Mutual Funds for a Sinking Economy

100% No-Load: The Way to Go

I instinctively favor no-load funds. In common parlance, any fund that doesn't impose an up-front sales charge can hold itself out as a no-load fund. However, I prefer "pure" or 100% no-load funds—those with no sales charge or redemption fee.

Numerous studies have been done comparing the performance of load and no-load funds. Frankly, they're inconclusive.

There's some evidence that load funds produce slightly higher returns than similar no-load funds, if you ignore the sales charge. The reason probably has nothing to do with managerial talent. Rather, it's because no-load managers tend to face heavier redemptions during down markets. Load funds, being sold by stockbrokers and financial planners, can count on these salespeople to hold the client's hand in a bear market. At a broker's urging, fund shareholders often decide not to redeem.

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