Should You Go with No Load Mutual Funds

Posted by Mr. Hachis | On: Nov 30 2012

If you've ever done any Internet research for information on mutual funds, no doubt, you have come across how people talk about no-load mutual funds and how they are generally superior to the ones that do have load. When it's a no-load fund, you go with a fund that allows you to do away with all the expertise that mutual funds often offer you a very high price.

Most times the investment articles that promote no-load mutual funds, usually go by reasons that are pretty simple. They don't really tell you much more than to bring up how those fees are atrocious and you should do whatever you can to avoid them, and how the performance is usually pretty decent too. What we need to do though, is to look a bit deeper.

The truth is that a while no-load mutual funds may be a bit cheaper, they may not be good investments.

Now you're probably wondering – if no-load mutual funds do perform well, what could be the problem?

Actually, there is plenty of evidence out there that shows that even in their difficult financial periods, no-load mutual funds usually do perform far better. For instance, between 2000 and 2002, major stocks fell by a third. The actually fell by more than 30%.

During the same time, no-load mutual funds did better than the regular ones by several percentage points.

So the question is – why on earth would anyone want to buy a load mutual fund? There are reasons. Many people feel, and justifiably so, that to just put their investments on autopilot without responsible manager overseeing them, is just asking for trouble. No matter what and the markets they have done in the past, they don't feel it's a good idea to drive blindfolded.

If you have a manager for your mutual fund, it's likely that. You should you make a rash decision to sell just because the markets seem to be heading down for a short spell.

In general, load funds are excellent investment opportunities for people who have little experience investing their money, and who need the assurance of a properly managed fund. For everyone else though, no-load mutual funds baby the best way to go forward.

Why, jokingly, some people say that people only choose to invest with load mutual funds anymore because in the event that something should go wrong, they desperately need someone to blame.

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