With so much at stake, what should an investor look for in a mutual fund? This handy ten-step guide can make the process a lot easier and give you some peace of mind as you sift through the thousands of available options. As always, grab a cup of coffee, sit back, and in no time you can feel like a mutual fund pro!
Some mutual funds charge what is known as a sales load. This is a fee, usually around 5% of assets, that is paid to the person who sells you the fund. It can be a great way to make money if you are a wealth manager, but if you are putting together a portfolio, you should only buy no-load mutual funds. Why? It's simple math!
Imagine you have inherited a $100,000 lump sum and want to invest it. You are 25 years old. If you invest in no-load mutual funds, your money will go into the fund and every penny - the full $100,000 - will immediately be working for you. If, however, you buy a load fund with, say, a 5.75% sales load, your account balance will start at $94,250. Assuming an 11% return, by the time you reach retirement, you'll end up with $373,755 less money as a result the capital lost to the sales load. So, repeat after us: Always buy no load mutual funds. Always buy no load mutual funds. (Keep Saving It!)
