Understanding No Load Mutual Funds

Explore the basics of no load mutual funds in this article.
EXPLORE FUNDS
Understanding No Load Mutual Funds
EXPLORE FUNDS
3 min
16 February 2024

No load mutual Funds offer a straightforward way for individuals to invest without the burden of commissions or charges. Before understanding the details about these funds, it is essential to grasp the concept of loads in mutual funds. Loads are commissions or charged by mutual fund companies when investors buy or sell shares of a fund.

What is a no load fund?

A no load fund is a special kind of savings fund where you do not have to pay any extra fees when you buy or sell shares. Instead, you just pay a small yearly fee for managing the fund. Investors like these funds because they do not have to give extra money to brokers or financial advisors when they invest.
In mutual funds, there are different costs like when you buy (entry load) or sell (exit load) your units , along with other fees for managing the fund. Entry load, the fee when you start investing, is not allowed anymore by SEBI (Securities and Exchange Board of India) rules. Exit load, charged when you sell your units, aims to keep investors from leaving too soon. Asset management companies charge an expense ratio for managing funds, which includes all sorts of fees. No load mutual funds do not have extra sales charges, unlike load funds, so investors keep more of their money.

Advantage of no load funds

When you redeem your investment, the amount you receive from a fund consists of the initial investment and the profits earned (based on applicable interest rates) after subtracting the fees charged by the fund house for managing your scheme. In No Load Funds, the final fees or average expense ratio are low because expense costs are not included. Therefore, no commission for unit sales results in higher returns.

Disadvantage of no load funds

  • Some no load funds impose redemption fees if shares are sold within a specific timeframe after acquisition, potentially affecting investors who need quick access to their money.
  • No load funds may offer a more restricted selection of investment options compared to load funds, which could be a drawback for investors seeking specific investment strategies.

Should you invest in no load funds?

Investing in no load funds depends on various factors such as financial goals, investment horizon, and risk appetite. While no load funds offer lower expense ratios and the flexibility to manage investments independently, investors should consider factors like taxation rules, exit load, and the fund's performance before making investment decisions.

In conclusion, no load mutual funds present a cost-effective and independent investment option for individuals seeking to build their investment portfolios. While they offer advantages such as lower sales commissions and greater autonomy, investors should carefully evaluate the disadvantages before making investment decisions.

With diligence and prudent decision-making, investors can leverage the benefits of no load funds to achieve their financial goals. Remember, informed investment choices pave the way for long-term financial success.

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Disclaimer

Bajaj Finance Limited (“BFL”) is a Non-Banking Financial Company carrying the business of acceptance of deposits, providing lending solutions to Retail & Corporate customers, and is a Corporate agent of various insurance Companies. BFL is also registered with the Association of Mutual Funds in India (“AMFI”) as a distributor of third party Mutual Funds (shortly referred as ‘Mutual Funds’).

BFL does NOT:

(i) provide investment advisory services in any manner or form;

(ii) perform risk profiling of the investor;

(iii) carry customized/personalized suitability assessment;

(iv) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.


In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on ‘As-is’ basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme /Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities. The NAV will inter-alia be exposed to Price / Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other / better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.

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Disclaimer on Risk-O-Meter:
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