No-load mutual funds serve two very different types of investors, a new study shows. On the one hand, 37 percent of no-load mutual fund investors, who have invested for an average of 13 years or more years, consider themselves well-informed and are self-directed. On the other hand, 63 percent of no-load fund investors who have owned mutual funds for an average of seven years or less, say they have only basic or limited knowledge and welcome personal advice, the study shows.

The study, The Changing Dynamics of the No-Load Investor, was commissioned by the Mutual Fund Education Alliance of Kansas City, Mo. and conducted in April by Boston Research Group of Woburn, Mass. Two-hundred no-load fund investors were interviewed by telephone. The alliance is a trade association of 44 no-load fund families.

"This bifurcation among no-load customers presents a challenge to the no-load mutual fund industry," said Warren Cormier, president of Boston Research Group.

No-load funds need to be aware that they serve two very different constituencies, he said. On the one hand, they can improve rapport with novice investors by providing them with better and personal advice, Cormier said. However, it is difficult for a no-load fund to give sound, free advice in a format that will appeal to this group, Cormier said.

Some no-load fund families have created new, load share classes so that their funds can be sold through financial planners, brokers and investment advisors who can provide the advice investors are increasingly seeking, said Howard Schneider, chairman of the education alliance, and managing director at Scudder Kemper Investments of Boston.

"No-load funds need to understand that not all of our investors are as incredibly self-directed as those who have been invested 10, 13 or 15 years," Schneider said.

Less than 10 percent of the population owned mutual funds in the early 1980s and investors who purchased no-load funds at that time were generally sophisticated and self-directed, Schneider said.

Now, 40 to 50 percent of the population owns mutual funds, he said.

"With this broadening of the population to include women, the middle class and the less affluent . . . the no-load mutual fund family needs to provide greater assistance" to these constituencies, Schneider said.

At the same time, no-load fund companies should not forget they also serve savvier, self-directed investors, Schneider said. This group is looking for more sophisticated information - including third-party ratings data and guidance on investment strategies - as well as software tools and calculators on the Internet, Schneider said. They would also welcome information about fund managers and their holdings, he said.

Those who said they have comprehensive knowledge of no-load mutual funds are more likely to be college graduates, male, and to have higher earnings and more investable assets than those who said they have only limited or basic knowledge, the study found. Of this more knowledgeable group, 70 percent were male. Of those who said they have only basic knowledge of no-load funds, 45 percent were male, the study showed.

Thirty-two percent of those with comprehensive knowledge had a college degree, versus only 18 percent of those with basic knowledge.

The average household income of the more knowledgeable group was $110,000. They had average investable assets of $2.4 million. The average household income of the basic group was $47,000 and had average investable assets of $200,000, according to the study.

Those who said they had comprehensive knowledge of no-load funds are more loyal customers than those with only basic knowledge, the study found. An average of 40 percent of the investable assets, or $400,000 of the knowledgeable group was invested in no-load mutual funds. Of the basic group, an average of 29 percent of their investable assets, or $100,000, was invested in no-load mutual funds.

The study did find some commonalties between sophisticated and novice investors, however. Both groups said they would like fund companies to provide more information about when to buy or sell a fund, funds' investment strategies and the managers behind the funds, the study found. Most no-load fund investors expect an average annual return between 10 percent and 20 percent, the study said.

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