A load mutual fund charges you a sales charge or commission for the shares purchased. This charge could be a percentage of the amount you are investing in, or it can be a flat fee, depending on the mutual fund provider.
The fee goes to compensate a sales intermediary, such as a broker, financial planner, or investment advisor, for their time and expertise in selecting an appropriate fund for the investor. There are different types of load an investor may encounter. Loads are only one of the fees which may impact the investor of a mutual fund.
Some loads will be paid from the assets of the mutual fund and will reduce the returns that will be distributed to the investor. A no-load mutual fund means there will not be a sales charge when the investor buys the shares or when they sell their shares. However, this does not mean that absolutely no fee will be charged. While these funds do not charge a front or backload sales fee, they may make it up by charging other fees.
The management firm will pay any charges based on the fund's daily net asset value NAV from the no-load mutual fund's assets. This method of payment impacts the investor when they receive a smaller distribution. Also, there may be limitations on the redemption of no-load shares. Shares in a no-load fund can be sold or redeemed only after a specific period. Those sold early will incur a fee—but if you are a long-term investor, there is no need to worry.
No-load funds are often sold through an investment company, rather than through a third-party sales firm. However, some companies, such as banks or broker-dealers, may charge their own fees for handling the transactions of third-party mutual funds. Most people recommend trying to avoid load funds altogether. Many studies have shown both types of mutual funds offer the same return, but load funds charge you a commission fee.
Proponents of no-load funds say that the commission may seem like a small, one-time fee, but the loss of compounded returns over the years can be substantial. Still, others make a case for load funds based on personal relationships or other convenience factors. For Class A shares, you pay most of your fees up front. That might sound like a lot to pay right off the bat. However, Class A shares usually have the lowest ongoing expenses and pay off in the long run. And on top of that , they have a back-end load—called a contingent deferred sales charge CDSC —if you sell your shares before an agreed-upon period of time, usually five years or so.
However, Class C shares do carry the highest ongoing expenses of the three classes. But no-load funds might have fees and ongoing expenses that will cost you later on. You might be looking at that list and thinking to yourself, No commission or sales charge? The no-load funds must be the cheaper option, right?
Not so fast! What people usually forget with no-load funds is that they come with plenty of ongoing fees that add up, which could make them more expensive than loaded funds.
If you owned Class A or B shares instead, you might have much lower ongoing fees. So if you plan on holding on to your mutual funds for decades, it could be cheaper to avoid no-load funds. Many no-load mutual funds also charge fees that are not sales loads, such as redemption fees, exchange fees and account fees. American Funds has traditionally offered load funds Class A, C and now T shares , but has more recently started offering no-load versions of our funds although third-party advisors will still charge clients fees.
In , American Funds launched the F-1 share class, which has no load, and in , we launched the F-2 share class, which has no load or 12b-1 fees. In , we launched the F-3 share class, which has no load, no sub-transfer agency fees or 12b-1 fees. Annual asset-based fee charged by financial professional; while Class F-1 shares have a 12b-1 fee, Class F-2 shares do not; Class F-3 shares do not have 12b-1 or sub-transfer agency fees.
Maximum loads are 2. Our funds, which have multiple share class options, are designed to fit most investment goals, time horizons and other key considerations. Unlike many providers, American Funds are not sold directly to investors; rather, investors must purchase them through a broker, financial advisor or other intermediary or plan sponsor. Our funds are distributed through financial professionals because we believe that all investors benefit from ongoing professional advice.
We recognize, though, that investors have different preferences for paying for that advice. No matter which share class they choose, American Funds annual expenses are among the lowest for comparable funds in the same share class, according to Lipper.
We recommend investors work with a financial advisor to determine which share class to own, how long they expect to own the shares, their investment objectives, how much they plan to invest and the expenses associated with each share class. Practically all load funds charge annual distribution fees, also referred to as 12b-1 fees, which may be used to pay for marketing, promotional and service costs.
These costs can range from 0. Some no-load funds also charge 12b-1 fees up to 0. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value. Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses , which can be obtained from a financial professional and should be read carefully before investing.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice. My Accounts. View Portfolio. Who are you? Select another location. DE EN Wer bist du? EN FR Who are you? Particuliers Conseillers financiers Institutions et consultants. Robo-advisors clearly state management fees on their websites.
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Investment fee calculator. More about these investment expenses. Annual fees. Inactivity fees. Research and data subscriptions. Trading platform fees. Paper statement fees. Account closing or transfer fees. Stock trading fee. Mutual fund transaction fee. Expense ratios. Sales load. Loads are charged in several ways:. Management or advisory fees. On a similar note Dive even deeper in Investing.
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