Loading the player...

What is a 'No-Load Fund'

A no-load fund is a mutual fund in which shares are sold without a commission or sales charge. This occurs because 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.

BREAKING DOWN '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 an investor purchases $10,000 worth of a no-load mutual fund, all $10,000 will be invested into the fund. On the other hand, if the person buys 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 fund holds a contingent deferred sales charge (CDSC), the $500 sales commission, which declines annually, comes out of the proceeds when shares of the fund are sold. If the level-load (12b-1 fee) is 1%, the fund balance is charged $100 annually for as long as the investor owns the fund.

The justification for a load fund is that investors are compensating a sales intermediary such as a broker, financial planner, investment advisor or other professional for his time and expertise in selecting an appropriate fund. Research shows, however, that load funds don't outperform no-load funds.

Vanguard

The largest purveyor of no-load mutual funds is The Vanguard Group. Located in Malvern, Pennsylvania, and managing $3 trillion in global assets, the company offers investors 127 mutual funds from which to choose. The do-it-yourself investor who eschews financial advisors and their commission structures can select from a variety of asset classes, ranging from ultra-conservative money market funds to riskier portfolios such as the Explorer fund. The Explorer fund invests in small-cap stocks that have annually returned 8.94% since inception on Dec. 11, 1967, through June 30, 2016.

T. Rowe Price

T. Rowe Price was founded in 1937 and offers one of the oldest no-load mutual funds in existence. Beginning operations in 1939, the company’s Balanced Fund charges no up-front or back-end sales charges while maintaining an expense ratio of 0.68% as of Dec. 31, 2015. Receiving an overall four-star rating from Morningstar, the fund appeals to moderate investors who avoid sales loads and seek to put every dollar invested to work. Through the life of the portfolio, the $4 billion Balanced Fund has averaged an annual return of 9.50%.

RELATED TERMS
  1. Mutual Fund

    Mutual funds combine money from many investors to invest in a ...
  2. Front-End Load

    A front-end load is a charge that an investment fund requires ...
  3. Load-Adjusted Return

    A load-adjusted return is the investment return on a mutual fund ...
  4. Service Shares

    Service shares are shares of a mutual fund that charge an extra ...
  5. Sales Charge

    A sales charge is a commission paid by an investor on his or ...
  6. Load-Waived Funds

    Load-waived funds are a share class of a mutual fund that waives ...
Related Articles
  1. Investing

    The Lowdown on No-Load Mutual Funds

    No-load mutual funds let you cut out the middleman—and the fees.
  2. Investing

    No Load Vs. Index Fund: Is One Better Than the Other?

    Find out how no-load funds, index mutual funds and ETFs can help investors boost returns just by cutting down on expenses and sales charges.
  3. Investing

    How to Pick a Good Mutual Fund

    Learn the basics of investing in mutual funds, including how to establish your goals and risk tolerance and choose the type of fund that's best suited to meet your needs.
  4. Investing

    A Guide For Picking Long Term Mutual Funds

    Learn about considerations for investors when buying shares in a mutual fund for a long-term investment, including fees, type of management and portfolio goals.
  5. Investing

    Consider These Fees When Evaluating Mutual Funds

    The best way to evaluate a mutual fund is by digging a bit deeper into the fees charged.
  6. Investing

    American Funds Vs. The Vanguard Group

    Differences between two of the largest mutual fund families, American Funds and Vanguard Funds. Discover how the two companies returns match up.
  7. Retirement

    7 Reasons to Yank a Mutual Fund from Your 401(k)

    Not all mutual funds are created equal. Here are some practical tips for recognizing – and ditching– low-value mutual funds that might be in your 401(k).
RELATED FAQS
  1. Does OptionsHouse have mutual funds?

    Learn about how investors can buy shares in mutual funds through OptionsHouse. Read how investors need to call the brokerage ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but ...
  2. Portfolio

    A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, also their mutual, exchange-traded ...
  3. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  4. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  5. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  6. Current Assets

    Current assets is a balance sheet item that represents the value of all assets that can reasonably expected to be converted ...
Trading Center