Load charges affect returns on mutual funds

Q: What is the difference between a load and no-load mutual fund?

A: Load funds charge a commission, while no-load funds are commission-free. The structure of load funds can be front-end, with a commission ranging from 3% to 6.25% of the investment amount; load-level, charging an annual commission for each year owned up to a certain number of years; or back-end loaded, also known as a redemption fee, which is usually about 3%. Some load funds also charge the fee on dividend and capital gains reinvestments.

Both load and no-load funds charge an annual operating fee, also known as a 12b-1 fee. These costs vary from 0.25% to 0.75% of annual asset value. A few fund families charge a transaction fee of about 0.6% but do not charge a 12b-1 fee.

Send your money management questions to medec@advanstar.com Answers to our readers' questions were provided by Richard J. St. John, president, St. John & Associates, Inc., Roswell, Georgia.