No Fee Mutual Funds

There are numerous different mutual funds, thousands and thousands of them, in fact. Not only that, but there are dozens of types of mutual fund groups too. Most of the different kinds of funds diverge in what they invest in.

For example, a general fund might invest in anything and an African fund may just invest in African firms or companies that are active in Africa.

Then there are sector funds that might just invest in up-to-the-minute technology stocks or alternative technology or precious stones. There are also funds that trail indexes: for example a NASDAQ 100 tracker fund, which would have in its portfolio all the stocks that are in the NASDAQ Exchange top 100 and in the same proportions.

Finally, another classification of mutual funds is in its fees: that is, how the fund makes charges for administration and profit. These charges are known as 'loads'. One interesting sort of fund are the so-known as 'no fee mutual funds' and one of the best sorts of no fee mutual funds are the 'index funds'.

Index funds were the first sort of finance tool to bring in the idea of 'no fee to the benefit of the investor. No fee mutual funds have a tendency to perform better for the investor because they leave more assets in the kitty from day one, which gives that money the opportunity to grow for the entire length of the plan.

One feature of most no fee funds is that the investor deals directly with the investment company, which means that there are no broker's fees - no middlemen - to pay. The financial adviser's fee could become very high, say 10%-20% of a lump sum investment or a full year of monthly instalments.

This money is split, often 50-50, between the investment company running the no fee mutual fund and the investor. The investor's part goes back into his investment fund, which means that it will go on working for the entire length of the plan.

So, how does the investment company get its income? Well, it has its fee the same as it usually would have; the only person who loses is the adviser and the only one who gains is the investor. The investment company gains nothing instantly, but it does in the long term How?

Well, another aspect of the investment firm's fees is the annual management charge. This management charge is a percentage of the funds under management, so if your investment pot is bigger, so is their charge.

There are also true no fee mutual funds where all your money is invested from day one - each penny of it with no commission deducted at all. This is all very well, but the investment company has to make money for itself somehow, so you will probably find that percentage rate for the annual administration charges is higher.

If you are interested in investing in any form of mutual fund, take guidance first from a professional financial adviser, but do your own research too.

Remember that a broker does not normally charge a fee for investment advice because the investment firm that he sells to you will pay him with your money.

Therefore, if there is no kick-back, he is not likely to suggest them and that includes no fee mutual funds. If you need financial advice, it is best to pay for it by the hour and have decent advice - nothing is for nothing and that is especially true in the financial world.

Owen Jones, the author of this article, writes on a number of subjects, but is now involved with No Load Mutual Funds. If you would like to know more, please go to our web site at Mutual Funds