No Load Funds

• Mutual funds which engage in loan participation usually offers higher interest payments.
• Loan participation funds are backed by the company assets.
• Loan participation funds are considered better investments than junk bonds.

What is a loan participation fund? These funds make investments into loans that have interest rates which are higher than that commonly paid. These loans are made to solid companies which are stable and have been shown to be successful, but who have lower credit ratings for any of a number of reasons, including a short number of years in business, the industry the company is in, and many others. The loans that loan participation funds may make are not considered investment grade loans, but they are a better quality than junk bonds are because the assets of the company secure the loan from the mutual fund. Another benefit is that a loan participation fund has a higher interest rate than investment grade loans do, which means that they offer a better return and yield. A low credit rating does not mean a company is likely to default, sometimes a company may have only been in business for a few years, too short of a time to receive a great credit rating which would qualify them for a lower interest loan. The business may be highly successful and be ready to expand, but without the needed capital this is not possible.

Mutual funds which include loan participation in their investment portfolios can offer a terrific investment opportunity, but no load funds offer the best value. Load funds charge a load fee, which is like a broker or sales commission, and this fee can be charged in a number of ways. Front load fees come out of your investment capital before the money is invested, and this can be a significant expense over the life of your investments. Back load fees may be slightly better, because these fees are taken out when you sell your shares. This means that the entire time your investment is in the fund the entire amount of your capital is working for you, but you still pay a fee to have someone else decide where your money goes. Instead, choose no load funds and make your own investment decisions. This will ensure that your money is invested in mutual funds and other investments that are right for you, and not ones which may pay more to your broker in commissions.

Loan participation funds can be a good way to use your investment capital wisely, and earn a better return in the process. If a default happens on a loan, the assets of the company stand as collateral, which means the mutual fund can recoup any missed payments or outstanding balances. This offers a safety net that junk bonds and some other investments do not, so there may be fewer risks involved. A no load loan participation fund investment can earn you a higher yield, which means you can increase your investment capital faster thanks to the higher interest paid. Some investors may shy from these mutual funds, simply because they are not considered investment grade, but smart investors will thoroughly evaluate and research any mutual fund before putting their capital in. There are a number of high quality no load loan participation funds which offer a safer investment than a lot of stocks and bonds, as well as other mutual fund types. These are funds that you should consider, even if you decide not to add them to your investment portfolio. Without considering all of your options you are limiting them, and this can result in lower returns and a lower yield. Over a period of years this can add up to a substantial amount. Look at all of the available options for your investment capital, and you may find that loan participation funds are the best choice for your investing strategies and acceptable risk levels.