April 12, 2015 Admin | April 12, 2015 Far too many people pay a load when investing. What is a load? Why should you avoid it? How?
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Loads are like fees that you pay either at the begining, end, or over the life of your investment. However, you should be looking for ‘no load’ investment options because every time you pay one of these fees, you are reducing your return. Avoiding loads will greatly increase the amount of your money that you keep.
A load is a kind of commission on a sale. A load goes to pay the person who sold you the investment in question. A load does nothing for you and just takes away money from your return. A load can be 7% easily, which may take you a whole year of investing to make up for. There is no reason to pay a load on a investment. Investments with a load are most of the time more expensive than an investment of a similar nature. The holding company gives the sales man a large commission for selling products that make them the most money and not the investor. If you pay a load your overall returns will take a hit. If you buy no load index funds at a place like Vanguard you dont have to worry about paying the load.
A load is a sales charge or commission that is charged to an investor either up front (front end) or when the investor redeems their share of a mutual fund (back end). Loads are important to avoid when growing your wealth because the costs of loads affects your investments ability to compound over time. The less money in your investments, the more you miss out on opportunity cost which make a substantial difference in the long run. You can avoid them by avoiding the salesmen of the business and learn to invest for yourself into no-load index mutual funds, or by finding a “fee only” or “fee for service” financial planner who will assist in getting the no-load funds and customize a plan to your situation.
Nice job everyone. Let’s review.
(1) Paying a load (commission) is for the uninformed only. Once you become educated on the issue, you will see how ridiculous it is to pay someone money when you do not have to do it.
(2) Eliminating the middle man and his load will increase your returns over time. That means you go straight to your investments in your retirement plan and at a place like Vanguard.com as you buy no-load index mutual funds that diversify you all over the world at the lowest possible cost.
(3) Start today by making an investment in YOU. Read books written by John Bogle, William Bernstein, Burton Malkiel, Charles Ellis, Larry Swedroe, and Rick Ferri. Financial freedom may follow!