No Load Fund
Updated on March 12, 2023
A No Load fund is a Mutual fund in which the shares in its portfolio can be transacted without brokerage or charges. The mutual fund in this case does the job of buying and selling stocks itself rather than utilising the services of a third party. It does not have to pay brokerage and thus there are no load charges. Mutual funds come with certain charges and apart from operational costs, there are marketing and distribution expenses. The operating expenses include back-end charges (sale/redemption of units) and exit load and other transaction charges. Exit Load is a charge which the fund charges at the time of exit or redemption, to prevent investors from exiting the plan too early. Mostly, there is no exit load after a certain time period.
What are the features of No Load Funds?
Some Features of No Load Funds are:
a) No Load mutual funds do not mean that no fee will be charged as it will include all other kinds of costs other than that of sales commission.
b) Load is an additional charge other than the expense ratio and is used for payment of commission or brokerage to broker or a third party for buying/selling shares for the fund.
c) Expense ratio in No Load funds will generally be slightly less than the Load Funds.
What are the benefits of No Load Funds?
Advantages of No Load funds are:
1. Reduced cost – any charge levied on a fund is essentially borne by the investor, hence a No Load fund will add to the overall returns
2. Maximum amount invested – In a No Load fund, maximum amount gets invested, thus earning more profit for the investor
3. Better control – investors can pick and choose No load funds based on their own research