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Yeah, I know, not really exciting. I guess I tried though.
Alright. So what is a load? A load is fee that you pay on a mutual fund to put your
money into the mutual fund. Doesn't really make sense, does it? No, it doesn't. Let's
go through what it is.
So, basically you have two types of loads; you have a front-end load and a back-end load.
Not all funds will have either both or one. So, if you are putting in $10,000 and a mutual
fund has a 2% load, you will actually only be investing $9,800 because they are going
to take $200 as a fee. Likewise, if you're taking $10,000 out and they have a 2% withdrawal
load then you will be taking out $9,800 instead of $10,000.
So, why do mutual fund companies do this? Well, most of the time that $200 if it's 2%
of our 10, then it's going to the financial advisor that recommended the fund. So, also
very important to note, that you will still be paying annual fees. So when you are paying
a load, you really truly are basically putting yourself in a hole. You're going to make back
that $200 plus the annual expenses to even get above and beyond.
Do you need to be in a load fund? Well, there's a lot of debate that they're better. But in
reality, nowadays, they're not. The competition is so great. There are some wonderful no-load
funds. And most importantly, there are tons of index funds with crazy low expenses that
they're really, today is no need for you to get into any mutual fund that has a load.
In fact, if you are with a planner, a financial planner, who is recommending load-based funds,
you might want to consider looking around or ask them about it. Say, "Is there another
alternative to this particular fund that doesn't have a load?"
So there you go. The dirty gritty about loads. Pretty simple. Not riveting, but pretty simple.
So because I like to give you an action step, here's my action step for you for this week.
Your fees on your mutual funds can be critical in actually you getting a great return. So
I want you to sit down and look to see what your fees are. Did you pay a load? Do you
have a load coming up front that may be at the back end? And are your annual fees less
than before? After you've checked out the expenses on your account so you can be making
as much as you can, I would love it if you would click "subscribe" so you can get the
next video update. Or head on over to TakeASmartStep.com, register for our weekly newsletter where I
let you know when the video is out and I share little tips and inside information along the
way.
'Til next time, this is Andrea Travillian.