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There are some types of mutual funds that charge a load. All investors must clearly understand that a load is a sales commission that goes to the broker who has drawn you into investing in mutual funds and not as an incentive to the fund managers who manage your funds. The load usually amounts to 5 percent of the assets.
It is not that mutual funds with loads are comparatively much better than no-load funds. There are a large number of examples where no-load or low-load mutual funds are performing equally well or much better than the high-performing load mutual funds and can even be purchased at far cheaper rates.
In the case of mutual funds with loads, although the commission amount is quoted to be less, what actually happens is that the total amount being invested is reduced without the knowledge of the investor. For instance, if an investor puts in $10,000 for investment in a certain type of mutual funds with load, a 6 percent commission is charged as a result of which $600 goes into the pocket of the broker or seller of the fund and the remaining $9,400 is actually invested in the mutual fund market.
Another important factor to be considered here is the period of investment. In the case of a long-term investment, the load gets spread over the entire length of time for which you invest as a result of which the impact felt is very little.
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