No-Load Fund

AAA

DEFINITION of 'No-Load Fund'

A mutual fund in which shares are sold without a commission or sales charge. The reason for this is that the shares are distributed directly by the investment company, instead of going through a secondary party. This is the opposite of a load fund, which charges a commission at the time of the fund's purchase, at the time of its sale, or as a "level-load" for as long as the investor holds the fund.

INVESTOPEDIA EXPLAINS 'No-Load Fund'

Because there is no transaction cost to purchase a no-load fund, all of the money invested is working for the investor. For example, if you purchase $10,000 worth of a no-load mutual fund, all $10,000 will be invested into the fund. On the other hand, if you buy a load fund that charges a front-end load (sales commission) of 5%, the amount actually invested in the fund is only $9,500. If the load is back-ended, when shares of the fund are sold, the $500 sales commission comes out of the proceeds. If the level-load (12b-1 fee) is 1%, your fund balance will be charged $100 annually for as long as you own the fund.

The justification for a load fund is that investors are compensating a sales intermediary (broker, financial planner, investment advisor, etc.) for his or her time and expertise in selecting an appropriate fund.

It should be noted that research shows that load funds don't outperform no-load funds.

RELATED TERMS
  1. Gross Expense Ratio - GER

    The total percentage of a mutual fund's assets that are devoted ...
  2. Load-Adjusted Return

    A load-adjusted return is how much of a return an investor actually ...
  3. No-Load Life Insurance

    A type of life insurance that charges much lower fees and expenses ...
  4. Growth Fund

    A diversified portfolio of stocks that has capital appreciation ...
  5. Front-End Load

    A commission or sales charge applied at the time of the initial ...
  6. Load Fund

    A mutual fund that comes with a sales charge or commission. The ...
Related Articles
  1. Fundamental Analysis

    Interpreting A Company's IPO Prospectus Report

    Learn to decipher the secret language of the IPO prospectus report - it can tell you a lot about a company's future.
  2. Mutual Funds & ETFs

    How To Pick A Good Mutual Fund

    Learn how to evaluate mutual funds and find the right one for you.
  3. Mutual Funds & ETFs

    Dollar-Cost Averaging With ETFs

    If you are investing small amounts regularly into an exchange-traded fund, be sure to do it right.
  4. Mutual Funds & ETFs

    Mutual Funds Are Awesome - Except When They're Not

    This investment is very popular, but that doesn't mean it comes without risk.
  5. Mutual Funds & ETFs

    The Lowdown On No-Load Mutual Funds

    These funds let you cut out the middleman - and the fees.
  6. Retirement

    Turnover Ratios Weak Indicator Of Fund Quality

    This indicator is not as important as some investors might think.
  7. Mutual Funds & ETFs

    Mutual Fund Basics Tutorial

    Learn about the basics - and the pitfalls - of investing in mutual funds.
  8. Mutual Funds & ETFs

    These Oil ETFs Offer Cheap, Easy Access

    Interested in investing in oil and the companies that extract and refine it? Here's a list of ETFs. Just be wary of fees.
  9. Mutual Funds & ETFs

    Why Monthly Dividend ETFs are Good for Everyone

    Monthly dividend ETFs can help ease the financial stress on investors of all ages. Here are a few fund names for you to consider.
  10. Professionals

    Why Investors Need to Rebalance Their Portfolios

    The best way to explain why one should rebalance their portfolio is to show what could go wrong if one doesn't.

You May Also Like

Hot Definitions
  1. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  2. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  3. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  5. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  6. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
Trading Center