Difference Between Load and No load Mutual Funds

A mutual fund can be defined as an investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments. It is the fund manager who manages the mutual fund and there are certain charges associated with mutual fund which are called load. A mutual fund can be a load or no-load mutual fund.

A load mutual fund is one which charges the investor investing in mutual fund purchase price for the shares/units purchased plus an initial sales fee. This charge is typically anywhere from 2% to 5% of the amount investor is investing or it can be a flat fee depending on the mutual fund provider. It can be of 2 types one is Back-end loads mutual fund in which fee is charged when an investor redeem the mutual fund and other is front-end load in which fee is charged when investor buys the mutual fund.
A no-load fund implies that an investor you can buy and redeem the mutual fund units/shares at any time without a commission or sales charge.

After looking above classification one can say that it is better to buy no load mutual fund and avoid load funds but it is not the case because many studies have shown that both types of mutual funds offer the same return.

0 comments… add one

Leave a Comment