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No-Load versus Load Funds

"Buy No Load! Buy No Load!" That's what Money magazine and many of the others say.

The editors of Money and the like fail to tell you that many of you who follow the mutual fund of the week and continually switch your money around lose the most.

A buy and hold strategy almost always wins!
If you and your broker eke out just 1% more on a loaded fund, you stand to make far more money with the professional advice. Please review the following study by Dalbar Fiancial Services.

This spreadsheet shows you how having a good broker can be well worth his/her fee.
If you have Excel 5.0 for Windows you can download and edit this spreadsheet on your own computer.

A recent study by Dalbar Financial Services revealed the following facts about do-it-yourself (no-load) investing and actual investment results.

Investment returns depend far more on shareholder behavior than fund performance. Poor market timing and not remaining invested for the entire period impact investment opportunities for the fund manager.

Do-it-yourself investors give their funds less time to perform and bail out earlier than those working with advisors.

According to the study, load fund investors outperformed do-it-yourselfers from January, 1984 through November, 1994. Those with a broker earned a total return of 66.1% on their stock funds and 84.2% on their fixed income portfolios. That compared with 51.2% on stock and 73.9% on bonds for people doing direct investing.

No-Load investors are influenced by fund-switching newsletters and hotlines which usually fail to beat the buy-and-hold strategy.

Fund managers find the stability of assets easier to manage and get better returns.

Representatives can instill a buy-and-hold discipline through a value-added service with the client. The representative takes the emotion out of the process versus the sweating bullets and second-guessing tendencies of the no-load investor when fund prices drop. This is avoided by developing a well-diversified asset-allocation portfolio strategy reflecting the investor’s goals, time horizon, and risk tolerance developed through a close personal relationship with the representative or even a financial plan of some sort.

Representatives provide some level of comfort on down markets, some measure of assurance that things will be okay. They also help with investment direction in an area that is usually unfamiliar to most people investing in the market for the first time.