| A load is simply a charge for buying (or | | | | with running the funds and are deducted directly |
| sometimes for selling) shares in a mutual fund. | | | | from the assets of the fund. They can include |
| That chunk of money, which can go as high as | | | | management fees to compensate the fund |
| 8.5 percent, will come straight out of your | | | | managers, a distribution fee (also called a 12b-1 |
| investment, with all or part of it going to the | | | | fee) for marketing expenses, and other fees to |
| broker or advisor who sold you the fund. | | | | cover shareholder services, such as mailings and |
| "When I first began investing I needed advice and | | | | the fund's toll-free phone service. |
| paid for it by buying funds with loads. It always | | | | The expense ratio is the total of all the operating |
| took a while for a fund to make up for the cost | | | | expenses, expressed as a percentage of the |
| of the load." --DSB "I've bought both load and no | | | | fund's total assets. |
| load funds. The loads are well worth it for the | | | | Low-cost index funds might have expense ratios |
| advice I get because I cannot afford to pay an | | | | as low as .2 percent, while a high-cost actively |
| advisor an hourly fee." --Jennifer W. | | | | managed fund might have an expense ratio as |
| "I have never bought a load fund because I want | | | | high as 2.5 percent. |
| to keep 100 percent of my money working for | | | | At first glance, it may be easy to brush off a |
| me. The catch with no-load funds is that you | | | | higher-than-average expense ratio, but don't |
| have to do the work." --Forrest H. | | | | underestimate the difference it can make. For |
| Be sure you're clear about what you're actually | | | | example, let's say you invest $10,000 for ten |
| paying for when you pay a load. | | | | years and get annual returns of nine percent |
| It is not to get a fund with a superior | | | | before expenses. If this money is in a fund with |
| return-there is no evidence that load funds | | | | an expense ratio of 1.8 percent, your money will |
| perform any better than no-load funds. Rather, | | | | grow to $19,741. If the money is in a fund with |
| you're paying for assistance in selecting the fund. | | | | an expense ratio of just .4 percent, however, |
| With thousands of no-load funds to choose from, | | | | your investment will grow to about $3,000 more, |
| I personally see no reason to ever pay a load for | | | | or $22,744. |
| a fund, unless you absolutely must rely on a | | | | To compare fees between different funds, read |
| commission-based advisor. | | | | each fund's prospectus. All fund prospectuses are |
| It's important to understand that all funds carry | | | | required to present a complete description of |
| some costs that lower your returns. Look at | | | | fees in standardized, easy-to-read tables. |
| these very carefully because a fund with high | | | | Also, the Securities and Exchange Commission has |
| costs has to perform better than a low-cost fund | | | | an excellent calculator that helps with expense |
| just to stay even. My quick guide will help you | | | | comparisons on its Web site at www.sec.gov. |
| understand the range of fund fees. | | | | THE BOTTOM LINE: Historically, load funds have |
| Shareholder expenses are paid for directly by | | | | no advantages over no-load funds when it comes |
| each investor in the fund. | | | | to investment performance. However, load |
| They can include sales charges (for load funds), | | | | charges may be a necessary evil when dealing |
| redemption fees when you sell shares, exchange | | | | with a financial advisor because that advisor |
| fees for transferring money from one fund to | | | | deserves to be paid for his or her time and |
| another, and annual account maintenance fees. | | | | expertise. |
| Operating expenses are all the costs associated | | | | |