When investing into mutual funds a lot of people are not sure if they should opt for load or no-load mutual fund, so I’d like to briefly explain what these two terms mean.

“Load” refers to the commission paid to the broker who sells you the fund. “No load” means there is no commission to be paid on the purchase or sale of fund shares. No load is a mutual fund whose shares are sold without a commission or sales charge.

The reason for this is that the shares are distributed directly by the investment company, instead of going through a secondary party. This is the opposite of a load fund, which charges a commission upon the initial purchase at the time of sale.

Since there is no cost for you to enter a no-load fund, all of your money is working for you. If you purchase $10,000 worth of a no-load mutual fund, all $10,000 will be invested into the fund. On the other hand, if you buy a load fund that charges a commission of 5% upon purchase, the amount actually invested in the fund is $9,500. If both funds return 10%, the no-load fund would have grown to $11,000 while the loaded fund would rize to $10,450.

Whether you prefer dealing with a broker selling load funds or an independent investment advisor recommending no loads, you need to clearly understand one truth: You can make money or lose money with either type of mutual fund.

The good thing is that with information availalbe online you can make a good decision when chosing a mutual fund. You do not need a sales person to do that for you. The major idea behind a load fund is that you will make up what you paid in commissions with the solid returns that the managers will provide. However, most studies show that loads do not outperform no-loads.

In fact, loads would usually do slightly worse, since commissions are paid directly from the fund’s return. So if in doubt, choose no-load mutual fund.