The Load
When investing, you should NEVER pay a load. What is this thing called a load, how many types are there and how can you avoid them?
When investing, you should NEVER pay a load. What is this thing called a load, how many types are there and how can you avoid them?
A load is a commission that is paid to a salesperson or as I like to call him, your “guy.” A class A load cost you up front (usually 5.75% before your money is invested), a class B load cost you in the rear (might start out at 10% and then reduce by 1 or 2% per year over time), finally, a class C load cost you the whole time you own the fund (usually 1% added on top of the yearly expense ratio). Loads do nothing but reduce your return over time (while increasing the pocketbook of your guy of course).
You avoid paying a load by going around your guy. That means avoiding salespeople who are not the experts you might think they are. Conflicts of interest abound and that means you should go around them as you buy no-load index mutual funds at a place called Vanguard. You will pay no loads and very low yearly fees (called the expense ratio). A good place to start would be the Total Stock Market Index Fund or a Target Retirement Fund (pick a number that fits your estimated retirement date) that owns index funds. Higher returns to follow!