If you have been dealing with mutual funds for any length of 
time, you undoubtedly have faced the question of which is better: 
Load Funds or No Load Funds. If you are new to investing, "load" 
simply refers to the commission paid to the broker selling the 
fund. "No load" means there is no commission on the purchase or 
sale.

Most discussions in the past have centered exclusively on 
performance comparisons. Even rating services like Morningstar 
have occasionally chimed in with their opinion. However, rather 
than focusing only on performance, there are some other issues 
I consider far more important:

1. Who is selling load funds and why?

2. Who markets no load funds?

3. Which one is right for you?

Who is selling load funds and why? Most load funds are being 
sold through brokerage houses, financial planners and Registered 
Representatives. With few exceptions, most of those folks operate 
on the basis of selling as much product as possible. They collect 
their commissions up front, as a back end charge, or both 
(usually in the range of 5 - 6%). Whether you make money or 
not is not their primary concern. What matters most to those 
operating under this approach is how often you buy—and thereby 
generate new commissions for them.

Who markets no load funds? No Load funds are either marketed 
directly by the mutual fund companies or, more commonly these 
days, offered through discount houses like Schwab, Fidelity, and 
many others. The advantage to this is that you have an unlimited 
choice of funds in one place and don't have to open separate 
accounts for each mutual fund family that you are considering.

Most fee based investment advisors, like myself, have independent
relationships with such major discount firms and are able to 
offer clients just about any no load mutual fund available. 
They receive no compensation from the firm and only get paid 
by the client at a pre-determined fee arrangement. Under this 
arrangement, there is no hidden motivation to sell you a 
particular fund or to try and sell more in order to get a 
larger commission.

Which one is right for you? Whether you prefer dealing with 
someone selling load funds or an advisor getting you into no 
loads, let me make one thing very clear: You can make money or 
lose money either way! Why?

Let’s assume for the moment that there is no difference in 
performance between the types of funds—some of either kind will 
do well and some of either kind won't. What then determines the 
successful outcome of you buying either a load or a no load fund?

The key is the advice you’re getting. And the fact is that many 
brokerage houses and Registered Representatives tend to be more 
interested in their profits than yours. Their investment advice 
is generally centered around Buy and Hold or dollar cost 
averaging and similar financially questionable recommendations. 
Hardly ever will you receive advice about when and why you 
should exit the market, either because of accumulated profits 
or to limit your losses. Getting out of the market is simply 
not in their best interest, though it may be in yours.

I must confess that, as a fee based advisor, I am somewhat 
biased and I prefer no load funds for my clients. I believe that 
this type of arrangement is best for all parties involved. It 
allows me to avoid any conflict of interest and to work 
exclusively for my clients’ financial benefit. And the better 
my clients do, the better I do.

I am able to choose no load funds and make buy decisions solely 
on the basis of my mutual fund trend tracking methodology. 
Following its signals, I can get clients into the market or out 
of it as often as is necessary to maximize profit or protect 
assets. And because I work with no load funds, other than a very 
occasional short term redemption fee, there are no transaction 
charges no matter how many times we move into or out of the 
market.

If market conditions dictate that we stand aside in a money 
market for an extended time in order to avoid a bear market (as 
was the case from 10/13/2000 to 4/28/2003), I can advise that 
because it is in the best interest of my client. I am always 
thinking about what will benefit my client, not worrying about 
lost commissions. (Please see my article "How we eluded the 
Bear in 2000."

Bottom line: Load fund vs. No Load mutual fund shouldn’t be the 
issue. Having a methodical plan and reliable advice as to when 
to buy and when to sell is far more important and will help you 
to secure a prosperous financial future.