You take the high load, I'll take the low load

May 15, 2007 10:38 AM

My 401k retirement plan through the company I work for is managed by Fidelity Investments. I have read recently that a "high-load" mutual fund will often return poorer yields than a "low-load" or "no-load" mutual fund. How do I find out if my plan is high-load, low-load, or no-load?
posted by doctorcurly to Work & Money (7 answers total)

Look at the prospectus for the specific fund(s) you are invested in. Also, Fidelity probably has an overview list of their funds with the loads and fees.
posted by kindall at 10:48 AM on May 15, 2007

You might need to call Fidelity's 401(k) department. In some (many?) cases, a plan that's part of a 401(k) will be no-load, even if that plan normally has a load for non-401(k) participants and the prospectus describes it as having a load. That was the case for my 401(k) with Franklin Templeton.
posted by phoenixy at 10:58 AM on May 15, 2007

If you have the freedom to choose, Fidelity has a lot of Fidelity-managed funds with no loads whatsoever, and low expense ratio. A lot of those funds do really well. Here's a Google Finance search of Fidelity Mutual Funds.

There isn't really a correlation to load price and fund performance.

Disclaimer, I own several Fidelity funds.
posted by neilkod at 11:28 AM on May 15, 2007

What phoenixy said- 401(k)s have access to a whole separate universe of funds, most if not all of which are no load (by virtue of the vast quantity of each fund they buy).
posted by small_ruminant at 12:00 PM on May 15, 2007

for instance, if you find a great no-load fund on morninstar.com, you then gave to look at the "minimum purchase" requirement- a lot of them require $100k and up.
posted by small_ruminant at 12:01 PM on May 15, 2007

If all of your funds are in the Fidelity family, then it is easy to tell. Fidelity has two classes of funds -- their regular Fidelity funds which are no-load and their Fidelity Advisor funds which have loads. If the name of the fund begins with Fidelity Advisor, then you will be paying a load, which is not good.

For example, looking up the Fidelity Advisor Aggressive Growth Fund on Mornngstar.com you will see this. Note that it has a front load of 5.75% and an expense ratio of 1.28%. Both of these are very high.

Contrast this with the Fidelity Spartan Total Market Index Fund here. Note that it has a front load of zero and an expense ratio of 0.10%.

Assuming you have no-load funds available, the second thing to look for is the expense ratio, either in the prospectus or on the Morningstar.com site. Anything over 1.00% would be considered very high. Anything below 0.50% would be good. The expense ratio can be as low as 0.09% for an index fund.
posted by JackFlash at 12:16 PM on May 15, 2007

You really need to look at total return, because some mutual funds with loads are stellar performers and some no-load funds are complete dogs. Some funds have no-loads, but ridiculous expense ratios, so their total cost is actually quite high. You really need to compare loads, expense ratios and performance. I would never buy a loaded fund without evidence of superior results, so you are right to instinctively avoid loaded funds, but they aren't all bad.

For inexperienced investors, it is often a good idea to seek out a few no-load index funds. These generally have very low costs and by definition will match the performance of the broader market. Today there are some outstanding index funds for every market segment and every foreign market. They are an easy way to get foreign exposure without a lot of research and relatively lower risks.
posted by Lame_username at 12:55 PM on May 15, 2007