You buy a no-load mutual fund directly from the investment company that sponsors the fund. You pay no sales charge, or load, on the fund when you buy or sell shares.
Although, no-load funds may charge a redemption fee if you sell before a certain time has elapsed in order to limit short-term turnover.
Some fund companies charge an annual fee, called a 12b-1 fee, to offset their marketing costs. Your share of this fee is a percentage of the value of your holdings in the fund.
You may also be able to buy no-load funds through a mutual fund network, sometimes known as a mutual fund supermarket, typically sponsored by a discount brokerage firm. If you have an account with the firm, you can choose among no-load funds sponsored by a number of different investment companies.
Load funds and no-load funds making similar investments tend to produce almost equivalent total returns over the long term - say ten years or more. But it can take an investor nearly that long to offset the higher cost of buying load funds.
- Browse Related Terms: 12b-1 fee, Back-end load, breakpoint, Contingent deferred sales load, front-end load, Fund network, Level load, load, Load fund, Mutual Fund, No-load mutual fund, Redemption fee, Sales charge, Share class, Surrender fee