No Load Mutual Funds

There are many different mutual funds, thousands of them, in fact. Not only that, but there are dozens of types of mutual fund companies as well. Most of the different types of funds differ in what they invest in. For example, a general fund may invest in anything and a European fund may only invest in European companies or companies that are active in Europe.

Then there are sector funds that may only invest in mining stocks or green stocks or precious metals. There are also funds that track indexes: for example a FTSE 100 tracker fund, which would have in its portfolio all the stocks that are in the London Exchange top 100 and in the same ratios. There are also others that specialize in retirement plans.

Finally, another classification of mutual funds is in its charges: that is, how the fund makes charges for management and profit. These charges are called 'loads'. One interesting type of fund are the so-called 'no load mutual funds' and one of the best types of no load mutual funds are the 'index mutual funds'.

Index mutual funds were the first type of finance tool to bring in the concept of 'no load' to the benefit of the investor. No load mutual funds tend to perform better for the investor because they leave more assets in the pot from day one, which gives that money the chance to grow for the entire length of the investment plan.

One feature of most no load funds is that the investor deals directly with the investment company, which means that there are no broker's fees - no middlemen - to pay. The broker's fee could be very high, say, 10%-20% of a lump sum investment or a full year of monthly payments.

This money is split, often 50-50, between the investment company running the no load mutual fund and the investor. The investor's share goes back into his investment pot, which means that it will go on working for the entire length of the plan.

So, how does the investment company make its income? Well, it has its fee the same as it normally would have; the only one who loses is the broker and the only one who gains is the investor. The investment company gains nothing immediately, but it does in the long run How?

Well, another aspect of the investment company's fees is the annual management charge. This management charge is a percentage of the funds under management, so if your investment pot is bigger, so is their income.

There are also true no load mutual funds where all your money is invested from day one - every penny of it with no commission deducted at all. This is all well and good, but the investment company has to make money for itself somehow, so you will probably find that percentage rate for the annual management fees is higher.

If you are interested in investing in any kind of mutual fund, even the high performing no load mutual fund companies, take advice first from a professional financial adviser, but do your own research too.

Remember that a broker does not usually charge a fee for investment advice because the investment company that he recommends will pay him out of your investment money.

Therefore, if there is no commission he is not likely to recommend them and that includes no load mutual funds. If you need financial advice, it is best to pay for it by the hour and get good advice - nothing is for nothing and that goes double in the financial markets.