Benefits of No-Load Funds

By: Samantha Asher
Have you ever heard the phrase, "there's no free lunch"? It's a pretty disappointing phrase because it means everything you ever want, need, and get will come at a cost. If you've ever invested in stock or other type of investment, you had to pay a commission or other type of fee. You might look at investing as free money, but it's not true. You pay for it with your time and work researching, and the commissions and fees you pay.

Mutual funds are a type of investment. You pool your money in with the money of other investments and a fund manager buys all different stocks for you. Sometimes you have to pay for these funds. You pay a percentage commission up front, or later on. In this case, you have to pay. With no-load mutual funds, you will come the closest to free money. No-load means you don't have to pay any commissions or fees.

Without the fees you would normally have to pay, you are able save money and put more into your investments. The more money you invest, the more money you will make because you have more money collecting interest or capital gains. With investing, you put your money to work for you. If you invest more, your more will earn more. With no-load funds, you get to put all the money you invest to work.

As I mentioned, another way that investments cost you is through time and effort. If you are buying stocks and bonds, you have to research the company you are buying shares of stock from. If you just invest in a company that you blindly pick from the newspaper, you are greatly increasing the risk of your investment. Also, when you invest yourself, you need to spend time and have to knowledge to know how to effectively diversify your stocks. This is time you could be spending with family and friends, spend helping others, or doing whatever you want. Our time is very valuable.

When you invest in mutual funds, your fund manager chooses the stocks for you. They research the firms, put in their time, and use their expertise to effectively diversify your portfolio. The only time you have to spend is choosing the mutual fund. This is usually a one time thing because you don't need to continue to diversify your portfolio as your fund manager is.

If you want to spend a lot of money on fees and commission for loaded funds, you can, but it's likely they won't earn that much more money and they might even earn you less after the fees. If you are interested in having a well diversified portfolio that is very easy and cheap, get a mutual fund.