What is No Load Fund ?
No Load Fund
No Load Fund in which no charges or commission is deducted or charged during the time of sale or purchase of funds. This is because these funds are distributed directly by investment company rather than selling their shares through an intermediary or broker, hence no broker kind of fee is charged.
Because there is no broker or transaction cost, if an investor invests $ 100,000 then it means all of his $ 100,000 is being invested to earn the profit.
No Load Fund
On contrary, there is another kind in which commission or broker fee is charged both during purchase and sale of the funds. These are called front end load and back end load respectively.
For example, suppose an investor wants to invest $ 100,000 and the load rate is 2 %, this means his $ 2,000 would be paid to the broker as his fee and rest $ 98,000 would be his actual investment.
- This load fee is not the primarily source of earning money by fund managers and institutions.
- They earn when the investment in their portfolio earns profit.
- Because load funds are lead and selected by professionals and experts does not mean load funds always outperform no load funds. No load funds in fact have more attraction for investors.
- One reason is that all of their money gets invested and they can compromise on less profit.
- Also, there is no charge on sale of the funds in future.