A Pinchy Tutorial: Learn About Mutual Funds - The Difference Between a Load and a No-Load Mutual Fund

When you are trying to decide what mutual fund to invest in, you need to understand the difference between a load and a no-load mutual fund.

Here's what you need to know:

A "load" is a sales commission on the money you invest. A load mutual fund is one that charges you that commission on money that you invest in the mutual fund. This can be up to 8.5 percent of your investment.

A "no-load" fund does not charge a sales commission. It may charge other fees, which you can identify, but it does not charge a sales commission.

The big problem with a load mutual fund is that you pay that fee upfront. So when you invest your $1000, if the load is 8.5%, you immediately lose $85.00 to the fees. That's a big chunk of your money that is NOT working for you.

So why would anybody pay a load? Maybe you think a load mutual fund is better managed and so it will make you more money. That is not necessarily true. And in fact, the load mutual fund must perform better to make you the same return, as you have less money invested. This can be a huge difference over time.

So when you are figuring out where you want to invest your hard-earned money, look at no-load funds, look at low management fees, check the fund manager's track record as well as checking the fund's track record, and always be sure to read the prospectus!