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There are many factors to consider when you invest in a mutual fund, including the costs of services provided. There are different classifications for these costs, and it is important to know what they are and how much each fund charges.
Mutual funds typically are sold as either "load" or "no-load" funds.
Load FundsUsually sold through a financial advisor. The load is a sales charge, or commission, that compensates the advisor for his or her services, including fund selection advice when you buy shares of the fund and throughout the course of the investment.
Generally there are three types of loads:
No-Load Mutual FndsThese funds do not have sales charges. You generally can purchase no-load fund shares directly from the investment company. Shares of no-load funds also may be available through a financial intermediary, such as a brokerage firm.
Mutual funds usually have expenses that are passed on to investors, whether the funds are load or no-load. These are referred to as the fund's annual operating expenses and are taken out of the fund's total assets.
There may be other expenses included in a fund's total annual operating expenses. Consult the fund's prospectus or your financial advisor for information about the fees and expenses for a particular investment.
Costs shouldn't be your only consideration when investing in mutual funds. Choose a fund because it has solid management and a good track record and meets your investment strategy.
This information is for educational purposes only and is not intended as investment advice.