 When you begin
to invest, one of the things you’ll have to decide is whether
to invest in load or no-load funds. Many fund companies rely on intermediaries
to help provide investors with advice on their funds. To buy these
funds, you have to pay a sales charge, or "load."
There are several reasons why you might want to consider a load
fund. For instance, some load funds offer the skills of an exceptionally
experienced portfolio manager or a unique investment strategy.
Even experienced investors may appreciate the help of an investment
advisor in sorting through the maze of mutual fund choices. The
fund's load compensates investment advisors for their valuable services.
What’s more, there’s evidence that investors who buy
load funds may achieve better results over time – because they
tend to move their money around less. In a recent study by a large
financial services research firm*, it was found that load fund investors
reacted less to market activity than no-load fund investors. In
other words, investors who bought no-load funds tended to try to
time the market more, which is exceedingly difficult to do successfully
and rarely improves investment performance.
Load fund investors, on the other hand, tended more to hold onto
their investments throughout market volatility and remain focused
on their long-term goals, rather than reacting to short-term market
fluctuations and trying to time the market. They may have made sounder
long-term investment decisions as a result of having had access
to an investment professional.
* Source: DALBAR Financial Services Special Report: Quantitative
Analysis of Investor Behavior.
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