 Personal Finance PowerPoint Presentation, No Load Fund. Prepare to get financially fit by practicing personal finance. Most of this information comes from Investopedia No Load Fund, which you can find online. Take a look at the references, resources, continue your research from there. This is by James Chen, updated August 4th, 2022. In prior presentations, we've been taking a look at investment goals, strategies, tools, and mine, the two major categories of investments. That being the fixed income, typically the bonds and the equity, typically the common stock. Also, keep in mind tools you might be using to invest such as mutual funds and ETFs, possibly helping you to diversify even with less investment in place, as opposed to investing in individual stocks and individual bonds. Keeping that in mind, we're asking, what is a No Load Fund? A No Load Fund is a mutual fund in which shares are sold without a commission or sales charge. So we're typically thinking about mutual funds here. Those are going to be those tools that we're basically pooling money together with other people that are in the mutual fund so that the mutual fund can take that pooled money and invest it in accordance with the terms of the fund. And we're looking at the load related to it with regards to the charges and fees here. So once again, a No Load Fund is a mutual fund in which shares are sold without a commission or sales charge. That sounds good. This absence of fees occurs because the shares are distributed directly by the investment company instead of going through a secondary party. So if we go through the secondary party, the secondary party is typically going to be charging a fee. So that's kind of the point here. So this absence of a sales charge is the opposite of a load fund, either front load or back load. So we talked a little bit more about the different kinds of loads or fees that can be put in place in a prior presentation, but in any case, which charges a commission at the time of the fund's purchase or sale. So front load basically being a fee at the time of the purchase and then the back load when you sell the stock sometime in the future. Also, some mutual funds are level load funds where fees continue for as long as the investor holds the fund. Understanding a No Load Fund. Because there is no transaction cost to purchase a No Load Fund, all of the money invested is working for the investor. That sounds great. For example, if an investor purchased in $10,000 worth of a No Load Mutual Fund, all $10,000 will be invested into the fund instead of some of it going to a fee in order to set up the fund for example or get you placed within it. So on the other hand, if the person buys a load fund that charges a front and load sales commission, in other words of 5%, the amount invested in the fund is only $9,500. Why? Because you paid the 5% on the commission. If the fund holds a contingent deferred sales charge, otherwise known as a CDSE, an expense paid at the time of selling the fund and the $500 sales commission comes out of the profits of the sale. So the CDSE decline each year the fund is held. So should you hold a level load mutual fund, the 12B1 fees, those are sometimes called the 12B1 fees, may be around 1% of the fund's total balance. The deduction of this charge is annual for as long as the investor owns the fund. Why are there loads? Why do we have to deal with this kind of fees kind of stuff? So the justification of a load fund is that investors are compensating a sales intermediary such as a broker, financial planner, investment advisor or other professional for their time and expertise in selecting an appropriate fund. So we talked about different kind of mutual funds in the past. So clearly it's kind of similar if you're dealt with a broker with your home selling a home or purchasing a home, then the broker is going to help you kind of with the process as well. Although, I mean, if you knew everything, you could basically do it possibly without the broker and save some of the charges. Of course, the broker acting on your behalf kind of like in your agent or as your agent is going to cost some money to do. We talked about different strategies we might use when investing in mutual funds. We might try to go with a simple strategy of having a like a balanced fund or a target fund towards retirement. And those could be fairly simple strategies that you might be able to pick the proper fund in and of yourself. If you get into more complex strategies where you're putting together multiple mutual funds, for example, then you might of course need more advice. If you get more complex tax strategies and whatnot, then it could be useful to get advice on the tax strategies, which will typically come into play when you have more money, more money invested because your taxes will be higher. So some investors find the pain of these fees bothersome. However, there is evidence that shows load funds can at times outperform no load funds in some portfolios. Investors should carefully read all fund information and compare similar funds before investing. Even no load funds will carry fees that the investor must pay. All mutual funds carry one form or another of such fees and expenses. And the different difference comes in how and when these charges are paid. So obviously you're going to have to manage the fund to some degree. So there's going to be generally fees involved with it. So rather than charging an investor upfront at the time of purchase, no load fees earned are part of a funds average expense ratio or ER. The expense ratio measures the operating and administrative charges for operating the mutual fund and are a percentage based on the funds assets under management, the AUM. So clearly you might have different types of funds that you're putting money into and you might give the fund manager more leeway to invest in different things and try to outperform the market or you might give them less leeway, possibly investing into funds that are geared towards specific segments of the market or possibly give them even less leeway, which would be tying the fund to say an index, which is like an average of the market. But even still you're going to have some fees. You're going to have less fees you would think on each of those tiers, but you're going to have some fees to manage the fund. So the large portion of this fee is to pay for the work of the fund manager and advisor. Every investor in the fund will pay their share of this expenses through the reduction of profits distributed on the mutual funds investments. Expense ratios can vary widely among different mutual funds, but it is fairly routine to find a no load funds with expense ratios that are as much as 5% less than an equivalent load bearing fund with compound interest and no principal depreciation choosing the no load fund can save an investor thousands of dollars over time. Let's take a look at a real world example, shall we? The largest purveyor of no load mutual funds is the Vanguard Group located in Melbourne, Pennsylvania and boasting more than 30 million investors. The company offers over 400 mutual funds worldwide from which investors can choose. You might be able to check them out online if you so choose. The do-it-yourself investor who eschews financial advisors and their commission structure can select from a variety of asset classes ranging from ultra-conservative money market funds to riskier portfolios such as the Explorer fund. The Explorer fund invests in small to mid-cap stocks that have annually averaged nearly 12% return over the last five years as of August 2022. So when you're looking into these mutual funds, then again, you're thinking about the different strategies you might use for the mutual fund. You want the fund manager to have some more control and then possibly you might be paying more expense ratio on those types of funds and you're hoping they can beat the market or you might say, hey, I'm not sure that the fund manager can beat the market and the added expense ratios that they have to pay to manage it and that structure over the long term. So maybe you choose a variety of say index funds or possibly like a target fund to say for retirement, for example. So we got the T-Raw price founded in 1937 and offers one of the oldest no-load mutual funds in existence, beginning operations in 1939. The company's balance fund charges no upfront or back-end sales charges while maintaining an annual expense ratio of 0.57% as of August 2022. Receiving an overall four-star rating from Morningstar, the fund appeals to moderate investors who avoid sales loads and seek to put every dollar invested to work. You could check out Morningstar to look at some of these funds as well if you want to try one tool you can use to kind of gauge the value of the funds or the ratings of the funds. The $4.2 billion balance fund has averaged an annual return of 5.74% over the last five years as of August 2022.