On this page you’ll find an alphabetical list of more than 100 of the largest load mutual funds, each followed by a no-load equivalent fund that we believe is a better alternative. A load is simply a sales commission that is subtracted from your investment when you buy the fund shares or withdraw your money. In addition, some funds impose sales loads in the form of higher expenses charged against investors on a daily basis.
Although we list alternatives to these large load funds, Explode Loads! is not meant to imply that the load funds listed here are defective in any way. In fact, many of them are excellent funds. Our point is that thousands of excellent funds are available without requiring investors to pay sales commissions. This article is not meant to suggest that existing shareholders should sell any shares they may own in the listed load funds.
If you are considering investing in a load fund, we suggest you consider our suggested no-load fund alternative instead. Each no-load alternative is roughly equivalent to the load fund.
If you are already invested in a load fund, you have already paid (or agreed to pay, in the case of back-end loads) a sales charge. There is no advantage to sell a fund just because you paid (or will pay) a load, and we are not recommending that you switch from an existing load fund to its no-load alternative.
When we choose an alternative no-load fund, we look for the best combination of three things:
See an example. Here’s an example of a large load fund, American Funds Investment Company of America (AIVSX) and its Explode Loads! no-load alternative, T. Rowe Price Equity Income (PRFDX). Returns stated here are annualized for periods ending August 4, 2005. Expense ratio figures include distribution or 12b-1 fees, if any.
A "load" is simply a sales commission paid to a broker for selling the fund to investors. Load funds are available in various flavors, called share classes, representing different ways to charge the shareholder and compensate the broker. Load funds typically have "A" shares, "B" shares and "C" shares, each of which has a different combination of loads and fees that affect the return you receive as an investor. The "A" shares carry a front-end load, which means you pay a sales charge when you first buy the fund. The "B" shares have no front-end load but charge a back-end load that declines over time, known as a contingent deferred sales charge (CDSC). The "B" and "C" shares typically charge what amounts to a continuing load on a daily basis, in the form of higher expenses charged to investors.
Here’s an example, using AIM Balanced Fund. The fund’s "A" shares have a 4.75 percent front-end load and annual expenses of 1.10 percent. The "B" shares have no front-end load, but they charge a declining CDSC of 5 percent to investors who sell their shares in the first year, 4 percent in the second year, 3 percent in the third year and fourth years, 2 percent in the fifth year, 1 percent in the sixth year and zero after that. After eight years, the "B" shares automatically become "A" shares, with lower expenses and no load. Annual expenses for "B" shares are 1.85 percent. The "C" shares have a 1 percent CDSC which ends after one year in addition to annual expenses of 1.85 percent.
Some loads are reduced for investors with large amounts of money. AIM Balanced Fund A shares, for instance, cuts its front-end load to 4.0 percent if you invest $50,000, to 3.75 percent if you invest $100,000, to 2.5 percent if you invest $250,000, to 2.0 percent if you invest 500,000 and to zero if you invest $1 million or more. However, even without the load and even assuming identical investment performance, AIM Balanced is considerably less desirable than Vanguard Balanced Index because AIM Balanced has much higher expenses.
To learn more about any specific mutual fund, check the Morningstar and Value Line mutual fund surveys, available in many public libraries.
Here are some online links to useful tools on other sites. To return to this page, use the Back button or command on your browser.
