Are mutual funds with loads worth buying?

Question

I purchased a mutual fund with a front load and off the bat I lost 5% (front load). It has been 3 months and the price of the fund has not surpassed the 5% load. So I am wandering if Mutual Funds with loads are even worth buying, why loads even exist?

Answer 1

Simple answer:
A load pays a fee to a broker & their company.

If you need help to pick a fund, buy a loaded fund. If you can pick your own fund...... save the money on the load and invest it too.

So.... $500 extra in a fund (average load for $10,000, not paid) would equal $3424.00 in 25 years. So in effect you're paying $3424.00 for the "load"...... Spend some time reading a couple of books on Mutual Fund Investing.... it will be worth the time!

BTW: It's a lie too suggest "no loads" have a higher internal fee. The "internal fees" of loaded funds & no loads are virtually the same. Look at the internal fees for;
Vanguard, T. Rowe Price, Fidelity, Dodge & Cox and many more............. No Load funds do not (do not) have higher internal fees.

Answer 2

A lot depends on the exact fund that you have invested in. As a general rule some are worth investing in. As your 1st responder stated, no load funds sometimes have much higher expense ratios to make up their costs, so over time you make make up the difference.

Another thing to consider is that a 3 month time frame is not a long enough time frame to judge the return of your fund. Most funds have lost about 5% of their value in the last 30 days. Some even more. Be they load or no load.

When you buy a mutual fund, you should be setting your time horizon for at least 5 years, with an annual review of the fund's performance vs other similar funds. Shorter time horizons are too variable for any meaningful comparisons. Heck I am not even certain that a one year review is not too frequent, but if the darn thing is underperforming its peers at an annual review by 5%, then maybe some thought should be given to throwing in the towel. But funds do have good years and bad years. Just the nature of the beast.

Answer 3

It depends on the share class and your investment horizon. If you buy A class shares, they generally have a 4.75% or so front load, but that load decreases a bit each year that you hold the fund. Generally over 5 or 6 years it will amortize down to zero. B Shares are the ones to avoid. You get whacked with the load plus a higher management fee.

So if you're a long term investor, maybe a front loaded share can make sense, but I don't know why you would choose one when there are so many good no load, low fee fund choices available

Answer 4

All mutual funds have fees. For no-load funds, the fees are hidden from you. For instance, the fund manager might take 2% of the fund's assets every year, instead of charging you directly. There are also front-load and rear-load funds that charge when you buy or sell.

Expecting a mutual fund to increase 5% in 3 months time is not realistic. Mutual funds are so diversified, and invest in so many hundreds of stocks, that the majority of them do no better than the Dow Jones Average, and with fees taken into account, most do worse.

My advice is to either hold on to this fund for much longer term. Think in years, not months. Or if you feel the need to chase higher returns, invest in individual stocks instead. Lastly, if you like trading in and out of mutual funds every few months, stick to no-load funds.

Answer 5

I started out with class A shares before switching to no load funds. No loads are far better IF you get the right ones. I look at no higher than 1.00% expense raito for no loads and have very good success with them. Now I am in ETF's (way more voliatle than Mutuals). Hold the fund for at least a year see what happens. if you invest small amounts no loads are your better bet.