| 'Loaded mutual funds' can be described as those that | | | | In all these three options, front-end loads are better for |
| require the investor to pay fees for buying a mutual | | | | investors. A hidden fact in a loaded fund is that the |
| fund. These charges are known as sales load and are | | | | charges or the sales load is deducted from the actual |
| primarily commissions paid to the person who sells the | | | | investment amount. As a result, the net investment |
| fund to the investor. Loaded mutual funds are | | | | value at the start of the fund is lower. For example, |
| preferred mainly by sales brokers and insurance | | | | when an investor wants to invest $10,000 in a mutual |
| salesmen because they earn revenues for them. | | | | fund and agrees for a 5 percent entry load, he is |
| There are three different types of sales loads on | | | | actually investing $9,500. The remaining amount of |
| these funds. They are as follows: | | | | $500 is deducted from the total investment and |
| 1. Front-end loads: Also known as entry fees, these | | | | deposited in the form of front-end load. This |
| charges must be paid up-front when the investor buys | | | | commission neither goes towards management of |
| the fund. | | | | fund nor gets the investor any special privileges. It is |
| 2. Back-end load: Also known as exit fees, these | | | | simply deposited into the bank accounts of the broker |
| charges have to be paid by the investor when he | | | | or the salesperson. In this regard, loaded funds are |
| walks away from the fund taking his investment along | | | | disadvantageous when compared to no-load funds. |
| with the returns. | | | | According to financial experts, no-load funds are better |
| 3. Constant load: These charges have to be paid | | | | than loaded mutual funds. |
| throughout the entire term of the fund. | | | | |