By JLP | November 9, 2006
Have you ever looked at a comparison between a load mutual fund and a no-load mutual fund? I just put together an Excel spreadsheet with side-by-side comparison and the results are pretty significant. Take a look at the table, assuming the following:
5% Load on the Front-Load Fund
10% Gross Annual Rate of Return
1.25% Management Fees For Both Funds
0.25% 12b-1 Fee on the Load Fund (this goes to the firm and the broker each year)
There’s the numbers. Take them for what they’re worth. Keep in mind that some research has shown that mutual fund investors do better with an advisor (even after the loads) than they do on their own. Although this may be true, it can be overcome by practicing a little self-discipline and learning to stay the course rather than moving money in and out of different “hot” mutual funds.
Finally, keep in mind that you can find no-load mutual funds that are a lot cheaper than the ones I used in the example. I just used an average expense ratio for actively-managed mutual funds. If you go the index fund route, you can easily pay less than .25% per year in managment fees.
When it comes to mutual funds, you get what you don’t pay for!