May 9, 2013
What is the difference between a load managed mutual fund, a no-load managed mutual fund, and a no-load index mutual fund? Why should you care?
What is the difference between a load managed mutual fund, a no-load managed mutual fund, and a no-load index mutual fund? Why should you care?
A load managed mutual fund has commissions, whereas no-load managed mutual funds and no-load index mutual funds do not have commissions; load = commissions. While no-load managed mutual funds do not have any commissions, they do have fees. By buying no-load index mutual funds, you cut out commissions and fees, making your real return much higher than if you would have invested in load managed mutual funds or no-load managed mutual funds. I should care, because I plan on investing one day. It is good to know what to invest in to grow my money the wisest.
Well done, Katherine. Let’s recap. A load mutual fund (purchased through financial advisors, life insurance agents, etc.) has commissions and high fees. Strike that. A no-load managed mutual fund (purchased directly with the investment company as you bypass the salesmen) has no commissions, but generally high fees. Strike that. Finally, we have the no-load index mutual fund (mimic an index with very low turnover) with no commissions and very low fees. BINGO! Go to Vanguard.com to learn more.
Understanding your investment options not only improves your returns today, but returns your returns BIG TIME over long stretches of time as you eliminate most of the costs. All commissions and fees come out of your final return. Eliminate most of them and you will see your investments grow and grow and grow. You win!
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