Isn’t it cheaper to buy no-load mutual funds because you don’t have to pay any fees?
It's a misconception that “no-load” means “no fees,” even though many no-load mutual funds maintain toll-free numbers for shareholders and produce elegant brochures. The cost for these services is paid by shareholders in fees. The “no-load” refers to the no-sales load or sales commissions.
It's a misconception that “no-load” means “no fees,” even though many no-load mutual funds maintain toll-free numbers for shareholders and produce elegant brochures. The cost for these services is paid by shareholders in fees. The “no-load” refers to the no-sales load or sales commissions.
Historically, no-load mutual fund shareholders tend to switch out of these funds more quickly than owners of “load” funds. This is because the sales charge acts as an incentive not to bail out at the first market downturn. No-load mutual funds have a much higher redemption rate than “load” mutual funds. When investors start to try to time the market, they usually penalize themselves by buying high and selling low.
Most investors are better off buying a mutual fund and holding it for the long-run, rather than redeeming it at a downturn and buying more at the upturn.
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