Load and no-load funds are the two types of mutual funds differentiated based on the fees charged by the mutual fund company.
A load fund charges a sales commission or fee, which is typically a percentage of the amount invested in the fund. This fee is paid to the mutual fund company or the investment advisor who sells the fund. Load funds can be classified as front-end, back-end, or level-load based on when the fees are charged.
- Front-end Load Funds: A front-end load fund charges a commission or fee at the time of purchase. The commission charged can be a percentage of the investment amount or a fixed fee.
- Back-end Load Funds: A back-end load fund charges a commission or fee when the investor sells or redeems the fund units. The commission is typically a percentage of the redemption value and may decrease over time.
- Level-load Funds: Level-load funds charge a uniform commission or fee throughout the investment period. The commission charged is typically lower than that charged by front-end load funds.
On the other hand, a no-load fund does not charge a sales commission or fee. The investors can buy or sell the fund units without paying any commission or fee to the mutual fund company. The expenses of a no-load fund are typically lower than that of a load fund. No-load funds can be purchased directly from the mutual fund company or through a broker.
Investors need to consider the fees, expenses, and the investment goals while choosing between load and no-load funds. A load fund may be suitable for investors who are looking for investment advice or need help in selecting the right fund. No-load funds may be suitable for investors who prefer to invest on their own and want to save on commission or fees.