Load vs No-Load Funds.
In plain English
A load is a sales charge, basically a commission, attached to buying or selling shares of some mutual funds. A front-end load is taken out when you buy, a back-end load is taken when you sell, and both reduce the amount of your money that actually goes to work. A no-load fund charges no sales commission at all, though it still has ongoing operating costs measured by its expense ratio. The difference matters most because a load is paid on top of those yearly expenses, not instead of them.
01Why it matters
A sales load comes straight off the top of your investment, so a few percent lost on day one is money that never gets the chance to grow for decades.
02The math, step by step
You invest $10,000 in a fund with a 5% front-end load. The load is $500, so only $9,500 is actually invested. In a no-load fund, the full $10,000 goes in. Over 30 years at a 7% average return, that missing $500 would have grown to roughly $3,800, money you gave up before you even started.
03What this is NOT
A load is a one-time sales commission on buying or selling. The expense ratio is a separate yearly operating cost that every fund charges, load or no-load. A no-load fund is not a free fund.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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