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Load vs. No Load Funds
I understand the basic premise of the load vs. no load debate and can see the appeal of a no load fund. However, it seems that the mutual fund world is dominated by load funds and in the case of a strong performer it may be best to just bite the bullet and go with a good load fund.
My question for those that have more experience in this arena than I is: Would you consider a Front-end Sales Charge of 5.75% to be too high? Furthermore, how would you rate a Total Expense Ratio of 1.25% and a 12b-1 Ratio of 0.42%?
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On a similar note, does the sales charge apply to each transaction? For example, in the above case if I were contributing $5,000 I would pay 5.75% to the broker and the remaining $4,712.50 would apply to my purchase of fund shares -- this is on a one time basis correct? And the remaining expenses and fees (e.g. Total and 12b-1) would be withdrawn from my holdings in the fund on an annual basis?
Thank you in advance for your help in this matter.
You owe it to yourself to set aside 19 minutes to watch the following (pass it on):
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MCD, as a former salesman of front-load funds, I believe that, in most cases, no-load funds are the way to go.
I can justify my former life as a fund peddler by saying that most of the folks I talked to didn't have a clue about how to invest. By putting them into an appropriate fund [and, yes, I did try to do that] I helped them in their financial future and earned my cut of the front-end load.
That said, if you are at a point where you can ask the question, "Front-Load or No-Load, which is better?" then you are probably beyond what a fund peddler can do for you
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The NY Times had a good article on this subject today.
Here's a link.
For the entry level investor, however, I still believe a no load fund is best — especially if initial investment amounts are relatively small.
:? "Forecast what or when, but never both!" --anon.
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its really hard to find a no load mutual fund nowadays, if you can.. consider yourself lucky bu ttheyre pretty much going extinct. id rather recommend going into etf instead, you basically pay the regular commission charge and expenses are much lower.
5.75% is pretty high, the max i believe is 6.75%
the only thing is it really depends on how much youre willing to invest into a fund. most funds now will have a smaller load but will require a higher minimum investment. i've seen some with a 1% load but require $25,000 to get in
another thing to make note of is if a mf has no load, the broker can still charge you up to 5% commission. thats why most brokers, not all, who will recommend you a mf will normally make sure the load is over 4%
1.25% expense is standard
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