What is a “no-load” mutual fund, and who gets the “load”?
The term “load” refers to the sales charges that are loaded on to the purchase price of some funds to compensate the broker for his or her services. “No-load” funds are those funds that are sold directly to investors, with no sales charges levied. With load funds, as much as 9%, is paid to the broker and brokerage firm, which is deducted from the investment amount. There are some funds that charge a “low- load” generally around 3%. Some funds also have multiple share classes with different load structures. Generally, the “Class A” shares carry an up-front sales charge. “Class B” shares generally have no up-front sales charge, but have a declining sales charge each year, generally starting at 5% and reducing to zero at the end of five years. “Class C” share carry an additional ongoing charge of 1% each year. In order to understand all the charges levied by funds, it is important to read the fund prospectus carefully, particularly the section labeled “fees and expenses.
