Whats the difference between a load fund and a no-load fund? Does it affect my investment return?
Load funds charge a sales fee, or load. No-load funds, such as Vanguard funds, don’t charge a sales fee. Front-end loads are charged at the time of purchase and can be as high as 8.5% of your initial investment amount. For example, a front-end load of 4% would lop $4,000 off an investment of $100,000, so only $96,000 would be put to work for you. Some funds charge a back-end load, also known as a contingent deferred sales charge, which is applied when investors sell their shares. This load typically declines the longer shares are held and eventually disappears. Both load and no-load funds may defray their marketing and distribution expenses—including commissions paid to salespeople—through 12b-1 fees. These fees are included in fund operating expenses, which are deducted from a fund’s returns each year. You can find a fund’s 12b-1 fees by checking the fee table in a fund’s prospectus. Vanguard funds have no 12b-1 fees. Because sales fees and expenses directly reduce net investment retu
