No-load mutual funds have been the center of a lot of discussions as investors try to decide which is best for them. Because they allow individuals to invest with no fees from advisors or brokers, investors really enjoy the perks of cutting out the middleman. However, some of the funds are better than others, so in order to determine which is best for you, let’s look at some basic criteria to help you govern your decision.
One way to get the most out of being able to invest with no fees from advisors or brokers is to research those costs that are harder to avoid with no-load mutual funds. Typically, investors are responsible for a 12b-1 fee, as well as other operating costs, even if they don’t have to worry about the expense ratio, which is pretty much related to investment management. By conducting research on the costs you will still be responsible for, you can begin creating a pros and cons list of which fund might be better for you.
When considering which of the no-load mutual funds to take on, it’s good to take a look at each fund to see how an investment style is approached. If a company tries different investment approaches regularly then you may be justified in feeling a little leery. Typically the fund that works best is the one that is consistent and very rarely deviates from its stated policy.
Some other ideas to keep in mind before investing include:
- You should only partially rely on historical performance. The temptation to invest in the most recent best-performing fund can definitely be strong. But because fund performance can fluctuate like stock market prices, it’s not a good idea to rely on historical performance alone.
- Media darlings aren’t always reliable. Just because a fund receives a lot of media attention doesn’t mean it is a great performer. So instead of relying on the fund that always wins in popularity, it’s good to take some time to research the actual performance levels of those you’re interested in pursuing.
There are many benefits to being able to invest with no fees from brokers or advisors. But it’s not a good idea to just spend your money on the first one that comes along. So before you buy into the most popular or historically-reliable no-load mutual funds, take some time to conduct thorough research on the additional fees, as well as each fund’s level of consistency.