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Load (Sales) Charges

Mutual funds can be classified as load funds, no-load funds, or low-load funds. The load fee is the sales charge, the amount the investor pays to buy shares. It is a direct deduction from the amount of money that actually goes to work for the investor in the mutual fund.

  • A no-load fund has no sales charge, and 100 percent of the investor's money goes into shares. For example, T. Rowe Price's GNMA Fund invests in U.S. Treasury securities and GNMA securities (also called agency securities), seeking high income potential with maximum credit quality. Because it is a no-load fund, there is no sales charge and 100 percent of your money is immediately invested in the fund.

  • A load fund charges a sales fee, which is used to compensate the sales force. For example, with a 5 percent load fee, the investor gives up 5 percent of the amount invested as compensation to the sales agent or broker. As one illustration, Merrill Lynch, a large brokerage firm, offers a variety of mutual funds. Its Healthcare Fund (A shares) has a load fee, or sales charge, of 5.25 percent of assets invested. An investor in this fund would give up this amount of the funds invested as a sales charge.

  • A low-load fund charges a fee of perhaps two to three percent (there is some variation here).


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