Q:

What is a no-load mutual fund?

A:

Quick Answer

A no-load mutual fund is a type of mutual fund that doesn´t charge a commission or sales fee when the initial investment is made, but may charge a fee if the units are redeemed early, normally in the first 5 years, according to Investopedia. A load fund is when a fee is charged by a financial adviser whose expertise in the market can greatly reduce the risks involved in an investment. Both have positive and negatives associated with them, but most agree that no-load funds are a good idea if the investor has the knowledge to research and put together a portfolio.

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Full Answer

While no-load funds don´t have sales tax and commissions built into them, there are a few different fees that can be associated with them. In addition to a charge for redeeming the shares, a no-load fund can charge for exchanging the shares to another fund within the same group and charge a purchase fee that is used to maintain the overall fund. Another fee can be charged to maintain an investor´s account when it falls below a set minimum dollar amount annually, according to the Securities and Exchange Commission. The difference between a purchase fee and those associated with a load fund is that the fees charged in the no-load purchase are paid directly into the fund and not to an adviser or broker.

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