 5 - 6%). Whether you make money or not is not their primary concern. What matters most to those operating under this approach is how often you buy-and thereby generate new commissions for them.
Who markets no load funds? No Load funds are either marketed directly by the mutual fund companies or, more commonly these days, offered through discount houses like Schwab, Fidelity, and many others. The advantage to this is that you have an unlimited choice of funds in one place and don't have to open separate accounts for each mutual fund family that you are considering.
Most fee based investment advisors, like myself, have independent relationships with such major discount firms and are able to offer clients just about any no load mutual fund available. They receive no compensation from the firm and only get paid by the client at a pre-determined fee arrangement. Under this arrangement, there is no hidden motivation to sell you a particular fund or to try and sell more in order to get a larger commission.
Which one is right for you? Whether you prefer dealing with someone selling load funds or an advisor getting you into no loads, let me make one thing very clear: You can make money or lose money either way! Why?
Let's assume for the moment that there is no difference in performance between the types of funds-some of either kind will do well and some of either kind won't. What then determines the successful outcome of you buying either a load or a no load fund?
The key is the advice you're getting. And the fact is that many brokerage houses and Registered Representatives tend to be more interested in their profits than yours. Their investment advice is generally centered around Buy and Hold or dollar cost averaging and similar financially questionable recommendations. Hardly ever will you receive advice about when and why you should exit the market, either because of accumulated profits or to limit your losses. Getting out of the market is simply not in their best interest, though it may be in yours.
I must confess that, as a fee based advisor, I am somewhat biased and I prefer no load funds for my clients. I believe that this type of arrangement is best for all parties involved. It allows me to avoid any conflict of interest and to work exclusively for my clients' financial benefit. And the better my clients do, the better I do.
I am able to choose no load funds and make buy decisions solely on the basis of my mutual fund trend tracking methodology. Following its signals, I can get clients into the market or out of it as often as is necessary to maximize profit or protect assets. And because I work with no load funds, other than a very occasional short term redemption fee, there are no transaction charges no matter how many times we move into or out of the market.
If market conditions dictate that we stand aside in a money market for an extended time in order to avoid a bear market (as was the case from 10/13/2000 to 4/28/2003), I can advise that because it is in the best interest of my client. I am always thinking about what will benefit my client, not worrying about lost commissions. (Please see my article "How we eluded the Bear in 2000" at http://www.successful-investment.com/articles12.htm.
Bottom line: Load fund vs. No Load mutual fund shouldn't be the issue. Having a methodical plan and reliable advice as to when to buy and when to sell is far more important and will help you to secure a prosperous financial future.
? by Ulli G. Niemann
About The Author
Ulli Niemann is an investment advisor and has written about methodical approaches to investing for over 10 years. He avoided the bear market of 2000 and has helped countless people make better investment decisions. Subscribe to his free newsletter: http://www.successful-investment.com/articles12.htm; http://www.successful-investment.com/articles12.htm
Chicago limo Skokie ..The following are a list of nine things you want... Read More
I made my very first investment in the stock market... Read More
Starbucks earnings are up again and so is their stock... Read More
We need a rabbit!This was a pretty horrible week for... Read More
You have heard about a particular mutual fund from a... Read More
Everything you invest in has risk so you want to... Read More
The date October 13, 2000 will forever be embedded in... Read More
∙ Make every investment in the stock market a long-term... Read More
I read a comment by a forum member on another... Read More
Most stock market traders have a favorite technical indicator.The one... Read More
As GuruFocus updates the stock buys and sells of gurus,... Read More
We all know that emotions control every decision that an... Read More
Duck! No I don't mean a quack, quack. I meant... Read More
There are so many kinds of work that needs to... Read More
"There is nothing more frightful than ignorance in action!" Johann... Read More
On November 17 I bought 7 different mutual funds and... Read More
Profitable day traders recognize that momentum trading is among the... Read More
Hedge current portfolio positions and gain access to capital resources... Read More
It looks like we have now entered a new bull... Read More
Day trading is all about making buy and sell decisions.... Read More
There are red lights, green lights, blue lights and spot... Read More
The recent criminal fiasco in the mutual fund industry is... Read More
Every day on CNBC-TV they show a 200-day moving average... Read More
I'll bet with almost anyone that has stocks or mutual... Read More
Because you don't feel too sure about which stock or... Read More
limo O'Hare Bonfield ..Well maybe that's overstating it a little, but it's certainly... Read More
Money: the most charged word in the planet. It means... Read More
You remember (they show it on TV every year) the... Read More
Having lived aboard a sailboat for 2 years I was... Read More
You have a lock on your house. You have a... Read More
During the day I watch CNBC-TV, the stock market channel.... Read More
Last time we looked at the real performance of the... Read More
I often hear from people, "I don't trade. I invest.... Read More
If you are serious about making and keeping money by... Read More
Ever jumped out of an airplane? It's OK if you... Read More
If you don't know what a Roth IRA is then... Read More
In my opinion, due to the volatility of stock market... Read More
As a novice trader, you'll often feel the need to... Read More
Just about now everyone is confused as to which way... Read More
You probably know the story of Sherlock Holmes and the... Read More
THERE'S SOMETHING TO BE SAID FOR standing firm in the... Read More
Mutual funds were created with the idea that one person... Read More
I continually hear from economists, talking heads, other market letter... Read More
Investors who exclusively use broadly diversified, no load mutual funds... Read More
"Buy and hold" is one of the most heralded investment... Read More
The thinking process of the brain relating to the... Read More
First let's see what protectionism is. According to Mr. Webster... Read More
Forget making a profit; instead focus on the income provided... Read More
The broker told me not to sell because the mutual... Read More
The Macedonian Stock Exchange (MSE) is not operating successfully. True,... Read More
Stocks & Mutual Fund |