Know Loads and Expenses

Whether you are an experienced investor or a beginner, you are probably aware that there are thousands of mutual funds to choose from and dozens of details to know. As an investor you should know about loads and expenses when investing in mutual funds.

i. Front Load:

These are charged up front (at the time of purchase) and can be up to 5% or more of the amount invested.

ii. Back Load:
These are charged only when you sell a fund. Also called deferred sales charges, back loads are usually in the 5% range and may decline or even be reduced to zero over time, usually after five or more years.

iii. No Load or Load Waived:
As the name implies, this category of fund expense has no front load or back load.

iv. Expense Ratio:
Not all funds charge loads; however there are underlying expenses in all mutual funds. Expense ratios average around 1.50% for stock mutual funds and are for the ongoing management of the fund. Also, sometimes included in the expense ratio is an operational charge.