No Load Mutual Funds vs Load Mutual Funds ,and the on-going debate.

What are the differences between No Load Mutual Funds and a Load Mutual Funds, and which is better?

No Load Mutual Funds are mutual funds that don't carry a sales commission. They're typically found at discount brokerage firms and can be purchased directly without using the services of a broker.

Load Funds carry a sales commission and are sold by Brokers or other Financial Professionals employed at full-service brokerage firms, banks, and other institutions. These funds are typically available to individual investors in 3 share classes:
• The A share carries an up-front sales charge to purchase the fund. This charge usually falls within 4.00% and 6.00%. A person spending $1,000 to purchase A shares in a fund that has a 5% sales commission would be investing $950, after paying the sales charge. Load Funds also have a fee called a 12b-1 fee. This fee continues to pay the broker between .25% and .35% annually until the fund is sold.
• The B share has no up front charges, but carries a back-end load that diminishes over time, usually 5 or 7 years. It also has a higher 12b-1 fee imbedded in its annual cost. After the fund is held for a specified length of time, the 12b-1 fee is reduced to that of an A share. Like the A share, this fee continues to compensate the broker until the fund is sold. Since it carries no up front charges the B share looks more attractive than the A share, at first glance. But, the selling restrictions and higher 12b-1 fee makes the B share less preferable than the A share.
• The C share carries no up front sales charge, and has a level 12b-1 fee of usually 1 percent. This fund must be held for a specified period of 12 to 18 months, or the buyer is subject to a back end load. The 12b-1 fee remains at 1 percent until the fund is sold.

No Load Funds and Load Funds both have underlying administrative fees. These fees defray the operational costs of the mutual fund companies. Which type of fund to purchase depends on the individual investor. If you are a do-it yourselfer, understand or are willing to learn about investing, and are cost sensitive, then No Load Mutual Funds are the likely candidate. On the other hand, if you believe that your broker has your best interest at heart, you don't understand investing and aren't inclined to learn, then perhaps Load Funds are more suitable.

I would like to offer a few words of caution. All mutual funds, both load and no load, are basically invested in the same "stuff", i.e. stocks and bonds. The returns on the underlying investments are the same whether you own a No Load Fund, or a Load Fund. For this reason, the investor should be price sensitive and aware of what he is actually paying. Over the long run, the erosive effects of fund expenses and sales commissions can be detrimental to a comfortable retirement.