But if you prefer to compensate an adviser in some other way, you probably can. Many charge an hourly fee or take a small percentage of the value of your assets in exchange for managing your money. If they work under one of those arrangements, they shouldn't (and probably won't) charge you loads on the funds they purchase.
So what difference does it make? Your overall goal is to maximize your returns and minimize your expenses, not to quibble over what kind of expenses you want to pay.
Suppose, for example, you hire a financial planner who spends two hours learning about your investment goals, charges you $100 an hour and advises to you to put $4,800 into a no-load fund. Is that any different from going to someone who spends two hours talking with you and then puts $5,000 of your money into a fund with 4-percent load and earns a $200 commission? Not really.
But of course you don't ride free, even after you're in. Remember that a load is not the only cost of investing. Make sure you've taken all fees and expenses into account.
|Costs that occur in load and no-load funds:|
|1.||12b-1 fees: Also known as marketing fees, distribution fees, service fees and hidden loads. A fund can legally charge a 12b-1 fee of up to 0.25 percent of its net assets and still call itself a no-load fund. Load funds often charge up to 1 percent. 12b-1 fees are disclosed in the prospectus.
|2.||Expense ratio, or management expense ratio, or MER: This includes investment advisory fees, administrative costs, other operating expenses and the 12b-1 fee. The expense ratio will be in the fund's prospectus, expressed as a percentage of the total fund assets.
|3.||Redemption fee: A redemption fee, or "short-term trading fee" may be charged at the time you sell your shares, just like a back-end load. This is limited, by SEC regulation, to 2 percent of your investment. But because it's not included in the expense ratio (above), remember to add it into your calculations if your fund has one.
|4.||Trading activity costs: This refers to the costs of buying and selling the securities within the fund's portfolio and it is passed along to the shareholders but is not included in the expense ratio. To get an idea whether the fund you've picked will have high trading costs, check its turnover ratio, which tells you how often the fund's holdings have been replaced within the year.
The self-help savants are pretty much on target. If you enjoy doing your own investing and you can find no-load funds that meet your investment goals and have reasonable expense ratios, then go for it. Just remember to think about the full picture before you reject an option out of hand.