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. Back-End Load

    A fee (sales charge or load) that investors pay when selling ...
  5. Exchange Privilege

    The opportunity given to mutual fund shareholders to exchange ...
  6. Balanced Fund

    A fund that combines a stock component, a bond component and, ...
RELATED FAQS
  1. Which commodities are the main input materials for the chemicals sector?

    Some of the most well-known no-load funds are the DoubleLine Total Return Bond Fund (DLTNX), Vanguard Short-Term Investment-Grade ... Read Full Answer >>
  2. How does a no-load fund make money?

    A no-load mutual fund does not have a sales charge, called a "load" in investment jargon, but that does not mean it has no ... Read Full Answer >>
  3. How can I check to see if an ETF’s price reflects its asset value?

    An investor can check the net asset value (NAV) for an exchange-traded fund (ETF) on the website for the ETF after the market ... Read Full Answer >>
  4. How does the risk of investing in the aerospace sector compare to the broader market?

    Investing in the aerospace sector is riskier than investing in the broader market. The most accurate measure of sector volatility, ... Read Full Answer >>
  5. How does a pension income drawdown work?

    While there are similar drawdown plans in the United States, a pension income drawdown plan most commonly refers to a specific ... Read Full Answer >>
  6. What is the most important section in an investment company's prospectus?

    It is important for investors to examine all information contained within an investment company’s prospectus. However, the ... Read Full Answer >>
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. Investing Basics

    Understanding Open-End Funds

    An open-end fund is a type of mutual fund that does not limit the amount of shares it issues, but issues as many shares as investors are willing to buy.
  9. Mutual Funds & ETFs

    Top 7 ETFs Designed for Retirement Income

    These seven ETFs offer several advantages over traditional ETFs, especially for investors seeking retirement income.
  10. Investing

    The Case For Stocks Today

    Last week, U.S. equities advanced with the S&P 500 Index notching new records. Investors are now getting nervous with rate and currency volatility spiking.

You May Also Like

Hot Definitions
  1. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  2. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  3. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  6. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
Trading Center