Posted by Aaron Smith on January 24, 2011 at 9:35 am

Mutual funds can be a great way to achieve instant diversification in the stock market, but investors must remember that not all mutual funds are created equal. One of the biggest differences from one fund to another is the amount of fees you will have to pay as an investor in the fund. A mutual fund incurs expenses during operation, so there will always be some fees, but some funds are much more cost-effective than others.

The Difference Between Load and No-Load Mutual Funds

What is the difference between loaded mutual funds and no-load mutual funds? A load mutual fund charges a sales commission for buying shares in the fund. These charges can occur at the time of purchase, when you make the sale, or sometimes even both. How bad can the loaded mutual funds hit you in the end? There are some mutual funds that carry loads as much as 7%. Put that in perspective, a loaded mutual fund with a front-end load of 7% would take $7,000 of your money before you even get started if you invest $100,000. A no-load mutual fund is just as it sounds, free of any commissions or fees to buy or sell the fund.

No-Load is the Way to Go

As an investor you should realize that there are now plenty of options in the mutual fund world. A couple decades ago the environment was very different, but today there are numerous no-load mutual funds that perform extremely well. Some financial planners will try to convince you that mutual funds with a load are better performers in the long run, which is why they carry a load. Do not believe this for even a second! This is nothing but a pure sales pitch that is designed to pad their pockets. No-load mutual funds consistently have a higher total return on investment than load mutual funds, because those significant fees are difficult to overcome.

Which Online Brokers Have Plenty of No-Load Mutual Funds?

• E*TRADE — E*TRADE is truly a market leader when it comes to mutual fund offerings, and the fees here are very affordable. E*TRADE has increased the amount of no-transaction fee funds available substantially in the last few years. You wont find a more user-friendly website, and the research tools at E*TRADE are second to none. Every mutual fund offered comes with detailed information on past performance and costs associated. A fan of mutual funds will be able to find what they need with E*TRADE.
• TD Ameritrade — If E*TRADE is the market leader in mutual fund offerings; TD Ameritrade has to be a close second. TD Ameritrade offers more than 13,000 mutual funds in all, so you are almost sure to find the perfect fund for you. They have a nice selection of no-transaction fee funds all across the board.
• Charles Schwab — The Charles Schwab Mutual Fund OneSource program offers more than 2,000 no-load mutual funds with no-transaction fee. The best news is that of those 2,000 plus mutual funds that come with no transaction fee, many of those funds are top performing mutual funds on a yearly basis. The selection of high quality funds here is impressive.

Successful mutual fund investing should always start with the purchase of a no-load mutual fund. This type of commission-free mutual fund will increase your total return immeasurably in the long run!