The first quarter of 2010 has brought a revolutionary investment situation. More and more investment firms are adding their top of the line and formerly load funds into the array of no load mutual funds. Investors sprang forward to this exciting opportunity with more glee than a happy puppy. This seemed like a too good to be true scenario, and, in many cases it was. The result was the fact that the costs associated with these no load funds were actually there, but rearranged in a different manner. So do true no load mutual funds exist?
There are actually three types of mutual funds: one hundred percent no load (no fees associated), no load mutual funds with management or distribution fees (usually an annual cost) and load mutual funds (up front, back end and or additional fees). In searching for the one hundred percent no load mutual funds you must make sure that there are indeed no fees associated with the price.
The title of no load mutual funds is a bit misleading. While there are indeed no load fees, there are also no free lunches. Every mutual fund listed as a no load has some kind of an associated charge. In the one hundred percent no load, this only means there aren’t any upfront or back end load charges. You will have to understand that there will be some kind of a charge, somewhere. Usually it is a percentage charge. It ranges from .18% to .25% at the current time.
There are other situations that must be taken into consideration on a true no load mutual fund. Automatic reinvesting without associated fees is a major one. You may not have an initial fee, but you have to make sure there are no sales fees charged if the fund is automatically reinvested. This information should be part of the disclosure when you are making your investment.
If you are not as experienced in the investment world, you might work with an investment advisor that will use no load funds in exchange for an annual or per consultation fee. This might be a wise choice for you since the advisor doesn’t have any particular interest or reason for recommending a particular fund for investment.
Something very few people think about, but a topic that should be added to the cost of no load mutual funds is the cost of your time. If you are spending every waking moment pouring over investment sheets, doing on line research and waking up in the middle of the night to see what fund is doing better, you are investing your time and that, my friend, is money. While this may be a fun exercise or you might even consider it a hobby, the cost of your time needs to be added to the overall expense of the no load mutual funds.
So do true no load mutual funds exist? The answer is no. There is always some kind of price tag associated with a no load fund. The decision on what level of price tag you are willing to pay is all up to you. There are no load funds with low costs that should be part of your investment consideration.
