How to Invest In A Load Fund

When mutual funds include sales charges in the price of shares, they are called load funds. A load is a sales charge or commission that compensates the broker or middleman for selling shares of the fund. Essentially, you are expected to benefit from the advice of the broker assisting you with purchasing your mutual fund shares, making the load worth it.

Difficulty: Moderate

Instructions

Things You'll Need:

• Money to invest
• Financial advisor, broker or agent
• Access to the Internet

Instructions for Investing in Load Funds

1. Record your investment objectives on paper or on your computer. Decide whether you are investing to save for retirement, to send a child to college, or to meet other goals.

2. Evaluate the acceptable level of risk for your load fund investments. Keep your risk tolerance in mind when selecting load funds.

3. Decide what percentage of your investments you'd like to allocate to load funds. Do not deviate from this percentage unless you have good cause to do so or the change is advised by a trusted financial professional.

4. Begin researching load funds. Use an independent mutual fund service, like Morningstar (a link to which can be found in the Resources section below), to research and evaluate load funds.

5. Request a prospectus for each load fund you are considering. Review it thoroughly to determine details of the load fund's objectives, investment plans, associated fees, level of risk, and tax considerations, as well as information regarding the fund's manager.

6. Consider a load fund's performance, as well as its volatility, before you decide to invest in it. Review its expenses as well, as they are deducted from investor proceeds.

7. Contact a broker, financial advisor, bank, or insurance agent to purchase shares in the load fund you've chosen.

Tips & Warnings

• More aggressive funds tend to have higher risk levels, but often offer higher rates of return. Less aggressive funds require less risk, but tend to offer lower rates of return. Select the load fund that best fits your level of risk tolerance.
• A load fund may carry a front load or a back load. A front load is added when you purchase shares and a back load is added when you sell shares. A load can be up to 8 1/2 percent of the amount you invest.
• Be aware that Morningstar provides information comparing a particular fund's performance against that of similar funds.
• As you are paying a sales charge, be sure to solicit the advice of the professional with whom you choose to work.

Resources

• Visit the Morningstar, Inc. site by clicking here.