How to Find The Best No-Load Mutual Funds

No-load mutual funds can be a sensible option for investors. With a no-load fund, there are no commission fees (loads) that would decrease the overall amount of your investment, as there are with front-end and back-end load funds. But how do you find the best no-load mutual funds? Research, ask questions and go with your gut.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• Internet access
• A sound investment guide or planner
• Investment magazines like BusinessWeek
• Basic understanding of mutual funds and load fees

How to Find the Best No-Load Mutual Funds for You

1. Make a list of no-load mutual funds that are performing well. You can find lists like these by using a search engine, visiting a well-known investment site like Charles Schwab or by checking investment magazines.

2. Research the investments each mutual fund has made, focusing on performance and diversity.

3. Look for funds with tenured managers: that is, managers who have been with the fund for at least 5 years. Find out any previous funds they have managed and how they performed, especially during market downturns.

4. Determine which funds match your investment goals, risk tolerance and buying power.

5. Read the mutual fund's prospectus carefully for any hidden fees or high 12B-1 (marketing) fees.

6. Once you have found the funds for you, invest your money and leave it there. Mutual funds do better with long-term investing.

Tips & Warnings

• While no-load funds are better in the sense that you aren't paying anyone to allow you to buy into a mutual fund, load funds shouldn't be dismissed outright. If you can afford the fees and the fund is working for you, there is no reason to dump it in favor of an untried no-load fund.
• No-load funds do not necessarily outperform load funds, even when taking fees into account.
• As with any investment, mutual funds carry different levels of risk. A high-risk no-load fund may not be as good for you as a back-end load fund (with commission fee) with little risk involved. The fee should not be the only factor you consider when choosing your mutual funds.
• Even no-load funds involve fees for participating, although the fees are generally low.

[MichaelWeiss]

on 9/14/2007 I would add that researching the fund manager should involve more than an evaluation of performance. The evaluation should include a review of the fund manager's education and other credentials. You should also research the analysts who contribute to the fund.

Michael A. Weiss, CFA
The Editor
The Mutual Fund Investor
http://www.mutualfundinvestor.net